Last week we discussed the pre-purchase due diligence you should undertake before proceeding with purchase a property, this week we are going to discuss why a comprehensive Due Diligence clause is a must. Next week, we'll share a great example of this!
When purchasing a property, especially a new build or one "off-the-plans," grasping the significance of a comprehensive due diligence clause is essential. This clause serves as your safety net, designed to protect your interests throughout the buying process.
The wording of the due diligence clause is critical. It not only provides you the option to withdraw from the purchase if your financing falls through, if you experience buyer's remorse, or if unforeseen personal or financial changes arise, but it also ensures that you receive all necessary information for your lawyer to review. This information is vital for making an informed decision about your investment.
A well-drafted due diligence clause covers multiple aspects of the property transaction. It allows your lawyer to thoroughly check the agreement's terms. This step is crucial because undisclosed issues could lead to significant financial and legal complications down the line.
Additionally, the due diligence clause typically includes provisions for securing finance approval from your bank or getting a valuation if required by your lender. These steps are fundamental in ensuring that your investment is sound, and that the property meets your expectations.
Equally important, the due diligence clause provides a way out. If at any point you feel uncertain about the purchase, this clause allows you to terminate the agreement based on non-satisfaction of the due diligence condition. This aspect can give you peace of mind as you navigate the often-complex process of purchasing property.
One common pitfall to avoid is succumbing to pressure from developers to include a "Solicitor's Approval Clause" instead of a comprehensive due diligence clause. This option is typically not in your best interest. A Solicitor's Approval Clause is limited; it allows a solicitor to approve a contract only when they find genuine faults in the conveyancing aspects of the agreement. The solicitor must also justify any refusal, which can lead to complications and delays.
On the other hand, a comprehensive due diligence clause gives you adequate time and flexibility to ensure that all aspects of the property meet your standards and requirements. It empowers you to conduct thorough research and due diligence without the unnecessary pressure of rushing into a decision.
When embarking on the journey of purchasing a property, particularly a new build or one 'off-the-plans,' never underestimate the power of a comprehensive due diligence clause. It provides you with the necessary protections and ensures that you are equipped to make informed decisions. Remember, this clause is your ally in a complex process, offering peace of mind and safeguarding your investment. Always consult with your lawyer to ensure that your due diligence clause is robust and tailored to your specific needs. This way, you can navigate your property purchase with confidence and clarity.
If you're in the market for a property, connect with our team at Equiti, and we’ll assist you in finding options that suit your needs. We also suggest consulting your mortgage adviser to arrange your financing, allowing you to act swiftly when the perfect opportunity arises. And to all financial advisers, remember to share this article with your clients to empower them in making informed decisions about their property investments!