The Feasibility Period for Commercial Real Estate Transaction
Updated: Jul 22, 2020
Most contracts regarding the purchase of commercial real estate, provide for a “feasibility period” after the contract is signed (aka the effective date) during which, the buyer can study and analyze the property to ensure there are no defects. Buyers must take this opportunity to ensure the property is in good condition and that it makes business and financial sense. A commercial real estate attorney in Austin, TX, will tell you that during this time, they have the right to cancel the contract if the results are unsatisfactory.
The feasibility period allows a buyer to terminate a real estate contract for any reason within a certain number of days
(which is a negotiated contract clause) after the effective date by giving the seller written notice of termination. A commercial real estate attorney may advise a buyer to secure this option. Typically, a buyer must pay some money (also negotiable), ranging from 1% to 4% of the purchase contract. If the buyer terminates the contract before the negotiated number of days, then their money will be refunded, minus the negotiated amount to have the option. If the buyer does not terminate the contract, then the consideration amount paid will be credited to the final sales price at closing.