The contingencies discussed above may not each be needed in some transactions, and conversely, some additional contingencies may be absolutely necessary to other transactions. Buyer will want to be assured the opportunity to obtain any required approvals and permits from the local governing body before they will close on the deal. The relationship between a buyer and a seller can become more complicated in the event that a buyer determines that the current zoning of a property is not suitable for its proposed development. When the future use of the property will require any type of local government approval (such as a special use permit, lot consolidation, lot split or variance) Buyer should include a relevant contingency in the purchase agreement. For example, the contingency clause may state, “The buyer’s obligation to purchase the real property is contingent upon the property appraising for a price at or above the contract purchase price.” The contract should also apportion liability for any roll-back taxes, which can be triggered by a rezoning of property in a land use tax abatement program. Buyers and sellers should consider the following issues when drafting contract language governing zoning contingencies and related provisions. The buyer can receive more time if needed, but then pays for the privilege with additional deposits or non-refundable fees. Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. "Purchaser’s obligations under this Agreement are contingent upon its securing the required permits, lot changes, zoning changes and any and all other land use approvals (the “Approvals”) necessary to use and operate the Property according to its intended plans as a _______. Ultimately, a Seller of real estate has only oneinterest in the transaction—the money promised in exchange for its transferring the property. Without them, most buyers and sellers would be unable to find the common ground necessary to mutually commit to the transaction. Does the contingency cover site plans, which in many jurisdictions are a ministerial approval, or even building permits, certificates of occupancy, or environmental permits? 3. 2. In addition, a buyer will likely want to include in the purchase agreement some language about obtaining necessary permits and zoning for the commercial property. The parties may negotiate a contract contingency that allows the buyer to pursue certain entitlements from the locality that would permit the buyer’s proposed use. If you need to cancel the contract because of a contingency, your offer to purchase will include the precise method you need to use to notify the seller. An inspection contingency (also called a “due diligence contingency”) gives … While the legislative body of the jurisdiction may deny an application, the applicant may still be entitled to an appeal. For tracts of land, this contingency may include approval of a legal survey, if one has not already been done. While far from common knowledge to the average investor, contingencies need to be introduced into your common vernacular. What is the owner not allowed to do with the property? The contract should afford the seller the option to require the buyer to assign any permits or other applications that may be pending with the local jurisdiction in the event that the buyer terminates the contract or defaults. Somewhere between Seller’s simplistic ideal and Buyer’s unduly contingent ideal must be found enough common ground to keep both parties committed, satisfied and confident in the terms of the transaction. It should be noted that the importance of and need for this contingency is tied to potential liability for environmental contamination, even if such contamination occurred prior to a purchaser’s ownership of the property. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. While a Buyer must look at the potential deal-breakers to determine what sort of contingencies they will push for (or demand), a Seller must have an understanding of how far it is willing to bend to make the deal happen. The exact terms of the contract will differ as they must be agreed upon by both buyer and seller. Do Not Sell My Personal Information, Purchaser may purchase survey and title reports, Purchaser to notify seller of objectionable or problematic title/survey matters, Seller should have a period to investigate/correct, Purchaser may elect to proceed regardless of the problem, Satisfaction of reports determined solely by Purchaser, Purchaser should be obligated to immediately notify Seller of title/survey objections, Purchaser’s satisfaction of reports should be held to a standard of reasonableness, If Seller cures the problems, Purchaser should be obligated to proceed to closing, Purchaser should have a limited time frame in which to raise title objections, Satisfactory condition of any improvements on the Property, ongoing cooperation of key business partners or joint-venture participants, obtaining tax abatement or other financial incentives with respect to the property, ability to acquire necessary insurance coverage, ability to reach agreements with necessary lessees, vendors or other parties. 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