A due diligence condition gives a buyer the opportunity to look further into things such as property searches and enquiries, town planning and financial viability property before deciding whether to proceed with the purchase. If the results found are not satisfactory to the buyer, usually at their own discretion, then the buyer may terminate the contract and the wording of the condition should be worded correctly so that the buyer receives their deposit back in full, should they elect to terminate under the due diligence condition.

This is why it is important that a buyer obtains advice before signing a contract, to ensure that:

• There is a due diligence condition in place; and
• The due diligence condition is worded correctly to protect the buyer. 

The buyer will often not need to provide an explanation or act reasonably when terminating under the due diligence condition.

Why is timing so important?

A due diligence condition is generally time-limited, and the buyer will have a set amount of time to complete their investigations and notify the seller whether they are satisfied or not with their results.

For example, this time limit could be 14 or 21 days from the date the contract is signed by all parties. This is where the concept of time being “of the essence” becomes crucial. If the buyer does not act within the specified timeframe, they may lose the right to terminate the contract under the due diligence condition and may be required to proceed with their purchase, if they have no other right of termination under the contract.

Delays in receiving search results are common and there are many reasons why searches may not arrive back prior to the due diligence date. Councils and other authorities can have delays, or scheduling certain inspections may be harder during busy periods, also leading to delays.

What are my options if the searches do not arrive by the due diligence condition date?

If you’re getting close to the due diligence condition date and your searches haven’t come back yet, you generally have two options:

• Request an extension of the due diligence condition: You can ask the seller for an extension of the condition to allow further time for the searches and other enquiries to return and for you to make an informed decision as to whether you wish to proceed with the purchase or not. If you need more time, you must request and secure the extension before the due diligence period expires. The seller does not have to agree to this extension, so if an extension is required it is best to request it as early as possible.

• Take the risk and satisfy the condition: If you decide not to request an extension, or the seller has declined the extension request, and you still wish to continue with the contract, you can opt to waive the benefit of the due diligence condition. This means that you lose the right to terminate the contract based on any adverse results that may be found in the searches yet to be returned, or other enquires you have made. This can be a risky decision that should not be taken lightly.

Every contract is different. Our property team can help you understand your rights under a due diligence condition and assist with negotiating extensions or terminating a contract if necessary.

Please contact our property team should you have any questions regarding your property contract.