Due Diligence Mistakes That Delay Closings

Due diligence is where commercial real estate deals are won or lost. Yet even experienced investors and developers routinely make mistakes that push closings back weeks—or kill deals entirely.

At Camelback Law Group, we've seen the same issues delay closings time and again. Here are the most common due diligence mistakes and how to avoid them.

1. Starting Too Late

The most common mistake is the simplest: waiting too long to begin. Many buyers treat the due diligence period as a countdown clock rather than an action plan.

A 30-day due diligence period sounds generous until you realize that title commitments can take 10-14 days, surveys take 2-3 weeks, and environmental reports take 3-4 weeks. Start everything in parallel on Day 1.

2. Failing to Create a Diligence Checklist

Commercial real estate due diligence involves dozens of moving pieces. Without a systematic approach, items fall through the cracks—and those items inevitably become closing-day emergencies.

Essential Categories to Track:

• Title and survey review
• Environmental assessments (Phase I, Phase II if needed)
• Physical inspections (roof, HVAC, structure, parking lot)
• Financial review (rent rolls, operating statements, CAM reconciliations)
• Lease review and tenant estoppels
• Zoning and entitlement verification
• Insurance requirements
• Lender requirements and conditions

Use a shared tracking document with deadlines and responsible parties. Review it daily during the diligence period.

3. Ignoring Title Exceptions

Many buyers glance at the title commitment and assume everything is fine if no liens appear. But the real issues often hide in Schedule B—the exceptions from coverage.

Every title exception should be reviewed against your intended use. What seems harmless for the current use may be fatal for your plans.

4. Underestimating Survey Issues

The survey is not just a formality. Survey issues are among the most common—and most expensive—closing delays.

Always order an ALTA survey with Table A items appropriate for your transaction. Review the survey alongside the title commitment—many issues only become apparent when you see both documents together.

5. Incomplete Lease Review

For income properties, the leases are the asset. Yet buyers often conduct only superficial lease reviews, focusing on rent amounts while missing provisions that affect value and operations.

Critical Lease Provisions to Analyze:

• Options: Renewal options, expansion rights, termination rights, purchase options
• Exclusives: Use restrictions that limit your ability to lease other spaces
• Co-tenancy: Clauses allowing rent reduction if anchor tenants leave
• CAM caps: Limits on operating expense pass-throughs
• Assignment restrictions: Consent requirements for lease transfers
• Self-help rights: Tenant rights to make repairs and offset rent

Create a lease abstract for each tenant summarizing key terms. This becomes invaluable for operations and future dispositions.

6. Skipping Tenant Estoppels

A lease tells you what was agreed—an estoppel tells you what's actually happening. Tenants often operate under informal arrangements that modify the written lease.

Require estoppels as a closing condition and start requesting them early. Chasing tenant signatures often takes longer than expected.

7. Environmental Oversights

Phase I Environmental Site Assessments are standard, but many buyers treat them as a check-the-box exercise rather than a genuine risk assessment.

Environmental Red Flags:

• Prior uses involving chemicals, fuels, or manufacturing
• Nearby contaminated sites (check EPA and ADEQ databases)
• Dry cleaners, gas stations, or auto repair shops on or adjacent to property
• Underground storage tanks (current or historical)
• Agricultural use (pesticides, fertilizers)

Review the Phase I carefully and don't hesitate to authorize Phase II testing if Recognized Environmental Conditions are identified. The cost of testing is trivial compared to potential remediation liability.

8. Inadequate Physical Inspections

A general property inspection is not enough for commercial properties. Each major building system requires specialized evaluation.

Get repair estimates, not just condition reports. You need dollar amounts to negotiate credits or escrows.

9. Not Verifying Zoning and Permits

Don't assume the current use is legal. Properties often operate under grandfathered uses, conditional use permits, or variance approvals that may not transfer to a new owner.

Zoning Due Diligence:

• Confirm current zoning designation with the municipality
• Verify current use is permitted (not just grandfathered)
• Check for any conditional use permits and their requirements
• Review any variances and confirm they run with the land
• Assess parking requirements against actual parking count
• Confirm no pending code enforcement actions

If you're planning any changes to the property, get preliminary zoning confirmation before closing.

10. Leaving Insurance to the Last Minute

Insurance is often treated as a closing checklist item rather than a diligence issue. But insurance problems can delay or kill deals.

Engage your insurance broker during due diligence. Get quotes and confirm coverage availability before you're committed to close.

Keep Your Deal on Track

Due diligence delays usually stem from poor planning, not unexpected problems. With a systematic approach and early engagement of the right professionals, most issues can be identified and addressed within standard diligence periods.

The key is treating due diligence as an active investigation, not a passive waiting period. Start everything early, track everything carefully, and escalate issues immediately when they arise.