We explain the feasibility period in Houston commercial purchase contracts: when it starts, independent consideration, earnest money, termination notice and extensions.
Once a Houston commercial purchase agreement is signed, the most important clock in the deal usually starts running: the feasibility or due diligence period. It is the window when the buyer studies the property and decides whether to move forward. For the seller, it is the stretch when the deal is most likely to fall apart. Both sides do better when they understand how the window is built before they agree to it.
What the feasibility period is
Commercial deals in Texas run on negotiated purchase and sale agreements. Some are drafted from scratch by counsel. Many start from the forms Texas REALTORS publishes for its members, such as the Commercial Contract-Improved Property (TXR 1801) and the Commercial Contract-Unimproved Property (TXR 1802). In those forms, the buyer may terminate for any reason within a stated number of days after the effective date by giving the seller written notice of termination. The parties fill in the number of days. Nothing about the length is standard, so treat it as a business point to negotiate.
When the clock starts matters as much as how long it runs. The Texas REALTORS improved property form defines the effective date as the date the title company receipts the contract after all parties sign. Negotiated agreements sometimes tie the start to the seller's delivery of its documents instead, so the buyer is not burning days waiting on a rent roll. Whatever the contract sets, put the exact deadline on a calendar on day one.
Independent consideration and earnest money
Texas law treats an unrestricted right to walk away as an option, and an option needs consideration to be enforceable. Texas REALTORS explains that the independent consideration in its commercial forms is non-refundable, and that if there is none, or it is refundable, the termination right becomes unenforceable. The seller keeps it whether or not the buyer terminates, and it is credited to the price only if the sale closes. The amount is negotiated.
Earnest money is a separate deposit, usually held by the title company. In the Texas REALTORS forms, a buyer who terminates within the feasibility period gets the earnest money back, less any independent consideration the seller keeps. Once the period ends without a termination, the buyer's ability to recover the deposit generally depends on the remaining contingencies and remedies in the contract. Negotiated agreements often say exactly when some or all of the earnest money goes hard, so read that clause closely.
Termination notice mechanics
A termination right only helps if it is exercised correctly. The contract's notice clause controls how notice must be given and when it counts as delivered. The Texas REALTORS forms require written notice, list the delivery methods that work, and state that time is of the essence. A phone call or a casual email to the listing broker may not qualify. Send written notice by a method the contract allows, to the addresses it lists, before the deadline, and keep proof of delivery.
What the seller should deliver
The contract usually lists the documents the seller must deliver and how many days it has to do so. On an income property, expect items like these:
- Rent roll and leases. A current rent roll and copies of all leases, amendments and guaranties.
- Operating statements. Income and expense history, tenant reconciliations and recent tax statements.
- Service contracts. Maintenance, management, utility and other agreements, so the buyer can decide which to keep.
- Prior reports. Earlier environmental assessments, geotechnical studies, surveys and as-built plans.
Buyers should log each delivery date and flag anything missing in writing.
What buyers test inside the window
The feasibility period is when the buyer pays for its own investigations. A typical scope on a Houston office, industrial or retail asset includes:
- Physical condition. A property condition assessment covering roof, structure, parking, MEP systems and deferred maintenance.
- Environmental. Usually a Phase I. Our guide to Phase I environmental site assessments covers that process.
- Title and survey. These often run on their own objection deadlines. See our post on the title commitment and ALTA survey.
- Use and restrictions. Houston has no zoning ordinance, but deed restrictions, plat notes and city development rules still shape what you can do. Confirm permits and certificates of occupancy match the current use.
- Financing. Lender appraisals and third party reports take time. Line them up so the loan process does not outrun the window.
Extensions and how they get negotiated
Reports run late and lenders ask for more. Some contracts build in an extension the buyer can trigger by depositing more earnest money before the original period ends, and part of that deposit may become additional independent consideration. Without a built-in right, an extension is a written amendment both parties sign. Sellers often ask for something in return, such as a larger deposit or a portion going non-refundable. Ask early, explain the reason and put it in writing before the deadline passes.
The seller's side of the window
Sellers want the period as short as the property allows. The best way to get there is document readiness: a clean rent roll, organized leases, recent operating statements and prior reports ready the day the contract is signed. Delivering promptly removes the buyer's argument for more time. Sellers should also watch inspection access, insurance and restoration duties. When we represent owners through investment sales, we build that data room before the property goes to market.
This is general information, not legal advice. Work with your real estate attorney on contract terms and deadlines.
Plan your diligence window with us
Whether you are buying or selling commercial property in Houston and want help setting a realistic feasibility period and staying on schedule, reach out to our team.