What are Seller’s Remedies if Buyer Refuses to Deliver the Due Diligence Fee?
QUESTION: I represent sellers who received an offer on Standard Form 2-T that included a substantial Due Diligence Fee. My clients accepted the offer, and I promptly delivered the fully executed contract to the buyer’s agent. When I called that agent two days later to inquire about the Due Diligence Fee, she informed me that her client had changed her mind and would not be delivering that fee. What are my clients’ rights in this situation?
ANSWER: We answered a very similar question several years ago. Our answer can be found here. While our answer has not changed, a recent change to Standard Form 2-T has made the answer to this question much more explicit in the contract itself.
The change in question is in paragraph 1(d) of Form 2-T. New wording has been added there to expressly state that if Buyer does not timely deliver the Due Diligence Fee (after receiving written notice to do so), Seller has the right to terminate the contract upon written notice to Buyer “and Seller shall be entitled to recover the Due Diligence Fee together with all Earnest Money Deposit paid or to be paid in the future.” Paragraph 1(d) goes on to note that Seller may also be entitled to recover reasonable attorney fees and court costs. The new wording makes it absolutely clear that Seller is entitled to recovery of the Due Diligence Fee and the Earnest Money Deposit even if Seller elects to terminate the Contract.
A related change was made to paragraph 4(g) of Form 2-T. New wording was added to make it explicit that Buyer may only exercise Buyer’s right to terminate the contract during the Due Diligence Period if Buyer has delivered any agreed-upon Due Diligence Fee to Seller.
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