By: Thomas Law Group On: October 19, 2022 In: Business/Employment Comments: 0

It is extremely common for a buyer to conduct a due diligence investigation of a seller when purchasing a business. At the very least, the buyer (or the buyer’s lender) will conduct a UCC lien search. However, a due diligence investigation on the seller isn’t just for buyers and should be done by the seller as well.

Sellers should engage in a due diligence search, involving a UCC lien search, litigation search, and real property lien search, to discover any liens or other items that need to be removed and “cleaned up” prior to closing. This is important because the seller is generally warranting to a buyer that the property it is selling will be done so “free and clear” of all liens or other encumbrances. The sooner that a seller is aware of these items the sooner they can be remedied. It is not uncommon for a seller to discover that a lender failed to properly remove a lien for an old loan that has long been paid, or that an old lien, in particular a State tax lien, that has never been addressed. It can take a seller some time to work with a lender or government entity to remove old liens and the inability to remove a line prior to closing on a transaction can cause delay of the sale.

The attorneys at Thomas Law Group can assist in conducting a due diligence investigation and remedy any issues that a search may show prior to, or at closing, to ensure a smooth sale and closing.