💡 Plain English Explanation

This clause protects the comprehensive package of due diligence materials shared during real estate transactions. Due diligence materials include title information, environmental reports, property condition assessments, and other critical documents that buyers need to evaluate a property thoroughly.

These materials often reveal issues that could affect property value or create liability. The clause establishes clear rules about how this sensitive information can be used, shared, and what happens to it if the deal falls through.

Due diligence materials typically include:

⚠ Why This Clause Matters

For Sellers: Due diligence materials may reveal problems you would rather not become public knowledge. Environmental contamination, structural issues, or title defects could affect your ability to sell to other buyers or could be used against you in negotiations. You need assurance that this information stays confidential if the deal fails.

For Buyers: You invest significant time and money in due diligence. You need clarity on whether you can rely on seller-provided reports, whether you can share them with your consultants and lenders, and what happens to reports you commission if you do not proceed with the purchase.

Third-Party Considerations: Many due diligence reports are prepared by third parties (engineers, environmental consultants, title companies) who retain certain rights. The NDA should not purport to transfer rights the seller does not own.

📄 Clause Versions

Balanced Version: Reasonable protection for due diligence materials while permitting standard transaction activities. Acknowledges reliance limitations and addresses return/destruction obligations. 
"Due Diligence Materials" means all documents, reports, and information provided by or on behalf of the Disclosing Party for the Receiving Party's evaluation of the Property, including but not limited to:

(a) Title commitments, title policies, surveys, and legal descriptions;
(b) Exception documents, including easements, covenants, conditions, and restrictions;
(c) Phase I and Phase II Environmental Site Assessments and related correspondence;
(d) Property Condition Assessments (PCAs), engineering reports, and inspection results;
(e) Structural, mechanical, electrical, and plumbing system evaluations;
(f) Roof condition reports and warranty documentation;
(g) ADA compliance assessments and accessibility reports;
(h) Seismic and geological assessments where applicable;
(i) Insurance loss history and claims information;
(j) Litigation history and pending claims affecting the Property; and
(k) Regulatory compliance documentation and correspondence with governmental authorities.

The Receiving Party agrees to:
(i) Use Due Diligence Materials solely for evaluating the potential acquisition;
(ii) Share Due Diligence Materials only with representatives having a need to know;
(iii) Not rely on seller-provided reports without independent verification;
(iv) Return or destroy all Due Diligence Materials upon written request if the transaction does not close.

The Disclosing Party makes no representation or warranty as to the accuracy or completeness of any Due Diligence Materials prepared by third parties. The Receiving Party acknowledges that certain reports may be subject to reliance limitations imposed by the preparing consultants.
Disclosing Party Favor: Maximum protection for sensitive due diligence findings. Strict limitations on sharing, explicit disclaimers, and comprehensive return/destruction requirements. Use when materials reveal significant issues. 
"Due Diligence Materials" means any and all documents, reports, studies, assessments, and information of any kind relating to the physical, environmental, legal, or regulatory condition of the Property, whether prepared by the Disclosing Party, its consultants, or third parties, including without limitation:

(a) All title information, including commitments, policies, searches, surveys, and all recorded and unrecorded documents affecting title;
(b) All environmental information, including Phase I, Phase II, and any other environmental assessments, remediation plans, regulatory correspondence, and compliance documentation;
(c) All property condition information, including engineering reports, inspections, assessments, and evaluations of any building system or component;
(d) All compliance information, including ADA, fire code, building code, and other regulatory compliance assessments;
(e) All insurance and risk information, including loss runs, claims history, and underwriting reports;
(f) All litigation and dispute information, including pending and threatened claims;
(g) All governmental correspondence, including notices of violation, enforcement actions, and regulatory inquiries; and
(h) All analyses, summaries, or notes prepared by the Receiving Party based on any of the foregoing.

The Receiving Party covenants and agrees that:
(i) All Due Diligence Materials are provided for informational purposes only and without any representation or warranty of any kind;
(ii) The Receiving Party shall conduct its own independent investigations and shall not rely on any Due Diligence Materials;
(iii) The Receiving Party shall not disclose any Due Diligence Materials to any person other than its legal counsel without prior written consent;
(iv) The Receiving Party shall not disclose any environmental findings, title defects, or property condition issues to any governmental authority, tenant, or third party;
(v) Upon termination of discussions or written request, the Receiving Party shall return all originals, destroy all copies, and certify such destruction in writing within five (5) business days; and
(vi) The confidentiality obligations with respect to environmental and property condition findings shall survive indefinitely.

THE RECEIVING PARTY EXPRESSLY WAIVES ANY RIGHT TO RELY ON ANY DUE DILIGENCE MATERIALS AND RELEASES THE DISCLOSING PARTY FROM ANY LIABILITY ARISING FROM THE RECEIVING PARTY'S USE OF SUCH MATERIALS.
Receiving Party Favor: Balanced protection that permits necessary sharing with transaction parties. Allows buyer to retain certain work product and addresses reliance rights on third-party reports. 
"Due Diligence Materials" means only the following categories of non-public documents provided by the Disclosing Party:

(a) Proprietary title information not available from public records or title companies;
(b) Environmental reports prepared specifically for the Disclosing Party and not otherwise available;
(c) Engineering and inspection reports commissioned by the Disclosing Party; and
(d) Insurance loss history and claims information not available from industry databases.

Due Diligence Materials expressly excludes:
(i) Title information available from public records or obtainable from any title company;
(ii) Environmental information available from regulatory databases or obtainable through standard Phase I inquiries;
(iii) Property condition information discoverable through standard inspections;
(iv) Reports commissioned and paid for by the Receiving Party; and
(v) Information the Receiving Party is legally required to disclose.

The Receiving Party may:
(i) Share Due Diligence Materials with its officers, employees, lenders, equity partners, attorneys, accountants, and consultants;
(ii) Retain copies of Due Diligence Materials as required for legal or regulatory compliance;
(iii) Rely on reports for which the Disclosing Party obtains reliance letters in favor of the Receiving Party;
(iv) Commission its own reports and retain such reports as its own property; and
(v) Disclose environmental conditions as required by law or regulation.

The Disclosing Party agrees to use reasonable efforts to obtain reliance letters for third-party reports upon request. Confidentiality obligations shall terminate upon the earlier of (a) closing of the transaction, or (b) eighteen (18) months from the date of this Agreement.

💬 Key Considerations