The Bottom Line
- Due Diligence is King: A Dutch court has reinforced that warranties do not protect a buyer from information that was made available during due diligence, even if its financial implications were not fully understood by the buyer.
- The Limit of Warranties: A seller’s warranty that “no side agreements exist” was not breached when post-sale costs arose from maintenance obligations detailed within the primary lease documents provided to the buyer.
- Contractual Risk in Q&A: Purchase agreements can validly place the risk of an unsatisfactory or incomplete Q&A process on the buyer, making it crucial for the acquiring party to secure complete and satisfactory answers before signing.
The Details
In a recent decision, the Amsterdam District Court provided a sharp reminder of the importance of meticulous due diligence in commercial real estate transactions. The case involved the buyer of an office building (AMS) suing the seller (AQS) after being hit with nearly half a million euros in maintenance costs by the building’s tenant. AMS claimed these costs stemmed from undisclosed obligations, arguing that AQS had breached several warranties in the purchase agreement. Specifically, AMS pointed to guarantees that all agreements were disclosed and that no separate “realisation agreement” with the tenant existed for additional investment contributions.
The court, however, sided firmly with the seller. The judges found that the maintenance obligations that led to the costs were not part of a secret side deal but were detailed within the lease agreement and the Multi-Year Maintenance Plan (MJOP). Crucially, these documents had been placed in the data room and were available to AMS and its advisors during the due diligence period. The seller had warranted that no separate agreement existed, which was factually correct. The financial obligations arose from the very documents the buyer was expected to scrutinize. The court determined that AQS had fulfilled its duty to inform by providing the relevant documentation.
This ruling underscores the high bar for claiming breach of warranty or legal mistake (“dwaling”) when information is technically available. The purchase agreement explicitly excluded claims based on legal mistake and, significantly, contained a clause stating that the buyer accepted the risk if it was not “entirely satisfied” with the answers provided in the Q&A process. AMS had asked questions about maintenance obligations but did not pursue them further when the answers referred back to the provided documents. The court concluded that the responsibility—and the risk—lay with the buyer to connect the dots between the documents in the data room and the potential future costs.
Source
Rechtbank Amsterdam
