​Excessive due diligence?

[Justin Whitfield]

Where do you draw the line on excessive/obsessive due diligence?

My family owns an apartment building that has a great rent roll history and has been a great property for years.  Another investor approached us and was interested in buying it, and we have worked with him to get him all the information he needs and got him access for him to personally inspect the property.

Yesterday we found out that he called the fire department to ask about any previous fires at the address, and the fire department told him there had been a fire there 10 years ago (there has not been a fire of any kind in the 35 years my family has owned the building) and worse, they told him that the fire report shows it as being a single family residence (it was officially zoned multi-family years before my family purchased it).

 Next, he called the cities zoning and planning division and asked them about the property and told them what the fire department said. The person from the planning department he spoke with did not know and simply told him "that's probably correct" and then initiated a required building and fire code inspection for the property because of "a fire in the last 10 years with no inspection".

The building completely meets fire code and has all the proper smoke detectors and fire extinguishers with updated tags, so I am not worried.  However, this got me thinking about when is there too much due diligence you can perform? This man has created a whirlwind of issues that literally don't exist.  In fact, the fire department inspected the building 2 years ago as a requirement for getting my insurance renewed, and this didn't show up on the city records.

Thoughts?