Commercial Lease Due Diligence in Real Estate Acquisitions: Key Issues and Best Practices

Buildout Obligations, Termination Rights, Purchase Options, Co-Tenancy, Rental Terms and More

Recording of a 90-minute premium CLE webinar with Q&A

Conducted on Thursday, January 24, 2019

Recorded event now available

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Program Materials

This CLE webinar will prepare real estate counsel to evaluate lease provisions that may significantly affect the purchaser of commercial real estate. The panel will discuss the importance of tenant estoppels and provisions on tenant buildout, termination rights, expansion rights, purchase options, co-tenancy, "go dark," and other provisions.


Leases are the contractual basis for rental income and the value of commercial property. Lease review should confirm that rental terms and expense allocations are consistent with the purchaser's economic underwriting of the property and the seller's rent roll and operating statements.

Counsel should also confirm that all leases and amendments are correctly executed and assignable to the purchaser and that the seller and tenant execute any required assignment documents. Tenant estoppels should be consistent with the leases and address other matters not adequately covered in the leases.

Counsel must identify and interpret various lease provisions regarding obligations of the landlord and tenant that may affect the continued viability of a lease and operation of the property. These include buildout and other responsibilities of the landlord that the purchaser will assume, purchase options or rights of first refusal, termination rights, "go dark" provisions, tenant expansion rights, co-tenancy provisions, use, and noncompete restrictions.

Counsel must also review any SNDA provisions contained in the leases and understand how lenders will view these provisions (or their omission).

Listen as our authoritative panel discusses best practices for lease due diligence about both property economics and legal concerns, and provides a detailed analysis of these lease provisions. Also, the panel will discuss the points to address in the tenant estoppel and how tenant estoppel can be used to confirm terms or facts which may be unclear in the lease itself.



  1. Lease review—economic terms
    1. Rental terms—percentage rent, rent abatement
    2. Allocation of taxes, insurance, maintenance, and other expenses between landlord and tenant
    3. Comparing tenant estoppels, leases and rent roll, and resolving inconsistencies
  2. Lease review—key legal provisions
    1. Tenant improvements—landlord obligations
    2. Use restrictions and noncompete provisions
    3. Renewal/expansion options
    4. Early termination clauses
    5. Purchase options and rights of first refusal
    6. Continued operation—"go dark" provisions
    7. Co-tenancy provisions
    8. Parking requirements
    9. Assignment and subletting
    10. Subordination, non-disturbance and attornment


The panel will review these and other relevant issues:

  • What are best practices for confirming the income and expenses of the property?
  • What remaining tenant buildout and other obligations will the purchaser be taking on as successor landlord?
  • Do any tenants have termination, purchase option, "go dark," or similar rights impacting the lease or the operation of the property?
  • Can the purchaser comply with all use restrictions, noncompete, co-tenancy, and parking requirements contained in the leases?


McPhelin, Hannah
Hannah Dowd McPhelin

Troutman Pepper Hamilton Sanders

Ms. McPhelin concentrates her practice in real estate matters and other business transactions, including the...  |  Read More

Swett, Matthew
Matthew J. Swett

Pepper Hamilton

Mr. Swett is chair of the firm’s Real Estate Practice Group, where he handles a variety of real estate matters...  |  Read More

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