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

Description

Leases are the contractual basis for rental income and the value of a 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.

Practitioners must identify and interpret various lease provisions regarding the landlord's and tenant's obligations 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, and use and noncompete restrictions.

Counsel must also review any SNDA provisions 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 regarding both property economics and legal concerns and provides a detailed analysis of these lease provisions. The panel will also discuss the points to address in the tenant estoppel and how the tenant estoppel can be used to confirm terms or facts that may be unclear in the lease itself.