By Keat Foong, Finance Editor<\/p>\n
Competition for credit-tenanted net lease properties in strong locations is intense, according to Steven Lurie, partner at the law firm of Greenberg, Glusker. Consequently, sales contracts \u201care fairly favorable to sellers\u201d in the current market. \u201cThere are lots of demand for good, well-located properties leased to high-quality tenants.\u201d<\/p>\n
Lurie observed that in the current market, sellers are better able to negotiate, for example, limitations on buyers\u2019 remedies to cap the amount of damages that buyers are entitled to pursue in the event of seller default or breach of warranty.<\/p>\n
For example, if the buyer discovers a breach of contract after closing, there would be a liability cap on the seller’s responsibility. Or if the seller terminates the agreement, the buyer’s recourse is limited to the deposit and out-of-pocket expenses.<\/p>\n
Lurie advises that the net lease property purchasers need to ensure the lease needs are “well drafted and financeable.” The buyer would want to ensure, for instance, that the tenant delivers a Subordination, Non-Disturbance and Attornment Agreement that satisfies the lender. Through the document, the lender would, among other things, aim to prevent the landlord and tenant from amending the lease without their consent and keep the lease in place in the case of foreclosure.<\/p>\n