Are You Buying A Shopping Center? If So, Look Here:

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Looking back at the almost 400 prior Ruminations blog postings, we realized that in the early days, and far less so over the last couple of years, we included a fair number of “forms” or, if not complete forms (as was rarely the case), at least substantive lease provisions or provisions from other commercial real property agreements. A number of readers also noted the same, and some of them have let us know. Generally, those who let us know do so by asking, “When are you going to give us some” agreement provision text to chew over? Well, to satisfy such requests and also because we have been traveling and got a little lazy while doing so, we dedicate today’s blog posting to providing a lot of suggested language for a property acquisition agreement where the property is leased to multiple tenants.

The provisions that follow cover a seller’s representations and warranties and a set of conditions precedent. In each case, they are edited to cover only items related to tenancies at the property to be purchased. You’ll see that what follows includes capitalized defined terms, but their definitions are not in the text provided. In all cases, the definitions are intuitive. Also, there are references to exhibits and no exhibits have been provided. If you are really curious, email us and we’ll look to see if we have a sample to send you. Now, without further ado, here we go:

Warranties and Representations of Seller

(shown only with respect to issues concerning leases and tenancies)

            Section (???).   As a material inducement to Buyer to enter into this Agree­ment and to proceed to its consummation on the Closing Date, Seller makes the following representations, warranties, and agreements upon which Buyer relies.  Each such warranty, repre­sentation, and agreement will be true and accurate at the Clos­ing Date as if made at that time.

            (i)         Seller is fully authorized to enter into and per­form its obligations under this Agreement and to carry out the transactions contemplated thereby.  Seller is a limited partnership duly organized and validly existing under the laws of the State of                           and has all requisite power and authority to own or lease its properties and to carry on its business as now being conducted.  …

            (ii)        The Property is zoned so as to permit the opera­tions of the improvements thereon as said improvements are being operated as of the date hereof; and to the best of Seller’s knowledge there are no known violations of any kind pending or threatened against the Property; and there are no violations of zoning and/or building laws, fire codes, statutes, ordinances, orders, or requirements affecting the Property, noted or issued by any governmental agency or any department thereof, nor has Seller ever received any notice concerning such non-compliance, the terms of which have not been complied with by Seller; and to the extent there are any violations, Seller will cure and remove same prior to the Closing.

            (iii)       Except as set forth on Schedule (iii), attached hereto and made a part hereof, there are no maintenance, service or supply agreements to or for the benefit of the Property which are to be performed or supplied for the Property; and except for those agreements appended to Schedule (iii), all such agreements listed on Schedule (iii) are oral month-to-month agreements cancelable on 30 days’ notice.

            (iv)       Except as set forth on Schedule (iv) there are no real estate brokerage commissions or fees due or payable with respect to the Leases and or the Property; Seller war­rants and represents that the list is complete and that all commissions due and owing the brokers on the list will be paid at or prior to Closing and a release from each of the brokers will be delivered at Closing to Buyer.

            (v)        Seller has no employees working at the Property.

            (vi)       Seller has not received any notice from any tenant, mortgagee, insurance carrier or other person, firm, corporation, or entity of any physical defects requiring repairs on the Property or any other work.

            (vii)      No party or entity has any rights of posses­sion or occupancy to the Property except for the leases (“Leases”) referred to in Schedule (vii) attached hereto and made a part hereof;  The Leases are in full force and effect and all rents are current except as noted on Schedule (vii);  the Leases have not been modified, amended, changed, nor have any consents been granted there­under except as noted on Schedule (vii);  Seller will promptly provide Buyer a copy of any notice of default received from any tenant between the date hereof and the Closing, and Seller will cure any landlord default prior to the date of Closing; Schedule (vii) sets forth the rent roll for the Leases which accurately include:

                       (a)        the name of the tenant;

(b)        designation at the demised premises;

(c)        dates of the Lease and all amendments and modifications thereto, if any;

(d)        the current monthly fixed annual rent per­centage rent, additional rent including base years, if any;

(e)        the amount of security deposit held by the landlord; and

(f)         the legend “yes” or “no” as to whether the tenant has any renewal rights contained in the at­tached lease document and, if so, the terms of rent and additional rent.

            (viii)           No tenant has subleased all or any part of its space nor as­signed its Lease and each tenant is in possession; Seller has the sole right to collect the rents under the Leases and there are no collateral assignments of rents to anyone.

            (ix)      Copies of the Leases and the Contracts which will have been delivered to Buyer pursuant to the provi­sions of Section (???) are true, accurate and complete copies of all documents comprising the Leases and the Contracts, with all supplements, amendments and exhibits thereto, and there are no modifications or other agreements, written or oral, affecting the Leases or the Contracts other than as expressly set forth in the copies thereof so delivered to Buyer.

            (x)       No prepaid rent (other than rent prepaid no more than one month in advance pursuant to the terms of the relevant Leases) with respect to the Property, or other­wise affecting any of the Property has been collected other than as reflected on Schedule (vii) hereto.

            (xi)        Seller has no knowledge or notice of: (a) any intention of any tenant of the Property under any of the Leases to vacate, prior to the termination of the Lease of such tenant, the premises leased by such tenant; (b) any right of offset against rent claimed by any tenant of the Property; or (c) any assertion by any tenant of the Property of rights to improvements not made or options not disclosed on Schedule (vii) hereto.

            (xii)       All rentals with respect to the Leases as shown on Schedule (vii) hereto are legally permissible rents un­der applicable federal, state, and local law, executive or­ders, regulations and ordinances, and none of said rentals are in violation of any federal, state and local law, execu­tive orders, regulations or ordinances.

            (xiii)      The improvements and the heating, ventilating, and air conditioning system a/k/a HVAC), plumbing, drainage, electrical and mechanical systems on the Property are in good operating condition and repair, free of struc­tural defects, and conform with all applicable building codes and other laws, ordinances, codes, rules, and regula­tions.

            (xiv)      Seller has no knowledge or notice of any ex­isting or intended use of any adjacent or nearby real property which would adversely affect the use or value of the Property.

            (xv)     There are no mechanics’, materialman’s, construction or similar claims or liens presently claimed or which will be claimed against the Property for work performed, by any person or entity (including by or for tenants or other occupants of the Property) or commenced prior to the date hereof or prior to the date of Closing.

            (xvi)      The books of account and other records of Seller relating to the ownership and operation of the Property, including financial reports and annual financial statements, originals or copies of which have been furnished to Buyer prior to the expiration of the Due Diligence period are in all respects complete and correct and have been main­tained in accordance with generally accepted accounting principles and good business practice.

            (xvii)  Since the dates of the financial statements furnished to Buyer during the Due diligence Period, there has been no material adverse change in the assets, liabilities or financial condition of the operation of the Property.

            (xviii)     The representations and warranties set forth in this Agreement do not contain any untrue statement of a material fact nor omit to state a material fact necessary in order to make such representations and warranties and infor­mation, in light of the circumstances under which they have been made, are not misleading, and Seller has not withheld from Buyer its knowledge of any material fact or event that has occurred or is about to occur regarding the Property which has had or, so far as it can reasonably foresee, will have an adverse effect on the Property.

          All representations, warranties, and agreements made by Seller pursuant to this Section (???) will survive the Closing.  Seller hereby agrees to defend, indemnify, and hold Buyer harmless from and against any and all losses, actions, claims, liabilities, and damages arising out of or in connection with or founded upon a claim that any of the foregoing representations of Seller are un­true, together with any and all costs and expenses (including reasonable attorneys’ and paralegals’ fees) relating to such claim or arising therefrom or incurred by Buyer in connection with the enforcement of this indemnification provision.

Conditions Precedent

(shown only with respect to issues concerning leases and tenancies)

            Notwithstanding anything to the contrary contained herein the following are conditions precedent to Buyer’s obligation to proceed with this transaction:

(A)         Buyer obtaining all final, irrevocable, uncontestable and unappealable permits and approvals required by municipal, county, state, federal or local governments or any departments or divisions thereof to permit the continued use and occupancy of the Property as is presently used and occupied.

(B) That as of the Closing hereunder no portion of the Property will be subject to any zoning ordinance, building regulation, or any restriction of whatever nature which would in any way prohibit or restrict the continued use and occupancy of the Property as is presently used and occupied.

(C)     That the use and occupancy of the Property is not pur­suant to a variance which would prevent Buyer from rebuilding the Property in substantially the same form as it exists today in the event of a fire or other casualty.

(D)     That the use and occupancy of the Property is not pur­suant to any non-conforming use.

(E)     That no tenant of the Property has filed or is in bankruptcy or is availing itself of the protection of any similar federal or state insolvency law.

(F)     That each tenant at the Property has executed and delivered the Tenant Estoppel Letter in the form and substance attached as Exhibit (B-F) or with such reasonable modifications as are acceptable to Buyer and to Buyer’s lender (if any).

(G)     That each guarantor of a Lease has executed and delivered the Lease Guaranty Estoppel Letter in the form and substance attached as Exhibit (B-F) or with such reasonable modifications as are acceptable to Buyer and to Buyer’s lender (if any).

(H)     That each tenant at the Property has executed and delivered the Subordination, Nondisturbance and Attornment Agreement in the form and substance attached as Exhibit (B-H) or with such reasonable modifications as are acceptable to Buyer’s lender (if any).

            In the event any one or more of these conditions in this Section are not fully satisfied prior to the Closing, Buyer may, at its option, terminate this Agreement in which event the Contract Deposit together with interest will be paid to Buyer and this Agreement will be null and void and of no further force and ef­fect.


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