Building on the excitement generated by last week’s blog posting (to see it again or for the first time, click: HERE), we “Press on Regardless.” [“POR,” as we know it – ask us, see HERE]. Briefly summarized, we think a property seller should make representations in the purchase agreement as part of its answers to what would be reasonable and appropriate due diligence questions from the buyer. For a more thoughtful, though not necessarily commanding, explanation read through today’s posting until its putative end, and we’ll try to do a “wrap-up.”

Extending the list we started last week, here are some additional representations we suggest a buyer might ask for and a seller should deliver:

No party or entity has any rights of possession or oc­cupancy to the Property except for the persons occupying un­der the Leases. Seller will promptly provide Purchaser with 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]. 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.

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Last week, we Ruminated about what “AS-IS” might mean in an agreement and when it might be an appropriate “agreement.” You can see that posting by clicking HERE. Basically, we think that the contracting party in the “best position to know” should “take the risk.” Sometimes, however, the one with the “lesser” knowledge may not need to rely on the one with the “best” knowledge. For example, Someone who owns a car for all five years of its life is in the “best” position to know if it leaks oil, but if it only takes ten seconds to look under the car, then it wouldn’t be unreasonable to ask a buyer to take the risk that the car leaks oil. Of course, if the seller fraudulently hid the leak or refused to allow inspection, that’s separately actionable.

Today (and in next week’s blog postings) we’re going to cover “AS-IS,” but in the context of a property purchase agreement and only as to how accepting a property in its “AS-IS” condition bears on the kind of representations a buyer might want to get from the seller. That’s a long and awkward way to say we are writing about representations a seller might be asked to make in a property purchase agreement. [Read more…]