Leases: A Ticking time Bomb in Your Company's Merger

New York, New York, UNITED STATES

NEW YORK, Oct. 21, 2014 (GLOBE NEWSWIRE) -- Moses & Singer LLP attorney Richard E. Strauss, Co-Chair of the firm's Real Estate practice, addressed critical issues affecting commercial real estate leases in his feature article, "Leases: A Ticking Time Bomb in Your Company's Merger?" The article was published in Real Estate Issues® (Vol. 39, No. 2, 2014), a publication of the Counselors of Real Estate, a nonprofit professional organization for leading real estate advisors around the world.
"If a business sale or acquisition is on the horizon, real estate tenant leases may play a central role in the inventory of business assets," observed Richard.  The leased premises may house an essential office location, plant or retail stores.  "Implicit in the price may be the buyer's ability to use and exploit these key locations through the tenancy."

Both buyers and sellers need to deal with assignment provisions found in the leases.  "Ideally," Richard notes, "the assignment provisions of a lease should not hold up the sale of the entire business.  But parties need to know that closing the sale may trigger the loss to the buyer of important lease rights.  Furthermore, the seller or a guarantor may continue to be liable under the lease even after the assignment."

The article spells out why it is crucial for both parties to review assignment clauses early in a transaction, including the need to obtain the landlord's consent.   He discusses how this impacts the structuring of a deal especially since some structures may facilitate assignments more readily than others.  Finally he discusses what can be done if a lease cannot be assigned.

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