I truly enjoyed moderating a panel at the #bisnow Greater DC 2020 Forecast event at the Marriott Marquis DC. I remain grateful for the candor and tremendous insight provided by the panel members (and thank Bisnow for the invitation). https://t.co/j5E2XPf6iRpic.twitter.com/sp4h9XoWoO
Some tenants think that subleasing office space is a more attractive alternative to signing a direct lease in an office building. For example, a tenant may find better space or a shorter lease term with a sublease versus direct lease. However, tenants should consider some potential challenges to subleasing before signing a letter of intent. Our motto is “every sublease is different.” Here are some things to think about.
Time and Cost: Subtenant’s counsel will need to review the prime underlying lease as well as the sublease agreement. In many cases, counsel will also need to review and negotiate a landlord consent agreement as well. Therefore, the document review and negotiation for a sublease may wind up being as, or more, time consuming and costly versus negotiating a direct lease. If the lease provides that a separate approval process has to occur before the landlord will consent to the subtenant’s
When a borrower places a lien on a commercial real estate (“CRE”) asset as part of a lending transaction, part of the collateral granted includes an assignment of the rents generated by the asset (often defined broadly in the loan documents, “Rents”). Unless a CRE loan is made subject to some form of pre-default cash management/clearing or some other restriction on budget or cash flow, a borrower receives, manages and distributes Rents without lender oversight or restriction unless and until there is a loan default. Consistent with this status quo, the loan documents will often provide that the borrower has a license to collect, receive and enjoy Rents until there is a default under the loan, at which point the lender has the right to revoke such license. For purposes of this article, we will refer to a loan that is not subject to cash management/clearing as an “Ordinary CRE …
CONSIDER ADVANCE PERMISSION FOR UTILITY EASEMENTS: The grant of utility easements, even if within the ordinary course of business or beneficial to a property, may fall within a transfer restriction, or other restriction, in loan/financing documents. Consider whether the following language (or other language appropriate in your circumstances) might be a helpful addition to your borrower/owner client’s loan documents to avoid an unintentional default under a loan or recourse liability under a non-recourse carve-out guaranty. Often times, a non-recourse carve-out guaranty will provide for full recourse in the event of a prohibited Transfer (which may technically include the grant of a utility easement).
The granting of easements for public utilities or for other public purposes consistent with the intended use of the [Property/Common Elements] shall not be deemed a transfer within the meaning of this clause.…
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