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Ordering Title Searches When Negotiating a Lease: Is the Failure to do so Malpractice?

As tenant’s counsel, did you ever think it was good practice to order a title search when your client contemplated putting in expensive improvements or in other situations where the lease may have value? The cost is modest and the information obtained by such a search can reduce the risk of your client being hurt by unintended adverse title matters.

Memorandum of Lease Clause: No More Significant than the Gender Clause??

A Memorandum of Lease or Short Form Lease (MOL) is usually a very short document (one to five pages in length, on average, depending on the complexity of the lease and the jurisdiction of the premises). The MOL typically contains only the most critical, but not confidential, provisions of a lease (e.g., a description of the premises; the term of the lease, including renewal rights; right[s] of first refusal; exclusive use clauses; etc.). A MOL is recorded wherever deeds are recorded, and the recording fees are typically paid either by the party designated in the lease, or, if not so designated, by the party requesting the MOL. Depending on the jurisdiction, the costs to record a MOL can be nominal or quite large.

The Art Of Reviewing A Leasehold Title Insurance Commitment

Often overlooked, leasehold title insurance policies and the title commitment that precedes them are not to be ignored. The commitment, itself, is a prime part of a thorough due diligence review for a leasehold because it reveals information that may not affect title to the property or to the leasehold but expose the rights that others have at the property that can inhibit the tenant’s intended use. For example. it may show maintainance obligations or exclusive use rights held by others. Ignore a leasehold title insurance commitment at your own risk.

The Application of the New Jersey Realty Transfer Fee to Transactions Between Related Entities

The New Jersey Tax Court has rejected the Division of Taxation’s regulations that sought to require payment of a realty transfer fee in connection with deeds to some related entities.

Be Ambiguous at Your Own Risk: Sloppy Draftsmanship Bites Again!

Ambiguous or vague contract provisions are an invitation for a court to undo the actual intentions of parties to an agreement. Be careful to write what you mean because failing to do so will upset the predicabilty of your contract or lease and allow a court to rewrite your agreement after the fact.

Crafting Letters of Intent in Purchase Contracts

A letter of intent or “LOI” is a valuable tool to be used when negotiating a deal for the purchase or sale of commercial property. It can clarify the key terms, making it easier to draft the contract. Here are some common items to address when preparing an LOI. Remember that each deal is different, so the LOI must be tailored to your specific deal.

Exclusive Use Clauses

When a retail tenant signs a lease, it does so with the intention of operating a particular business. In order to be successful, a tenant needs to maintain a competitive advantage over other tenants in the same center. With this in mind, many commercial retail leases include a very thorny and hotly-negotiated provision, called the “exclusive use” clause. The inclusion of an exclusive use clause, or a decision not to do so, is a critical issue, and is one that is commonly glossed over by the parties.

Successor Liability For Employment Tax Liabilities

Generally, when a business acquires the assets of another business it will not be liable for the seller’s debts and liabilities unless the buyer expressly agrees to assume them. There are exceptions to that principle. Pursuant to the doctrine of successor liability, the buyer can be held responsible for the seller’s debts if: (a) the transaction is a de facto merger of the two companies; (b) the new company is a mere continuation of the business of the old company; or (c) the transaction was fraudulent and entered into only to avoid liability.

Use Of Trademarks and Other Intangible Personal Property As “Like-Kind” Property in a 1031 Exchange

Under certain circumstances intangible personal property may be used as part of a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code. Now, in a Chief Counsel Opinion, it has been concluded that, except in rare and unusual situations, intangible personal property that can be separately described and valued apart from goodwill can qualify as like-kind property for like-kind exchange purposes as long as it also satisfies the nature and character rules set forth in Section 1.1031(a)-2(c)(1).

“Development Rights” As “Like-Kind” Property As Part of a 1031 Tax-Deferred Exchange

Development rights qualify as real property interests in a “like-kind” exchange if: (a) the development rights are “in perpetuity”; (b) the development rights are directly related to the taxpayer’s use and enjoyment of the underlying real property; and (c) the sale of development rights is done as part of an arms-length transaction.

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