Change Of Control Lease Agreement

Change Of Control Lease Agreement

If one of the parties decides to retire and transfer its rights to a third party, or if the existing party decides to enter into a partnership with the third party, or if the existing party decides to outsource a sub-contract with the third party, such decisions would affect the administration of the contract, then that clause becomes important. For mergers, commercial sales, joint ventures, acquisitions, employment contracts, partnership changes, etc. The analysis of the lease transfer provisions in the context of a merger should not stop here. Even if a merger is not limited by the terms of the lease, if the stages of the merger involve the “movement” of the merged entity within its corporate structure or in that of another family of companies (as may be the case with a merger and acquisition), restrictions on the change of control could be triggered. For example, if the majority shareholders of the pre-merger of tenants become minority shareholders in the tenant merger, the amendment to the control provisions of the tenancy agreement could also apply. One of the challenges in dealing with the less explicit change in control provisions is whether the amendment to the control clause should cover the “low” or “upper bottom” of the tenant`s business structure. In other words, it is appropriate to consider whether the amendment to the control clause should limit not only a direct change in the tenant`s control, but also changes in the control of the tenant`s direct parent company, related businesses and/or its final parent company. If a business tenant commits a change of ownership or control over the tenant unit, which is prohibited by the provisions of the transfer of the tenancy agreement without the prior written consent of the lessor, the consequences can be devastating. As soon as the change of owner or control of the rental company occurs and the tenant has not been able to obtain the landlord`s written agreement, the tenant may have committed an incurable delay under the tenancy agreement. If the tenancy agreement contains a conditional requirement and the landlord finds that a change of landlord prohibited or a prohibited control of the tenant unit has intervened, the landlord can give notice to heal the tenant`s delay and, if the delay is not healed within the specified healing period, the lessor can simply terminate the rental contract. Depending on the particular facts and circumstances, the tenant cannot cancel the change of available landlord or the control of the tenant unit to remedy such a default, which could then lead to the termination of the lease and the forfeiture of the tenant`s entire property. In order to avoid the draconian consequences of an incurable rental delay, a business tenant should seek clarity and precision in formulating changes to the control provisions. In developing the leasing provisions, tenants should clearly define the concepts of “control” and “change of control.” In this regard, a business tenant helps determine in the future whether a business restructuring or transfer of assets is considered a transfer under the lease agreement, which requires the prior written agreement of the lessor and/or the recapture rights of the lessor.