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In the Spotlight: Options to Purchase in Retail Leasing

By Scott A. Miskimon and Michael R. Thornton
September 24, 2013

When finalizing a term sheet for a new lease, an option to purchase may seem like an easy, last-minute throw-in item to request or to agree to readily. Even during the drafting process for the actual lease agreement, it may be tempting to address only the basics in the option-to-purchase clause in order to leave more time for issues that are more contentious in a typical retail lease. Unfortunately, this approach often results in a bare-bones “agreement to agree” that leaves the individuals responsible for exercising and closing the purchase option years later without sufficient knowledge of the intent of the original parties that made the deal. On the other hand, the intuition to avoid a full-blown purchase and sale agreement to address every possible contingency seems valid when the primary transaction at hand is a lease of the subject property.

This article identifies issues to consider when dealing with options to purchase; whether and how to grant or request an option in the first place; important issues to include in the terms of the option clause in the lease agreement; and how to manage a client's conduct when the parties who have inherited the original lease have been left in a no-man's land of unfinished thoughts and vague suggestions about how to exercise and close the purchase option.

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