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Early Termination Provisions: A Landlord's Saving Grace … If Done Right
To commercial landlords, the ideal lawyer is one that can predict the future. And in the context of buying and selling New York City real estate, that means lawyers who can craft lease provisions to pre-emptively thwart tenant-holdouts seeking cash buyouts in exchange for surrendering and vacating their premises. The scenario usually plays out like this: landlord markets the building for sale; buyer tenders an offer on the condition that the building be conveyed vacant on the closing date; tenant demands an exorbitant amount of money from landlord in exchange for vacatur; landlord scours the lease for any possible tactical advantage in its negotiation with tenant; landlord finds none and capitulates to tenant's demand or loses the deal. A win/win for the tenant.
A lease provision that affords landlords the tactical advantage they need in such scenarios, and the focus of this article, is the “early termination provision” (hereinafter as the termination provision). Specifically, this article seeks to: 1) guide the practitioner through the pitfalls of a poorly drafted termination provision; and 2) advise the practitioner how to craft a proper and effective termination provision.
Case Study
The following termination provision was encountered by this author in connection with a building that a client was considering purchasing:
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