Property update — February 2014: delays in transactions
By Cassandra Cartwright
When negotiating heads of terms for a transaction, it is quite common for the parties to agree various matters based on the date of completion of the deal. What will be the liability period under any construction warranties, for example? When will the tenant’s rent-free period start and finish? For how long after completion will the buyer be able to hold on to money retained from the seller out of the sale proceeds?
If the completion date is delayed, it might be wholly in order for the rights and obligations being created in the documentation to ‘shift’ with the timetable. But it is something to be aware of: in certain circumstances, the commencement — and end — date of the rights and obligations might need to be revisited immediately prior to the lease or contract or warranty being entered into.
The risk of increasing, overall, the length of a period of obligation or entitlement tends to arise where the parties are already ‘doing’ something before the formal documentation is completed. If a new building is put up, but the contractor’s warranty is not given until several months later, the six- or 12-year period under that warranty might inadvertently only start once the warranty is formally completed, rather than on the date when the building works finished…
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