What is Sale Leaseback Agreement Drafting?
A sale leaseback agreement is a legal contract that outlines the terms of a financial arrangement between a buyer and seller. How it works is that the owner/seller sells a valuable asset, such as property, to the buyer, then continues to use it with a lease.
Such an arrangement helps a company to earn a lump sum upon selling the asset while still being able to use it by leasing it back. It also prevents them from having a financial burden of debt.
If you want to draft a sale leaseback agreement, read the rest of this article. We’ll explore essential information you should include in the contract and how a lawyer can assist you with the drafting process.
What Key Information Should Your Sale Leaseback Agreement Include?
When drafting a sale leaseback agreement, it should contain these core essentials:
- Lease length. State the duration of the agreement, which is usually a long-term commitment.
- Renewal. Outline if there will be a lease extension and how it can be implemented.
- Sale price. This is the amount of money the buyer will pay to purchase the asset.
- Rent rate. Specify the starting monthly, quarterly, or annual rental payment the seller will pay for the lease.
- Escalation. How the rental payments will increase over time must be specified to prevent surprise costs.
- Repairs. Explain which party is responsible for repairing the asset, such as if it’s heavy machinery or other equipment.
- Default. Should the seller not make payments on time, the agreement should explain what happens.
- Guarantees. This outlines the parties’ financial assurances for rental payments and other agreement terms to stay on track.
What Should You Bear in Mind When Drafting a Sale Leaseback Agreement?
Since a sale leaseback arrangement needs to provide clarity for parties to prevent disputes, there are some important things to consider when drafting the agreement.
Describe the Asset
You should clearly define the asset so that there’s no confusion over what is being sold and leased. Be specific. For example, if the asset is property, you should provide a legal description of it, unit numbers, addresses, and more.
State the Purchase Price
Include the exact amount required to buy the asset. This section must explain how the amount is calculated, such as if it’s determined by third-party appraisal. Include a closing timeline for clarity and mention what closing costs will apply.
Make the Sale and Lease Simultaneous
You want the sale and lease to be conducted at the same time so that there are no operational mishaps and the lease takes immediate effect after closing. This gives the seller assurance that they can continue using the asset after ownership transfer.
Explain How to Manage Operating Expenses
Operating expenses and how they’re handled should be outlined in the contract as they can affect the financial value of the transaction. There are different leases that can apply, such as a gross lease in which the lessor covers living expenses.
Should You Hire a Lawyer for Sale Leaseback Agreement Drafting?
It’s advisable to hire a lawyer to draft your sale leaseback agreement, especially because the contract can be complex as it combines an asset sale with a lease arrangement. A lawyer will identify and explain all your legal obligations for clarity.
A lawyer can help you when drafting a sale leaseback agreement by:
- Protecting your interests. A lawyer will negotiate the contract terms so that you get favorable conditions and provisions.
- Complying with legal requirements. They’ll consider all applicable laws, such as property laws, depending on the type of transaction. This ensures the agreement is compliant.
- Identifying hidden liabilities. They’ll explain all potential issues to prevent you from taking on hidden risks, such as if there are property or asset defects.
- Collaborating all documents. A lawyer will ensure that all documents required for the transaction are consistent to avoid creating conflicts or confusing information.
- Writing the agreement with clarity. Since a sale leaseback agreement can be complex, a lawyer can help you to ensure that it’s written in a clear, specific way to prevent disputes.
- Reviewing your agreement. If you’ve already drafted a sale leaseback agreement, a lawyer will conduct an in-depth review to ensure you haven’t missed any essential information, protecting your interests.
Where to Find a Lawyer for Sale Leaseback Agreement Drafting
If you need to hire a lawyer to help you draft a sale leaseback agreement, finding a lawyer is an easy process if you use an online legal platform. This grants you access to a network of qualified lawyers who are experienced to help you.
ContractsCounsel is one of the largest online legal marketplaces that connects you to a network of lawyers. All the lawyers on the platform are vetted and have years of experience in contract drafting and review.
Here are the steps to follow to request that a lawyer drafts your sale leaseback agreement:
- Go to the ContractsCounsel marketplace.
- Post your project for free. You should mention a few details to help you find the most suitable lawyer, such as the type of asset or the parties involved in the agreement.
- You’ll receive multiple bids from lawyers directly on the platform who have the experience to help you.
- Review the lawyers’ profiles. Go through the platform’s lawyer data, such as their location, client ratings for previous projects, expertise, and credentials. This will help you to select the right lawyer for your legal requirements.
- Connect with a lawyer and hire them to draft your sale leaseback agreement for a flat fee.