What is a Sale Leaseback Agreement Review?
A sale leaseback agreement is a legal contract outlining an arrangement between a seller and buyer in which the seller sells their valuable asset to the buyer and continues to use it with a lease. This can be an effective way to turn assets into cash without business operations being affected.
If you’ve had a sale leaseback agreement drafted, you should review it for accuracy and clarity.
Read the rest of this article to explore key terms in a sale leaseback agreement to check, how to review the contract, and why you should hire a lawyer for help with the review process.
What are Key Terms to Check in a Sale Leaseback Agreement?
Some of the most important terms to review in a sale leaseback agreement include the following:
- Duration. Check that the agreement duration is stated clearly and that lease extension options are included if these apply to the financial arrangement.
- Sale price. Verify the accuracy of the amount of money that the buyer will pay to buy the asset from the seller.
- Rental payments. The rental amounts must be checked so they’re accurate. It must be stated if the rent is paid monthly, quarterly, or annually.
- Upkeep. Should the asset require maintenance or repairs, the agreement must include information about which party is responsible for it.
- Defaults. If there is non-payment, the agreement should specify what happens, such as if penalties must be paid.
How Should You Review a Sale Leaseback Agreement?
Once you’ve checked key terms in your agreement, there are other things to look for so your sale leaseback agreement is clear and legally valid.
Check the Asset Description
One of the most important things to check in a sale leaseback agreement is the asset description. You want both parties to understand what is being sold and leased. Include product specifications, model or serial numbers, or unit numbers, depending on the asset.
Consider Operating Expenses
Your agreement must specify how operating expenses should be handled, such as which party will pay utilities and insurance. This prevents confusing or missing information that can lead to disputes.
Analyze Rental Escalations
The agreement must provide clarity for how rental payments will increase over time. Make sure that it’s clear when rental amount increases will occur, how they’ve been calculated, and if increases are capped.
Verify the Title and Ownership
You should check representations about ownership and if there are any encumbrances, such as liens. Clarifying this fosters transparency between parties. Ensure the seller has the legal authority to transfer the asset to the buyer.
Look at Usage
You want the agreement to specify what uses are permitted and prohibited. For example, if the asset is a property, you might place restrictions on alterations or subleasing.
Do You Need a Lawyer to Review Your Sale Leaseback Agreement?
To prevent red flags in your agreement, such as legal jargon that can result in ambiguity, it’s worth hiring a lawyer to provide a legal review of it.
A lawyer can help you by:
- Explaining the agreement. They’ll unpack any legal or complex provisions so you understand all rights and obligations.
- Reviewing the purchase terms. They’ll check the purchase price, payment terms, and what closing conditions are required.
- Verifying the title and ownership. To prevent issues, the lawyer will check that the seller has the right to transfer the asset and note any mortgages or liens.
- Considering responsibilities. A lawyer will determine which party is responsible for expenses, repairs, maintenance, and more.
- Navigating defaults. To protect your interests, a lawyer will help you understand what constitutes a default and what its consequences are, such as transaction termination.
- Thinking about future events. A lawyer will think ahead to ensure you’re protected. For example, if you want to sublease in future, they’ll consider what’s best for you and include necessary clauses in the agreement.
- Flagging any one-sided or vague provisions. They’ll revise anything that can put you at risk, especially regarding long-term obligations.
- Negotiating with the other party. A lawyer will help you to achieve more favorable terms in your agreement by negotiating with the other party on your behalf.
Where to Find and Hire a Lawyer for a Sale Leaseback Agreement Review
If you’d like to hire a lawyer to review your sale leaseback agreement to give you peace of mind, you don’t have to wonder where to find one.
By using an online legal platform such as ContractsCounsel, you’ll gain access to a range of lawyers who can assist you with a contract review.
ContractsCounsel is one of the largest online legal marketplaces that connects you to a curated network of lawyers who have been vetted on the platform. You can quickly hire a lawyer who is experienced in contract drafting and review.
Here is what to do:
- Go to the ContractsCounsel marketplace, where you can post a request (or project) for free.
- Select ‘One-time project’ and ‘Review contract.’
- Add some information about what you require so you match with the most suitable lawyers.
- Wait for lawyer bids. You’ll receive multiple bids from lawyers on the platform who are ready to assist you, instead of having to search for lawyers.
- Review the lawyer information. ContractsCounsel provides extensive lawyer information, such as the lawyers’ location, expertise, years of experience, credentials, and client ratings.
- Select a lawyer who meets your requirements and hire them to review your sale leaseback agreement for a flat fee.
