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KEY ISSUES IN DOCUMENTING THE Y10-15 FEE SALE The Sellers Perspective Allen Lynch Nixon Peabody LLP 100 Summer Street Boston, MA 02110 617-345-1235

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Presentation on theme: "KEY ISSUES IN DOCUMENTING THE Y10-15 FEE SALE The Sellers Perspective Allen Lynch Nixon Peabody LLP 100 Summer Street Boston, MA 02110 617-345-1235"— Presentation transcript:

1 KEY ISSUES IN DOCUMENTING THE Y10-15 FEE SALE The Sellers Perspective Allen Lynch Nixon Peabody LLP 100 Summer Street Boston, MA

2 Preliminary Matters Portfolio sales & different investors Implications of packaging purchase access with equity/debt Engagement/alignment of all partners Who drives the bus? Who takes the pen? Know your LURA, Reg. Agreement, Loan Agreement

3 The Property Whats in? Whats out?

4 Feasibility Period Sellers materials Buyers reports LURA

5 Approvals Period Sellers Approvals – LP Consent – Investment Committee – Lender issues Buyers Approvals – State Agency – Municipality – HUD

6 Title and Survey Title – before, not after Permitted Exceptions

7 Warranties Not a substitute or supplement for DD 10 year hold Limitations – Actual knowledge of Designated Person – Acquired knowledge of Buyer – Survival period – Basket & cap – Disclaimer (as is/no re-syndication or subsidy guaranty*)

8 Tax Credits Buyer covenants – Compliance – CC annual compliance certification,8609s Procurement of recapture bond – Who obtains – Who pays premium – Who indemnifies (the rich Uncle) – Who fixes noncompliance – When

9 Tax Credits II Buyer indemnity of Seller – Breach of compliance/reporting covenants – Post-transfer noncompliance – Cancellation of bond – Cause Guarantor to deliver separate indemnity at closing Seller indemnity of Buyer – Pre-transfer noncompliance

10 Tax Credits III Buyer transfer within compliance period – Risk – Notice – Effect on indemnities – Consent to change of management agent

11 Pre-Closing Obligations Maintain normal course ops Stabilized assets: vacant units rent ready or allowance ($500)

12 Conditions to Close of Escrow I Seller – Approvals – Recapture Bond issued (or available for issuance but for payment of premium) – Experienced management agent – No default under Related Agreements – No Buyer default

13 Conditions to Close of Escrow II Buyer – Approvals – No Seller default – Issuance of title policy – No default under Related Agreements

14 Conditions to Close of Escrow III Deposits fully refundable for all unsatisfied conditions (e.g., Approvals)? Extension of Closing for Approvals? – Additional extension deposit (refundable vs. hard) – Additional purchase price

15 Close of Escrow Buyer delivers recapture indemnity agreement signed by SPE and the guarantor of the surety (the rich Uncle) – They are not parties to the PSA

16 Default and Remedies 15 day notice and cure period (excluding title) Seller default – Buyer gets (i) specific performance or (ii) refund of deposit and if intentional default documented third party costs capped at X. Thats it. Buyer default – Seller gets deposit and Buyers third party reports. Thats it. Cross default – default under one = all

17 Why Read the Boilerplate? Assignment – Only to SPE majority controlled/owned by Buyer. Buyer remains obligated. No flipping. Limited liability – principals excluded.

18 KEY ISSUES IN DOCUMENTING THE Y10-15 FEE SALE The Sellers Perspective Allen Lynch Nixon Peabody LLP 100 Summer Street Boston, MA


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