Standstill Agreement Commercial Real Estate

A standstill agreement is a common agreement in commercial real estate that allows both a buyer and seller to negotiate a potential transaction without the risk of losing the property. Essentially, it puts a pause on the sale while both parties determine the property`s true value, assess potential risks, and negotiate a mutually beneficial agreement.

Standstill agreements are typically used when a buyer has expressed interest in purchasing a property, but the seller is not yet ready to sell. In this scenario, the seller may agree to a standstill arrangement to give the buyer time to conduct due diligence activities and formulate an offer. Alternatively, a seller may request a standstill agreement to maintain control over the property and retain its value while negotiating with a potential buyer.

One of the benefits of a standstill agreement is that it allows both parties to continue working towards a potential transaction without the risk of the property being sold to another buyer. This is particularly important in markets where there is significant competition for commercial real estate properties.

The length of a standstill agreement can vary depending on the specifics of the deal and the needs of both parties. In some cases, a standstill agreement may last only a few weeks, while in others, it may last several months. It is critical to document all aspects of the standstill agreement, including the length of the agreement, the terms of the agreement, and any other relevant details.

Another critical aspect of a standstill agreement is that it can help to limit the seller`s liability. Since this type of agreement puts a pause on the sale of the property, it allows the seller to limit their potential exposure to legal and financial risks associated with the transaction.

Overall, a standstill agreement can be an effective tool in commercial real estate negotiations. By providing both parties with the necessary time and space to conduct due diligence and negotiate a mutually beneficial deal, it can increase the likelihood of a successful transaction while minimizing risk and liability. Therefore, it is advisable for both buyers and sellers to consider the use of a standstill agreement when engaging in commercial real estate transactions.