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Service Contracts: Often Overlooked, but Deserving of Respect

When buying commercial real estate, due diligence requires careful analysis not only with respect to the asset itself, but also of the service contracts that ensure the smooth and efficient operation of the asset.

By Kevin L. Shepherd
Service Contracts

Service Contracts

The seller and the buyer have just closed on the purchase and sale of a multi-tenanted office tower. The diligence period was truncated, and the closing occurred on an accelerated timeline. At closing, the seller assigned the space leases and security deposits to the buyer. The seller also assigned to the buyer the various service contracts relating to the day-to-day operation of the office tower. The buyer plans to terminate most, if not all, of the service contracts shortly after closing so that it can bring on its preferred service providers.

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