Shearman And Sterling

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Feb 01, 2006

Post-Closing Apportionments: The Escalation Trap

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Abstract: In sale transactions involving commercial real property, the provisions that relate to closing and post-closing apportionments involve several conflicting objectives of the parties, primarily the seller's desire for finality to its obligations and the purchaser's desire to have the seller retain liability for those items accrued prior to the sale. The conflicting objectives present especially challenging issues in the area of operating expense escalation and pass-thru charges, where the amounts involved will generally not be ascertainable until after the end of the then current year and the amounts actually payable by the tenants until some time thereafter. This article analyzes these issues.

This article was originally published in the February 2006 edition of the Real Estate Review, and is reprinted here with permission.

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