Change of control, clauses in contracts

The starting point is that the tenant is free to transport the lease to another legal entity. Often, however, leases contain so-called change of control clauses, which limit the tenant’s room for maneuver additional. How important are such clauses?

Standard rental contracts for commercial property leases are being built on the right of return and, like the right of right, says that the tenant must obtain the consent of the landlord to be able to transport his contract. This is general rule. The rationale is, among other things, the consideration of predictability, where the landlord must be able to relate to the same tenant during the rental period.

However, the background right does not guarantee that the tenant can sell their shares to another legal entity (change of control) with that consequence that the lessor risks having to deal with the buyer of the shares, including new ones tenant. This is true even if the tenant is formally the same. Example, the disadvantages for the landlord may be that the new tenant does not have as good liquidity and financial soundness.

Regulation that equals ownership change control in tenant with the transportation of the lease, with the consequence that such change of control requires the consent of the landlord, therefore can secure the landlord, among other things their rental income to a greater extent than what the copyright does.

Violation of change of controll clauses causes the tenant to have breached their obligations to obtain the consent of the landlord accordingly leash. The default gives the landlord access to claim, and The breach can quickly be considered significant, so that it gives the landlord the right to cancel the lease. The tenant can of course ask for a subsequent one consent from the landlord, but on the basis that the tenant has already defaulted lease, the landlord is free to consider whether consent should be given.

Change of control clauses are therefore important in the relationship landlord and tenant, but is particularly relevant in acquisition situations. For buyer it must be examined whether leases and other other contracts hold change of control clauses, and consider whether acquisitions trigger these. If so, should the buyer requires that it be clarified with the landlord, including that one is obtained prior written consent prior to the acquisition.