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Commercial Leasing Law & StrategyFeaturesLandlord Tenant LawLitigation

Buyout Provisions In Commercial Lease Litigation

By Adrienne B. Koch
May 01, 2023

Real estate joint ventures often include a contractual provision for one side to buy the other out under certain circumstances. Although these provisions vary widely, one feature they share is that their purpose is to end the relationship. As a result, when they are invoked the parties are often at odds. It should therefore come as no surprise that they can give rise to litigation.

Such litigation frequently involves an attempt by one party to enforce the terms of the buyout provision through specific performance. But that remedy may be less readily available than the parties might assume. This article explores the reasons why, and suggests some drafting considerations.

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Types of Buyout Provisions

First a brief primer on buyout provisions, which fall into two categories: the "buy-sell" provision and the "put" or "call" provision. Either type may function as a dispute resolution mechanism, in which the agreement specifies that a party may invoke the provision if a particular type of dispute arises and is not resolved through some other specified means. But the agreement may also (or instead) specify that the provision can be invoked after a certain date, or following the achievement of a particular milestone.

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