Should We Ban Forward Sales?

During a recent forward sale transaction a client declared "Forward Sales should be illegal!". What prompted this outburst was the limited ability of a buyer under such an arrangement to withdraw from a transaction and some often unforeseen grey zones.

A forward sale is often structured as the obligation to purchase a property after the seller completes construction and often achieves certain leasing thresholds in exchange for a certain price often determined based on a formula using a cap rate and leased area and leases are often subject to either some form of approval rights of the buyer or a leasing policy that sets forth certain leasing parameters.

The vendor is usually entitled to close upon delivery of a variety of items such as as built plans, completion certificates, area certificates, leases, estoppels, title, zoning, enviro and building condition reports together with a calculation of the purchase price.