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Transactional Real Estate: Specific Performance of a Sale-Leaseback

October 17, 2022

Real estate partners Peter Fisch and Salvatore Gogliormella’s latest transactional real estate column, “Specific Performance of a Sale-Leaseback,” appeared in the October 12 issue of the New York Law Journal. The authors discuss potential limitations on the availability of specific performance in real estate transactions, particularly in the case of sale-leasebacks, which have become more prevalent in recent years.

Specific performance is an equitable remedy for a breach of contract, in which a court will force the breaching party to perform its contractual obligations. Courts typically disfavor this remedy. While they are more willing to specifically enforce agreements pertaining to the sale of real property, any sale-leaseback involves an ongoing relationship between the parties, which can pose an issue in the eyes of the courts. The Third Circuit recently declined to enforce the specific performance clause in a sale-leaseback case. The authors note that there are ways for parties to draft their agreements and structure their transactions to minimize the possibility of a court declining to grant specific performance, but that parties should also understand that specific performance clauses have limitations.

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