General Partner Interest Sales Legal Issues Robert H. Adkins

Basic Terms Purchase Price Deposit – Refundability – Additional deposit in return for extension of closing date

Basic Terms Timeline – Due diligence review period Sellers responsibility to provide documents Buyers diligence period Title and survey Site visits, testing Multi property portfoliomust buyer buy all or none, or can buyer pick and choose

Basic Terms Timeline – Additional time to obtain third party consents – Rights to extend closing date to cure defaults

Basic Terms Closing prorations and adjustments – Who pays various closing costs, e.g.: Transfer taxes Title insurance premiums Escrow agent fees Lender consent fees

Basic Terms Closing prorations and adjustments contd – Do existing reserve accounts stay with the partnership, is there a purchase price adjustment – Any adjustments at closing for operating cash, outstanding accounts payable, delinquent rents

Documents Purchase agreement Assignment of general partner interest, other items (e.g., deferred development fees) Amendment to existing partnership agreement Guaranty of obligations of new general partner to limited partner Option/right of first refusal for general partner to purchase property after compliance period

Consents Limited partner Consent to general partner interest sale Approval of replacement property manager Will limited partner look for inducements to granting consents, e.g.: – Extension/expansion of general partner guaranties – Modifications to cash distributions – Expansion of limited partner post compliance exit strategy rights

Consents Lenders – Consent to general partner interest sale – Approval of replacement guarantor, key principal – Approval of replacement property manager Credit agency (if required) Co general partner (if any) Estoppel certificate from limited partner and lenders as to absence of defaults

Representations and Indemnifications Are seller representations limited to those matters which cannot be directly investigated during due diligence period? Survival of representations after closing No recovery by buyer unless total damages exceed minimum amount (materiality requirement) No recovery by buyer in excess of a maximum amount (purchase price?)

Representations and Indemnifications No recovery by buyer for matters buyer knows of prior to closing Indemnification of buyer by seller for claims and disputes vs. limited partner, co general partner Indemnification of buyer by seller for claims and disputes vs. previously removed general partner

General partner guaranties to limited partner Project completion, repurchase, operating deficits, loss of projected tax credits Seller liable for guaranty liability arising prior to closing, buyer liable thereafter

Buyers rights to receive fees and distributions from partnership Amounts paid from any future limited partner equity installments, including development fees Amounts paid from future cash flow and sale/refinance proceeds – Deferred development fees – Accrued partnership management fees – Property disposition fee Buyers right to take over property management