Purchase and Sale Agreement Representations: Who Bears the Risk of Change? required to only be accurate as of the date of execution of the purchase and sale agreement. However, it will be important to the buyer to know what the existing arrearages are as of the closing date, recognizing that changes occurring in the arrearages schedule will not give rise to buyer's right to allege the failure of a condition precedent. ing the example of a lease default, the parties may agree that seller's representation regarding tenant lease defaults needs to only be accurate as of the date of execution of the purchase and sale agreement while seller's representation regarding landlord lease defaults must also be accurate as of the closing date. This rationale is founded upon the premise that a landlord lease default is largely a condition that is within a landlord's control, and thus, seller should bear the risk of a change. The determination of who should bear the risk of a change in facts underlying a particular seller representation often hinges upon whether or not the seller has control over the underlying condition or if the importance of the underlying condition is fundamental to the buyer's decision to purchase the real estate. To the extent that a seller has the ability to impact and control the matter, the buyer will likely insist that the seller bear the risk of any change occurring prior to closing. Similarly, the existence or nonexistence of a particular condition may be fundamental to the transaction—for example, a buyer which is acquiring real estate for redevelopment purposes would not want to take the risk of an adverse zoning or land use matter that arises prior to closing. In certain unique instances, the existence of a tenant lease default (or another particular representation) may have profound implications on the real estate that may engender a buyer insisting that seller bear the risk of a tenant default occurring prior to closing. With respect to tenant leasing matters, this is generally the case with respect to a master lease, ground lease or other leases deemed material and fundamental to the transaction, including with respect to one or more major tenants.

Nonetheless, a seller needs to remain acutely sensitive to the ramiÂŽcations of assuming the risk that a tenant lease default gives rise to the buyer's right to elect not to consummate the transaction. Conclusion The ultimate scope and extent of seller's representations, the limitations on a buyer's ability to exercise a remedy under the purchase and sale agreement and the risk of a change in facts blend important legal and business considerations that should be given careful thought and discussion. In many respects, the negotiated outcome of these concepts and the related provisions contained in the purchase and sale agreement should be of paramount import to both a seller and a buyer. It is important to be cognizant, even if the parties agree that a particular seller representation need only be accurate as of the date of execution of the purchase and sale agreement, that a sophisticated buyer will still require that the seller inform the buyer at closing whether or not the facts underlying such representations have changed. For example, the purchase and sale agreement may contain a representation as to a rent arrearage schedule that is The Real Estate Finance Journal E Fall/Winter 2015 © 2016 Thomson Reuters 29 .