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27 JUL 2015

Confidentiality Clauses in Lease and Sale Agreements

Many leases and sale and purchase agreements contain confidentiality clauses. They are used often when transactions contain special structures or incentives with commercial sensitivity claimed as the reason for this. In our experience confidentiality is over used in both commercial and residential transactions.

From a landlords or vendors view they often do not want the structure of the deal known as it may undermine their position on other negotiations they are involved in.

If engaging a valuer, it is important that they can get behind the actual deal of comparable sales and leases. Certainly if you were acquiring a property and denied information on the sale of a relevant property, then any market change that may be reflective from that transaction cannot be reflected in the property you are acquiring. This would be regarded as acquiring without full knowledge and could prove to be negative, neutral or positive to your situation.

We have found that confidentiality clauses typically fall within what is acceptable market parameters of structure or incentive. As such they aren’t shielding anything other than market norms, and can be regarded as unnecessary. It is when the parameters or content of confidentiality are not revealed that such information should be viewed with circumspect.