A non-disclosure agreement (NDA), also known as a confidentiality agreement, is typically entered into between parties who need to share confidential information with each other in order to evaluate it, typically as a prelude to an acquisition or a merger. An NDA sets out the terms on which the information is being disclosed and imposes obligations on the receiving party to keep the information confidential. NDAs can be unilateral (where one party is receiving the information from another, but not disclosing any confidential information itself) or bilateral (where both parties are disclosing confidential information to each other).
An exclusivity agreement (EA) prevents the parties to it from negotiating in respect of a proposed transaction with other parties for an agreed period of time – typically to enable them to agree specific terms or carry out due diligence. An EA does not legally bind either party to conclude a deal with the other, but it does provide breathing space to do so. Where one party is committing to significant professional costs, an EA may be a shrewd move.
The problem is that both NDAs and EAs can be heavily negotiated in their own right and can distract the parties from the deal itself. There are common terms which parties will seek to include and compromise positions which are often agreed.
In an effort to streamline the process, the Investment Property Forum formed a working group to produce a template NDA and a template EA which they hope will be acceptable to both sides of the agreements with minimal amendment. The NDA and the EA (and the accompanying guidance notes) can be downloaded from the IPF website here. In particular the IPF seems to have its eye on overseas investors who they hope will take comfort from knowing that the agreements are acceptable in the UK market. The IPF states that the templates have been:
“created to represent what the IPF believes is a fair and reasonable position for both parties and reflecting general market standards at the current time.”
Historically, the real estate industry has not been quick to adopt standard form documents as evidenced by successive attempts to standardise commercial leases. However, NDAs and EAs do not create long term relationships between parties so in theory, at least, they should be less controversial. The acid test is likely to be what happens where one or both parties have their own standard documents, which may not have been created specifically with real estate in mind. This scenario is recognised by the IPF, but their hope is that use of the templates will become standard across the industry in keeping with their mission:
“to enhance the efficiency and liquidity of real estate as an investment asset class.”
No one in the industry would argue with the merits of that mission.
