A Nevada asset purchase usually leaves your employees' covenants behind.

An asset purchase in Nevada buys the book without the covenants

Traffic Control Services v. United Rentals Northwest (2004) set conditions that almost no employment paper satisfies. Absent an agreement negotiated at arm's length, which explicitly permits assignment and which is supported by separate consideration, employee noncompetition covenants are not assignable. Separate means separate from whatever consideration supported the covenant in the first place, so a successors-and-assigns clause in a form agreement supplies one of the conditions at most.

The court drew the opposite line for mergers. HD Supply Facilities Maintenance v. Bymoen (2009) recognized a hard-and-fast distinction between the implications of a merger, which is a statutory creature, and an asset purchase, which is not, and held that Traffic Control's rule of nonassignability does not apply when a successor corporation acquires restrictive employment covenants as the result of a merger. An equity sale never reaches Traffic Control at all: nothing is assigned, so nothing has to satisfy its conditions.

So in an asset purchase a Nevada buyer takes your client list and your payroll without the covenants that protect either, and for a property management company those covenants sit on the people who hold the owner relationships. The repair is to have every manager the buyer cares about sign a fresh covenant at closing, for consideration stated separately from anything else that person is receiving. That is a signature nobody can compel, collected on the one day when the person being asked has more leverage than they will ever have again.

A buyer arriving from a state where covenants ride along with the assets will propose an asset purchase and will not have priced the difference. Naming an equity sale or a merger at the outset keeps the covenants a term of the deal. Structure is fixed at the letter of intent, and in Nevada the covenants are fixed with it.

NRS 613.195 reversed Golden Road, and only for employees

Where an employer sues to enforce a noncompetition covenant, or an employee sues to challenge one, and the court finds it supported by valuable consideration but carrying limits on time, geographical area or scope that are not reasonable, imposing a greater restraint than necessary, or imposing undue hardship, subsection 6 provides that the court shall revise the covenant to the extent necessary and enforce the covenant as revised. Shall, not may.

That rule replaced its own opposite, and recently. In Golden Road Motor Inn v. Islam (2016) the Nevada Supreme Court held that an unreasonable work exclusion term made the agreement wholly unenforceable, because Nevada courts do not modify or blue pencil contracts. The Legislature added NRS 613.195 in 2017 and reversed that outcome for employment covenants. Nevada changed sides inside the working life of the agreements sitting in your personnel files.

The reversal has an edge and it points at the seller. NRS 613.195(8)(b) defines a noncompetition covenant as an agreement between an employer and employee which, upon termination of the employment of the employee, prohibits the employee from pursuing a similar vocation in competition with or becoming employed by a competitor of the employer. What a seller signs in a purchase agreement is not that. Whether Golden Road still governs a covenant given by a seller is a question no Nevada appellate court has answered, and Golden Road was itself an employment case.

That uncertainty is not a seller's problem to solve. Nevada's antitrust statute already exempts a reasonable seller covenant in a business sale, at NRS 598A.040(5)(a), and an owner has no interest in making their own restriction easier to enforce against them. Negotiate a radius and a term you can live with, because a court will apply either the rewrite rule or Golden Road's all-or-nothing rule and neither side can know in advance which. Watch instead for the buyer's fix. If you are staying on after closing, papering your restriction as an employment covenant rather than a sale covenant puts NRS 613.195(6) back in play and obliges a court to rewrite it instead of striking it.

One place a buyer's model goes wrong runs in your favor. NRS 613.195(3) provides that a noncompetition covenant may not apply to an employee who is paid solely on an hourly wage, and NRS 613.195(7) requires the court to award that employee reasonable attorney's fees and costs if an employer sues to enforce one anyway. Leasing agents and maintenance staff are usually hourly. A buyer discounting the price because that stack of signed agreements looks weak is discounting protection Nevada never allowed the company to hold.

Twenty-four classroom hours, or a Nevada designated property manager

Managing property for others for compensation in Nevada takes both a real estate license and a separate permit to engage in property management, neither of which a buyer can borrow from you at closing under NRS 645.230(1)(b), and under NRS 645.6054 that permit is held by a named member, officer, employee or manager the entity designates rather than by the entity itself.

Two routes lead to that person, and they are not equally hard. Where the designated person qualifies directly, NRS 645.6052 asks for 24 classroom hours of property management instruction on top of the underlying license. Where the broker does not personally hold the permit and property management activities will be conducted at an office, NRS 645.6055 instead requires an appointed designated property manager who holds a broker or broker-salesperson license, holds the permit, and has 2 years of active property management experience within the 4 years immediately preceding the appointment.

A buyer on the first route needs a course. A buyer on the second needs a person, and two years of recent active experience is not something a deal timetable produces. If you hold the permit yourself, a buyer that cannot field a designated property manager closes that gap with your time after closing, which turns the transition period from a courtesy into an operating requirement and gives it a price. Which route a buyer is on can be answered before a bid arrives, which is part of what a sell-side process is for.

Part of a Nevada book sits outside Chapter 645 altogether. Managing a homeowners association is community management under NRS 116A.070, and NRS 116A.400(1) provides that a person shall not act as a community manager unless the person holds a certificate. The two credentials are normally held by different people, and they answer to different bodies: certificates come from the Real Estate Division of the Department of Business and Industry under NRS 116A.410, while discipline sits with the Commission for Common-Interest Communities and Condominium Hotels created by NRS 116.600. A diligence checklist that says to confirm licensing with the Real Estate Commission is pointed at one of your two regulators.

The exemptions run the other way. NRS 645.0445(1) puts outside the chapter an owner or lessor and its regular employees managing its own property and, for an apartment-heavy book, a person performing the duties of a property manager for a property while maintaining an office on that property and doing no property management for any other property. A roster of unlicensed on-site staff can therefore be entirely lawful. Which properties are run from your office and which are run from the site by someone who manages nothing else decides how many of those people a buyer has to license, because the exemption covers the second and not the first.