Give Me A Sentence That Uses Both “Due Diligence” And “Letter Of Intent”

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We needed to think about Letters of Intent because we’ve been asked to join a panel discussion in June and tell all we know. Certainly, we’ll recycle our thoughts from some earlier Ruminations blog postings, notably the ones you might want to revisit or see for the first time by clicking HERE and HERE and HERE. But, what about some fresh thoughts?

Those of us who try in earnest to Get The Deal Done, usually don’t see “the” Letter of Intent until it is signed, sealed, and delivered. (That is, if there even is such a document.) And, when we write, “Letter of Intent,” we’re thinking of those broadly – term sheets, email messages, (literally) jottings on a napkin – whatever. [Read more...]

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Can A Bag Of Dog Food Be A Pet? Can A Bar Of Soap Be A Grocery? Another Unnecessary Fight Over Exclusive Use Rights

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Many readers may remember reading one or even many articles or possibly attending programs growing out of a 2013 United States District Court ruling in a law suit by Winn-Dixie Stores against three “dollar store” chains. Some may even have read that lower court’s decision. Basically, that case explored a number of aspects of a dispute about a supermarket’s exclusive use rights. Ruminations never did a blog posting based on that decision. There were two main reasons. First, we were late to the game; many other got there first. Next, the discussion space got so full, there wasn’t much elbow room for us.

Well, things have changed. The United States Court of Appeals “spoke” on March 5, 2014. You can see the 72 page decision by clicking HERE. We’re not so sure this appellate court got it “right,” though it may have had little choice. Read on.

Today, we’ll review the substance of the exclusive use dispute, and we’ll do a reprise of a frequent Ruminations refrain – say what you mean, and mean what you say. [Read more...]

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What Does A Weak Link Have To Do With Defining A Real Property Fixture? Read On.

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 Last week, we described the practical law of (real property) fixtures. We pointed to a recent case decided by the Missouri Court of Appeals, Herron v. Barnard, 390 S.W.3d 901 (2013). You could be removed can see that decision by clicking HERE. And, we promised that, this week, Ruminations would apply the “law” to the “facts” of that case. Let us know if we now deliver on that promise.

To remind you, here’s the background. A tenant with a two year (office) lease had the right to make extensive changes to the leased space. By way of example, the tenant, an architectural firm, was allowed to remove partitions, relocate plumbing and other utility lines, and even relocate the entry door. More important for the purpose of today’s blog posting, the lease allowed it to do the following. Install a sink; install cabinetry with a waste receptacle and storage bin; add appliances; and, install kitchenette shelving. That wasn’t all. The tenant also arranged for a custom-made glass door and matching transom, lots of light fixtures and bulbs, a “picture-hanging” mechanism, filing cabinets, and a security system. [Read more...]

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At Least We Know They Aren’t Dental Fixtures, But What Kind Of Fixtures Are They?

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One of the most common questions we hear is: “Can you explain to me what is meant by a ‘fixture’”? The follow-up questions focus on variations of: “Can I take it with me” and “Who owns it”? The implicated issues deal with repairs, damage, and insurance. We’ve gone down this path before (see HERE for an example), and thought it would be timely to travel a little farther than we did with our earlier efforts. Fortunately, today, Ruminations will be able to use the recent Missouri Court of Appeals decision in Herron v. Barnard, 390 S.W.3d 901 (2013) (see it HERE) as a road map. Here’s what that case was about

A tenant with a two year (office) lease had the right to make extensive changes to the leased space. By way of example, the tenant, an architectural firm, was allowed to remove partitions, relocate plumbing and other utility lines, and even relocate the entry door. More important for the purpose of today’s blog posting, the lease allowed it to do the following. Install a sink; install cabinetry with a waste receptacle and storage bin; add appliances; and, install kitchenette shelving. That wasn’t all. The tenant also arranged for a custom-made glass door and matching transom, lots of light fixtures and bulbs, a “picture-hanging” mechanism, filing cabinets, and a security system. [Read more...]

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Write It Right In The First Place – It’s Not A Game Of Chance: Insurance, Good Faith, Fair Dealing.

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Last week, for a “nugget” of wisdom unrelated to the substance of the dispute, we cited the decision in Boston Market Corporation v. Hack. This is an unpublished New Jersey appellate decision that can be seen by clicking HERE. We’ve known about this case for six years and that wrongly made us think, subconsciously, so did everyone else. Well, we’ve woken up to the reality and thought this week would be a good chance to “share.”

On a superficial level, this is an insurance coverage case – an allegation by a landlord that its tenant wasn’t carrying the required insurance coverage. A simple factual understanding can be gleaned from these words from the court itself: “The central dispute involves the proper interpretation of the parties’ lease agreement and, more particularly, whether the insurance obtained by [the tenant], with high deductibles of up to one million dollars, constituted self-insurance or no insurance at all… .”

Peeling back some layers reveals that it is also about the implied covenant of good faith and fair dealing, about what happens after a purported breach may be used to analyze the purported breach, and about how those who don’t understand a substantive subject shouldn’t be drafting documents that rely on what they don’t really understand. [Read more...]

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You Can’t Cure Them All – Sometimes It Depends On How You Write The Same Obligation

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If, three months ago, you failed to carry contractually required insurance for one week, can you cure that breach now? Over the past week, we were thinking about the curability of defaults. And, we weren’t distinguishing between those of landlords or tenants or borrowers or lenders. Our starting point was the common formulation used to define an “Event of Default,” the occurrence of which triggers “consequences.” Here’s an example of the genre: [Read more...]

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Mortgage Loan Term Sheets Are So Long; So, Why Are They Missing All Of The Provisions Borrowers Should Be Looking For? Part 2.

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Last week, we started a list of loan terms that regularly seem to be left out of Loan Term Sheets prepared by lenders despite those term sheets using up an entire tree for what is included. If you didn’t see that posting and you are compelled to start at the beginning of our Ruminations, click HERE to start at the beginning. Today, we continue and then conclude our list. Don’t confuse “conclude our list” with “conclude the complete list,” because we know the limits of our ability and experience. A further caveat would be – every deal has its own factors to consider, but most loan term sheets attempt to fit all shape pegs into a round hole.

So, here we go with the rest of our list of “missing” terms in the common Loan Term Sheet:

Cash Management Accounts. If a borrower can avoid a “clearing account” (essentially, a “lock box”), it should. For those unfamiliar with how those work, the lender “owns” an account at the bank you choose and all rent checks go to that account. Your bank agrees, with the lender, to “sweep” all money out of that account every night and put the swept funds in your own account. That is, it will do that sweep until the lender notifies the bank to sweep the money into the lender’s regular bank account (at whatever bank the lender uses). That allows the lender to interrupt the cash flowing to the borrower when the lender thinks a “Trigger Event” has occurred. A Trigger Event could be the borrower’s default or it could be that the rental income, though exceeding the debt service payments, doesn’t exceed it by enough. It could also be when a key tenant has left the property. In fact, it could be anything the loan documents say it is, including receipt of a report of alien abduction signed by two adults. Though the last example is unlikely, it does illustrate that if the Loan Term Sheet calls for a cash management account, it should state what the Trigger Events would be. [Read more...]

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Mortgage Loan Term Sheets Are So Long; So, Why Are They Missing All Of The Provisions Borrowers Should Be Looking For? Part 1.

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 We think it’s called “document creep.” When documents were hand-written, they were pretty short and the world survived. Then, along came the typewriter, and a three page mortgage and a five page lease were probably seen to be somewhat burdensome by the party most burdened. Then, as typing got faster, the documents got longer. Rudimentary word processors, such as memory typewriters, made it easy to go even longer. Modern word processing allows for 100-plus page mortgages, leases, and other documents. Yes, now, we’re able to craft super-long documents “in a single bound.”

Even the term sheets for loans have succumbed to this “document creep.” A dozen or more pages? – No sweat. Doesn’t this benefit everyone, having a complete set of loan terms right up front so that the lawyers don’t wind up negotiating important items while the “outside closing date” looms close? Wish that were the case, because, as lengthy and detailed loan term sheets are getting (call them commitment letters, loan applications or whatever), for some reason they don’t exactly cover all of a borrower’s concerns. Ruminations doesn’t mean “all of a ‘particular’ borrower’s concerns.” We mean all of the concerns that any (or every) borrower should or does have. Like what, you ask? Like, the kinds of items we’ll be covering this week and next (and maybe even the one after that). [Read more...]

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