What Can A Tenant Take When It Leaves?

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We’ve traveled this road before, though not very recently. What can a tenant remove from its leased space when it leaves the space? There is some “common law,” modifiable by the terms of a lease. Most leases cover the subject. All should.

We’ll start today by presenting what a landlord asserted its lease said about whether its departing tenant could remove display cabinets, television monitors, and a large outdoor air conditioning unit. Don’t get too excited. The Washington Court of Appeals also didn’t think it answered the question:

Lessee shall not make any alterations, additions or improvements to said Premises without the consent of Lessor in writing first had and obtained, and all alterations, additions and improvements which shall be made at the sole cost and expense of Lessee, and shall become the Premises of the Lessor, and shall remain in and be surrendered with the Premises as a part thereof at the termination of this Lease, without disturbance, molestation or injury.

[Read more…]

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Liquidated Damages: How Much Is Too Much?

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Imagine a landlord delivers promised space 84 days beyond the target delivery date, and the tenant gets 755 days of rent credit. That’s a little over two years’ of free rent for a delay of a little less than three months. Is that appropriate? Is it lawful? Is it a proper measure of damages? Is it a penalty imposed on the landlord? At the end of March, a federal judge in Pennsylvania, applying New Mexico law, answered the legal questions. She ruled that the 755-day rent credit was an acceptable approximation of damages and was not an unenforceable penalty. Ruminations has no argument with the court because, when it comes to whether an agreed-upon damages provision in a lease is enforceable, the unvarying answer is: “It depends.” [Read more…]

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What Permanent Changes Do YOU See For Retail Leases?

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Today Ruminations’ blog posting, our 480th, will be different from all that have come before. We’re making it our readers’ blog posting.

Since March 11, we’ve seen only the supermarket (with our laundry-dry cleaning, and mail drop concessionaire), the same hardware store (twice), an outdoor herb nursery (once), and a warehouse store (once). We picked up an order from a fishmonger, giving us a glimpse (from outdoors) of its back office. That’s two months – five retailers at most. No take-out, though we admit to a lot of on-line shopping from a behemoth seller-selling platform.

So, we have no idea as to what is really happening on the “retail” ground. Reading about the retail marketplace is unhelpful. Some would say that press coverage is filtered through political pathways. That must be true, but we think the bigger filter is that for media outlets to survive, “news” has to be interesting. Certainly, adding a dose of “politics” can make it so, but far, far more often it is a lot simpler than that. “Dog bites man” isn’t very interesting. “Man bites dog,” now, that’s a story. Translated to today’s subject, media reports focus on the unusual, not the humdrum, ordinary. [Read more…]

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How Gross Are “Gross” Sales? And More.

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A few weeks ago, we wrote about the distinction between “rights” and “remedies,” but in somewhat theoretical or even esoteric terms. Today, we’ll present a situation that demonstrates a practical intersection of the two. Our story comes from an April 24, 2020 decision from the Appellate Division of the Supreme Court of New York. [That’s New York’s name for its intermediate appellate court.]

Imagine a mall with approximately 150 tenants. One of those tenants (and possibly others) was listed as a “Named Retail Tenant” or as a “Suitable or Successor Replacement Anchor Store,” a “Required Tenant” or “Upscale Tenant” in the “co-tenancy” provisions within the leases of many other tenants at the mall. Basically, if this “Named Retail Tenant” left the mall, dominos could fall. [Read more…]

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A Sneaky Attempt At Amending A Lease Fails – Lessons To Be Learned

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A little more than eight years ago, we wrote: “[I]t seems like a fair number of lenders think the “A” in “SNDA” stands for “Amendment,” i.e., an amendment of the lease.” [Click HERE for more about that.] Today, we look at an Estoppel Letter and see whether the initial “E” stands for “Emendation.” [We found a website explaining the following: “Amend is to change something, usually a document or personal behavior, to make it better. Emend is to correct something, usually in a text, to fix an error.”] Either way, SNDA or Estoppel Letter, let’s stop trying to use those documents to amend or emend a lease.

In an April 15, 2020 published decision, a United States Court of Appeals court looked at the history of a lease and other lease-related documents for a single-tenant office complex. The validity of the lease and five subsequent amendments was not at issue even if there was some dispute over their meaning. All were signed by both the landlord and tenant. On the other hand, the court was presented with two other documents – one was a letter from the landlord to its tenant (signed only by the landlord), and the other an estoppel letter (seemingly) signed only by the tenant and given to the property’s buyer. The estoppel letter, in its recitals, referred to the landlord’s letter as one of the lease’s amending documents. [Read more…]

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No One Is At Fault: It’s Time To Rethink Our Leases And Loan Documents

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A few weeks ago when COVID-19 kidnapped our blog postings, we wrote about recognizing the differences between individual catastrophes and community catastrophes. As further evidence that Ruminations has little if any influence on our industry, it seems to us that we stand almost alone in the way we are analyzing the current situation. While newspapers, other media, law firms, industry gurus, and general analysis sources are predicting the future from a global perspective – i.e., what will the “new normal” look like; will this coronavirus rear its head again, over and over; will it morph and be with us for a long time to come – the industry blog postings and law firm memorandums we are reading (by the hundreds) seem to focus on weaponization. Yes, how can one of the three: landlords, lenders, and tenants, defend or protect themselves against the others?

Articles about “force majeure” are an example. Those that look backward analyze how clauses written without any thought of a pandemic can be retroactively reinterpreted to provide rent relief. Those that look forward seem to be encouraging that tenants (in their leases) and landlords (in their loans) insist on a provision giving relief either for a pandemic or, in essence, for any situation not anticipated at the time the binding documents are executed. We’ve seen “advice” from respected sources suggesting that, in situations such as what we are all facing today, payment modifications or workouts be treated just like “we always did,” beginning with a review of the payor’s financial statements, business plans, financeability, etc. [Read more…]

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COVID-20 And Beyond – What Will It Take For Brick And Mortar Retail To Thrive?

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The news is full of information about the current “novel coronavirus”: (2019-nCoV), as the Centers for Disease Control and Prevention identifies it. A “novel coronavirus” is a new coronavirus that has not been previously identified. So, there will be further coronaviruses. They will be just as novel. Hopefully, they will be no more disruptive than the common cold, also caused by a coronavirus. The keyword in that last sentence is: “disruptive.”

COVID-19 has swept swiftly over society and our industry. So has the disruption it has brought. We’ve seen many disruptions before. In fact, they overlap one another. The difference this time is its swiftness. In the 1920s, as the developed world was transitioning from an agrarian society to an industrial one, although the future was imponderable, there was time to adjust. Today, although on-line merchandising and sales are shifting the retail paradigm, the disruption has been slow and progressive. “Slow and progressive” allows time to adapt. [Read more…]

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Rights Without Remedies: Moratoriums And Real Estate

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If blog postings, law firm memorandums, newspaper articles, televised pundits, and the like were effective medications for COVID-19 infections, this crisis would be over. Without even asking readers, we know that all of you are inundated with reliable [and less than reliable] information and guidance about this virus and how to deal with it. Unfortunately, more and more, it seems like we’re hearing Arthur “Guitar Boogie” Smith and Don Reno performing “Feudin’ Banjos” on their seminal 1955 recording. We don’t play the banjo. Therefore, we won’t be joining the COVID-19 legal advice band today.

 

One thing, however, bothers us more than the many others. We’ve seen a lot of words speculating on what “laws” were needed. Some opinions have been sage. Many have been uninformed. What bothers us is that much of what we are reading ignores or blurs the difference between “rights” and “remedies.” Almost all lawyers know the following; many of our other readers may not. One way to explain what is going on is to use an example that comes right out of our current news. An increasing number of jurisdictions are legislating (or administratively imposing) rent relief for (usually only residential) tenants. [Read more…]

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