Save A Tree – No More Paper Copies – No More Ink

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It seems to us that, in at least one way, ordinary consumer transactions are moving much more quickly into the future than are commercial real estate transactions. We’re thinking about the way they are replacing paper documents with purely electronic ones. Broker generated property sales contracts and leases are increasingly, completely paperless. Residential loans are moving into the paperless world with signatures directly on tablet computers.

For years, many jurisdictions have accepted facsimile signatures on entity (corporate, limited liability company, etc.) filings, including printed signatures that read: “/Jane Doe/.” More and more real property recording offices require electronic filing, mostly using pdf copies of scanned or generated documents. Again, goodbye ink. In fact, at this time, a very serious project is afoot at the federal level to create a registry where “paper” notes will be electronically filed, whereupon the “sacred” original will be destroyed, yes – destroyed. Heresy, you say? Perhaps, but the electronic version will be the one and only authentic note. [Read more…]

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Did You Get My Letter?

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We’ve always wondered about an aspect of giving “notice,” but never having faced the particular issue, never went beyond “wondering.” Then, last week, we came across a Massachusetts Appellate Court’s decision touching on the issue. Ruminations can’t say that the outcome was very satisfying. So, we thought we’d toss it out for readers to think about. [That doesn’t mean we won’t share some of our observations, just that we don’t really have a conclusion (yet).]

Here’s the setup. A lease had a self-extension provision. Its term would roll over, a year at a time, unless either the landlord or tenant gave a “don’t do it again” notice. The particular provision read exactly as follows: [Read more…]

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Who’s On First? Keeping Track Of Basic Facts

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Please don’t ask for the central theme of today’s blog posting. We’ve done so already and came up empty-headed. The closest we’ve come is that we’re writing about how a stitch in time saves nine.

The genesis of today’s subject is a very simple case that reached a California appellate court. It probably isn’t worth looking at, but for those compelled to do so, the February 2, 2017 decision can be seen by clicking: HERE.] The court was confronted with a situation where, on its face, the signatory to an indemnification agreement was not authorized to sign the agreement on behalf of the indemnitor (the one who would have to pay). There was no indication that the document was signed with the intention of fooling anyone. It appears that the person signing the agreement was confused or ignorant as to “who” should have done the signing. We’ll explain.

There were two limited liability companies. One was the sole manager of the second. We’ll call the first company, the parent, and the second, the child. The parent had a managing member. He was the kind of person who breathes, unlike, say, Citizens United. He could sign on behalf of the parent, but when signing for the child, the “proper” signatory would be “by parent, as sole member of child, by breathing person, as managing member of parent.” Get it? If not, then realize that the “person” who could sign for the child was the parent. But, because the parent was an entity who could not hold a pen, a “real” person needs to sign on behalf of the parent. [Read more…]

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Rights Of First Refusal Transmogrify Into Purchase Options

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Rights of first refusal create difficult situations. For that reason, knowing landlords resist granting them. Unknowing ones don’t know not to resist. Then again, “resist” doesn’t mean never. So, like it or not, there are plenty of leases with such a provision.

We’ve written about rights of first refusal and alternatives to such provisions. If you’d like to get on the same page as those who have seen what we’ve written in prior blog postings, click: HERE and HERE.

A few weeks ago, we came across a case that gives a pretty good explanation about what a first of right refusal is and what it becomes. But, we’re getting ahead of ourselves. First, here’s the story.

A landlord owned two adjacent parcels. One was tenanted by a quick service restaurant, the other by a discount store. The quick service restaurant had the earlier lease and that lease gave it a right of first refusal to purchase both parcels. The later (in time) discount store lease had a purchase option (not a right of refusal). The option was exercisable during the last two years of the lease term, but was expressly subject to the right of first refusal in the quick service restaurant’s lease. Got it so far? [Read more…]

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We Can Waive Claims, Not Subrogation

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What’s an “evergreen”? An evergreen contract is one that automatically renews unless one party or the other affirmatively terminates it. An “evergreen” blogging topic is one that never dies; one that we can visit over and over. The topic of insurance waivers of subrogation is such an “evergreen.”

We just reviewed a March 22, 2017 decision from a United States District Court sitting in New Jersey. Let us tell you some things about it. It has a twist. [You can see it yourself by clicking: HERE.]

Allegedly “unsupervised, untrained, and unlicensed maintenance workers” employed by a residential landlord were accused of misusing (our euphemism) an acetylene torch and thereby setting a fire that destroyed tenants’ property. The tenants’ insurance company paid the losses and sued the landlord for recovery.
The landlord (almost certainly, the landlord’s own insurance company) responded that each tenant-insured had waived and released it from liability for such a fire. [Read more…]

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In Good Faith, Would Your Agreements Say That A Party Can Act In Bad Faith?

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Would you write that a tenant’s or landlord’s consent was required but that consent could be withheld in bad faith? We don’t think so. We’ve never seen such. We doubt we ever will.

There is no need for a contract, such as a lease or mortgage, to say that the parties will act in good faith. The obligation to act in good faith and deal fairly with the other party or parties is implied by law into every agreement. As such, it is a contractual obligation, not a fiduciary duty. So, we think that, as a contractual obligation, it can be negated by a voluntary and knowing agreement between the parties to an agreement. That’s what expressly allowing one party or the other to act in bad faith would do.

Admittedly, we haven’t done any legal research that would support or undermine our thinking. That’s because we strongly doubt anyone ever included a “bad faith allowed” provision in their agreement. If any reader knows otherwise, let us and other readers know through the comment feature of this blog site. [Read more…]

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Representations; Warranties; Covenants; Weasel Words And Estoppel Certificates. Huh?

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Last week, we left off with: This trilogy (“represent” – “warrant” – “covenant”) is thrown about so casually that it isn’t possible to generalize as to what the cumulative effect might be. Try replacing the word “covenant” with the word “agree” and then reread the statement being requested as part of the estoppel. To “covenant” does not mean to “acknowledge.” It means to “agree” in the sense of to “promise.”

Now, as promised, we will elaborate. [That should come as no surprise to long-time readers of Ruminations.]

One way to appreciate the difference between making a representation and giving a warranty is to understand the consequence of each statement. In the case of a representation, the “relying” party may act as if the representation (statement) was true, but only if that relying party either did not know it was untrue at the time it was given or if the relying party couldn’t have easily known it was untrue. That’s what “reliance” is all about. In addition, in appropriate circumstances, though unlikely in an estoppel, if a material representation is untrue at the time given, the recipient of that representation may suspend its contractual obligations or even terminate an agreement with the representing party. For example, in the normal transaction, if a car seller represents that the car runs, and it doesn’t, the buyer can terminate any agreement to buy that car because whether a car runs is material. Of course, if the buyer really knew that the car didn’t run, it could not rely on the representation. [Read more…]

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Estoppel Letters – Can’t We All Get Along?

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About 9 months ago, we wrote about some practical aspects of dealing with estoppel letters. Readers can see that blog posting by clicking: HERE. [We did so more substantively in 2011 and that can be seen by clicking: HERE.] Today, in fulfillment of a promise made 9 months ago, we have more to say about requesting and furnishing those letters.

We start with where we left off. Furnishing estoppels is an administrative matter, not a substantive one. There may be items under dispute that will be covered by an estoppel, but responding to the request for the estoppel should not be one of them. And, it shouldn’t matter whether the lease requires one party or the other to furnish one. Estoppels are needed to support the property, to keep the stool upright, so to speak.

Experience informs us that the most common tension as between landlords and tenants about estoppels is that the requesting party often has made its request too close in time to when the certificate is needed. Sometimes that situation is inevitable; sometimes it is the result of carelessness. Regardless of the reason, the need for a quick response frequently causes unneeded tension. It may seem that landlords are those most often pressuring their tenants for a quick turn-around. That’s only because, by far, landlords request estoppels more frequently from tenants than tenants request them from their landlords. [Read more…]

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