It Isn’t A Quiz Show Choice, “Ordinance Or Law.” So, What Is It?

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Riding on our success with an insurance discussion last week about the meaning and implications of having someone’s insurance coverage be “primary and noncontributory,” we thought we’d risk a similar topic this week. [To see what Ruminations said about “primary and noncontributory,” click: HERE.]

There are two pretty common land use and construction approval concepts across the country. If a building is destroyed beyond a certain degree (by fire or otherwise), its reconstruction has to comply with current law. “Grandparenting” (f/k/a “grandfathering”) doesn’t allow you to put it back the way it was. Generally, when it comes to construction codes, new buildings and major reconstructions need to meet most new code requirements. For example, if the “old” building had 1/2 inch wallboard (which was lawful when built) and the current code requires 3/4 inch wallboard, 3/4 inch is the answer to your question.

As to compliance with land use requirements, the most common “threshold” is 50% destruction. In some jurisdictions, that is 50% of value; in some that’s 50% of floor area; in some it might be 50% of bulk volume. The “threshold” is jurisdiction specific. Look it up. Regardless of the threshold, if the damage exceeds that level, you don’t have the right to put the building as it was, if it didn’t conform to the land use requirements on the day the damage took place. So, if the building was a prior nonconforming use because it was a three-story building now in a two-story zone, you don’t have the right to rebuild three stories. You need to get a variance. The same goes for setback violations, and so forth. And, yes, sometimes you can’t get the variance and the building can’t be reconstructed. [Read more…]

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Here Is A Primer On “Primary And Noncontributory”

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Many of us who “do” agreements, such as a lease, were seemingly trained by Admiral David Glasgow Farragut, “remembered for his order at the Battle of Mobile Bay (in which he was victorious) usually paraphrased as ‘Damn the torpedoes, full speed ahead’ in U.S. Navy tradition.” [Thank you, Wikipedia.] How so? Well, we all like to jump in there and use terms of art, not our own, as if we understand those terms. Like, what? Try, insurance terms.

This will be a primer on the meaning or concept behind the insurance term: “primary and noncontributory.” [Yes, for those who are wondering, “primer” and “primary” both share the common Latin root: Prīmārius, meaning “of first rank.”] That’s helpful information because, as should become clear, the essence of what is behind “primary and noncontributory” is priority of payment, which insurance carrier pays first. Not “pays all,” but “pays first.” Yes, the “primary” in “primary and noncontributory” doesn’t mean “the most important”; it means it, the “primary” carrier, pays first. With that start, Ruminations is going to “back into” the bottom line” by explaining some related concepts. [By the way, “short’ was for last week.] [Read more…]

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Edward Snowden Can Help You Negotiate Your Agreements

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We’ve promised this before, but have yet to deliver. This time, we’ll keep our promise. Today’s blog posting will be short. Yes, short, but not unimportant. (Yes, short by Ruminations standards, only by those standards).

Data within data is called “metadata.” Your word processing program creates it and embeds it, hidden, within your documents. So does your spreadsheet program. Your digital camera does so as well. Digital videos have it. Web pages, too.

We’ll restrict today’s Ruminations to documents (because we promised you and ourselves) to be brief.

Buried and hidden in documents, especially those produced using Microsoft’s Word program, are the changes that were made to the original document. You might find who wrote the original document. You can find “hidden” text. You can find its revision history. If that’s not enough, there’s more as well. [Read more…]

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What’s In A Name? That Which We Call A Tenant…

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We titled today’s posting with apologies to Shakespeare, who wrote for this line for Juliet: “What’s in a name? That which we call a rose; By any other name would smell as sweet.” Ruminations has wanted to explore this issue for quite some time, but hasn’t found a “handle” to latch onto until now. What issue, you ask? It should be obvious, ABC, so to speak, that when you look at a lease (or any other agreement), you should be able to know who the landlord and tenant are. Amazingly, that isn’t always the case. Allow us to continue.

But, before we begin, we’ll explain that when the problem arises, we’ve only seen it concern the identity of the tenant, not the landlord. That’s never been discomforting because lack of care or lack of knowledge is more common when the lease involves a small space and, in most of those cases, the form used comes from the landlord and the landlord knows its own name even if it isn’t already built into the form itself. [Read more…]

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Who Treats A Non-Recourse Loan As A Full Recourse Loan? Your Uncle Might.

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We very much doubt that the Internal Revenue Service took note of our the blog posting that follows, but on April 15, 2016, two weeks after we wrote about the significant change to the tax treatment of non-recourse carve-outs, it published a “backtracking,” some might call it a reversal, of its earlier position. You can see how it essentially reversed its earlier position by clicking: HERE.

So, the text that begins in the paragraph below the shaded one is mostly of historical significance, hopefully only an aberration. Nonetheless, we leave it posted not only to preserve history, but also for how it explains the effect of “recourse debt,” an arcane topic.

Here is the latest position of the Internal Revenue Service, as of March 31, 2016:

If a partner’s guarantee of a partnership’s nonrecourse obligation is conditioned on the occurrence of certain “nonrecourse carve-out” events described below, the guarantee will not cause the obligation to fail to qualify as a nonrecourse liability of the partnership … until such time as one of those events actually occurs and causes the guarantor to become personally liable for the partnership debt under local law.

If a partner’s guarantee of a partnership’s nonrecourse obligation is conditioned on the occurrence of certain “nonrecourse carve-out” events described below, the guarantee will not cause the obligation to fail to qualify as qualified nonrecourse financing … until such time as one of those events actually occurs and causes the guarantor to become personally liable for the partnership debt under local law.

Today’s blog posting was written with more than a little trepidation. Before we reveal its topic, Ruminations needs to emphasize two of our recurrent themes. The first is that the prime skill in counseling clients or bosses is not to know the answer, but to figure out the question – to identify possible issues, problems or opportunities. With the question in hand, most answers are easily found. Without knowing the question, the answer is useless even if in your own head.

The second highlighted theme is that you don’t need to know all of the answers or even all of the questions if you have an expert source available to you. We’ve touted the need to have a “Rolodex” (for those more recently arrived on Earth, that’s a trademark for a conveniently arranged set of cards holding names and contact information for easy retrieval). Your Rolodex should have contacts for construction issues, utility issues, insurance issues, and whatever other experts you can gather in your data base. After wading through the labyrinth of today’s technical and boring posting, you’ll want to find one or more tax experts to add to your Rolodex, probably a tax-focused accountant and even a (business) tax attorney. Today, our sole mission is to sensitize readers to a narrow tax issue brought to mind by an October 15, 2015 Tax Memorandum from your friend and ours, the Internal Revenue Service. Yes, there will be a useful, but (probably) esoteric, “fact” revealed someplace near the end of today’s posting. But, that is only to scare readers into yielding up their egos and get better connected with experts. [Read more…]

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Bargaining Power: If You Don’t Ask, You’ve Already Got Your Answer. It Is: “No.”

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In the course of preparing last week’s blog posting about small (bargaining power) tenants being entitled to assurance that their leased spaces are as physically accessible and visible as when the lease was signed, we got to thinking about “why this comes up in the first place.” No, we weren’t thinking as a philosopher might think; we were much more at the nuts and bolts level. Basically, we framed the question thusly: “What do tenants look for in landlord-form leases that just don’t seem to be there?” Today, we aren’t listing things that are commonly in such lease forms, but written in a way that should make a tenant unhappy. We’re talking about items tenants need to ask for. [This isn’t bait and switch our part.. We’ll tie this in with today’s blog posting’s title later.] [Read more…]

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Hippopotamuses And Site Plan Control In Your Lease

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Hippos are very territorial; ants, not so much. Large tenants are very territorial; small tenants, not so much. Protecting some sense of dignity, we’re not going to tell readers how hippos protect their chosen turf. Find out on your own. In the retail leasing context, we equate “territorial” with “site plan control.”

Though it hardly needs to be said, we’ll do so anyway. Landlords reluctantly allow tenants any right other than the right to pay rent. We don’t really mean that, and it isn’t actually true, but it gets an idea across. More fairly stated, landlords prefer maximum flexibility in the use of their property. Of course, that flexibility can be substantially achieved  by keeping the property vacant. That, of course, defeats the reason for owning rental property and, thus, landlords will compromise flexibility for money. [Read more…]

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All Damages Are The Consequence Of Something. So, What’s This Subset Called “Consequential Damages”?

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What is the effect of a provision, whether in a lease, purchase agreement or any other kind of agreement, when it says something like this:

Neither party will be liable to the other for any indirect, special, consequential, incidental or punitive damage with respect to any claim arising out of this agreement (including without limitation its own performance or own breach of this agreement) for any reason.

Yes, today’s blog posting will be about “law.” After all, Ruminations does its blog posting at “retailrealestateLAW.com.” We’re not going to dissect every aspect of that sample provision or ones like it. We’re not going to endorse it as one to use. We’re only going to Ruminate about two kinds of damages – “consequential damages” and “direct damages.” [Read more…]

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