No Shopping Clauses (Not What You Think)

Print

Here’s a scenario that doesn’t happen often but happens much too often. A tenant and a property owner work out a tentative deal. They put the basic terms down on paper and call it a deal sheet or elevate its name to a Letter of Intent. Either way, they don’t intend to be bound to make a lease, but they understand that they’ve agreed to negotiate in good faith to reach one.

So, they then start to work on the lease. There are some issues, but nothing that would thwart agreement UNTIL a better deal comes along. Perhaps the landlord finds another prospective tenant and negotiates with that prospect in parallel with the first one. Perhaps a nearby location that the initial prospective tenant had seen and liked better has come back on the market and discussions with its landlord are now taking place. Fair enough, but didn’t the two parties with the deal sheet or letter of intent explicitly or implicitly agree to negotiate in good faith? Yet, even as late as when one party, usually the tenant, has signed what was thought to be the final, execution copy of a lease, the other party pulls out. Then, it turns out that a few days later the retracting party signs a lease with someone else. [Read more…]

Print

Bye Bye LIBOR (And Friends)

Print

Yes, many readers may have heard whispers (or stage whispers) about the demise of LIBOR. Well, it goes on life support on December 31, 2021 and that might also be the date of its death. That’s when the banks that provide its underlying data will no longer be obligated to do so. Who cares? Those who set borrowing interest rates certainly do. Those who have loan documents based on some spread over a LIBOR rate where those documents didn’t consider a back-up rate if LIBOR ever went away care even more. [Read more…]

Print

Price; Quality; Time – Pick Two

Print

It is Labor Day weekend (and the start of Labor Day week). Ruminations has tried to present short blog postings on such weekends. Frankly, we’ve not been successful. Today’s posting is yet another attempt. So, with 30 words already behind us, here we go.

In the management field of study, there is something called the “Project Management Triangle.” We’re not sure when we first heard the term or discovered the concept it describes. So, when we went to research some “history,” we discovered it isn’t really an obscure secret in other fields of endeavor. Based on long experience though, our industry doesn’t yet seem to have discovered the concept. The “Project Management Triangle” has a number of other names: “Triple Constraint,” “Project Triangle,” and “Iron Triangle.” [“Iron Triangle” is also used to describe an aspect of Washington politics, and we leave the reader to explore that form of its use on her or his own.] [Read more…]

Print

Notwithstanding Anything To The Contrary Contained Herein

Print

When a carpenter or other craftsperson needs to make “that final adjustment,” she or he reaches into the toolbox and out may come a shim. We’ve all seen shims used, but not everyone knows they have a name. Those wedges, washers, and thin strips of material used to align parts or make them fit are called “shims.” We who draft agreements of every type also use shims. Reluctant as Ruminations is to use the word “all” and mean “all,” today’s use seems accurate. Who among us hasn’t slipped in at least one “notwithstanding anything to the contrary” into every agreement longer than several pages? That’s using a shim because it makes the parts of the agreement “fit” together.

Basically, this shim is used in two circumstances. The first is where, after reading what we’ve written, we realize that our crafted provision isn’t exactly right. We realize that there are one or more circumstances that don’t fit what we’ve written. We realize that what we’ve written needs adjustment. We’ve got to carve out some exceptions. So, instead of rewriting the provisions to make them say what they should say, we append a list of those things we realize don’t fit – but not of those things we didn’t realize don’t fit. [Read more…]

Print

Insurance Question: Who Are You And What Is Yours?

Print

When I speak to “you,” you know who you are. That seems simple enough. But, you might not be entirely correct. Try the word in this sentence: “After a while, you get used to it.”

Who’s “you”? In the sense of “After a while, you get used to it,” “you” means any person in general.

Well, in the most commonly used form of commercial liability insurance, the one promulgated by the Insurance Services Office, Inc. (ISO), knowing who “you” is turns out to be pretty important. The policy form defines “the insured” and that includes the policyholder and a specific list of persons and entities related to the policyholder. The coverage, however, applies only to certain acts or omissions “you” might have done or not done and to certain things that are “yours.” Is it possible that “you” and “your” refer to “any person in general”? [Of course not.] [Read more…]

Print

Let’s Learn Our Trade – Warning: A Rant

Print

Imagine you are the computer user of the century. There is nothing about using a computer you don’t know. [So you think.] Your friends call you day and night asking, “How do I do this; how do I do that?” Coding? – No problem. Formatting to produce a publishable book using Microsoft Word? – No problem. Manipulating data to prove or disprove human involvement in climate change, if there is such a thing? – No problem.

Then, one day, boxes from all over the world show up at your door. There are no notes, no letters, and no instructions to tell you what you’ve got. But, one of the boxes has something that looks very much like a computer case. With that clue and looking at the generality of some of the other things that were in the other boxes, your best guess, a good one, is that these are the parts for a computer. You’ve looked inside a lot of computers before. After all, your friends have had you play with some connectors; you’ve replaced a hard drive or two, even a solid state one. But, can you assemble the parts to make a working computer? Do you really, really understand how to assemble a computer? Will your proficiency in using a computer, even playing with its cables and poking around inside the case be enough for you to put all of those parts together? [Read more…]

Print

What’s In A Name: Gross And Net Leases

Print

Gross vs. Net Leases. Rent is the dominant continuing connection between a landlord and a tenant.  Almost always, all expenses arising out of real estate development are paid by tenants – taxes, insurance, maintenance and other operating costs, environmental costs, and the rest.  These costs may already be included in the initial rent.  In such a case, unless the lease is for a very short term, the tenant will thereafter separately pay the amounts by which taxes, insurance premium, and maintenance costs increase over the “base year” cost of those items.  The base year is almost always the first year of the lease term.  So, it doesn’t matter if the initial rent has already taken into account the then current taxes, insurance premiums, and maintenance costs or whether it doesn’t.  When they are included, the rent is higher and the tenant only pays subsequent cost increases – that’s called a “gross” rent lease.  When the rent doesn’t included these initial “pass-through” expenses, the tenant will pay, as “additional rent,” its entire share of the cost for taxes, insurance, and maintenance over and above the seemingly lower rent.  Leases employing this latter approach are frequently referred to as some form of “net” lease – “triple net” (NNN), “absolute net” or “net.”  Unfortunately for the inexperienced practitioner, those terms (and similar ones like them) mean little because, from their “nickname” alone, they cannot tell who is responsible for paying the costs to fix the building’s structure or flooring or items of similar character.  As a result, it is imperative that anyone preparing a lease find out “who pays for what.” [Read more…]

Print

Old And Cold – Audit Rights And Claim Cut-Offs

Print

Is there a time to let old things die? We are qualified to answer that question when it comes to matters emotional, but when it comes to “business,” Ruminations only has some thoughts. Today, we’ll discuss chasing people who owe money but, because money isn’t everything, we’ll start with a little digression intended to make a point.

How long should the government (that’s us, by the way) be permitted to chase a criminal? Many (but not all) states have laws that answer that question. Here’s New York’s answer:

6 years for felonies punishable by 8 or more years in prison

3 years for felonies punishable by less than 8 years in prison

No limit for murder or other capital offenses.

Three years for misdemeanors committed against children 13 and younger.

One year for other misdemeanors.

Though the time limit to file civil claims also varies by state and by the type of claim being made, they also butt up against time limits. Typically, general contract claims must be made within 6 years after the claim can first be made. Claims arising out of the sale of goods have a 4 year limit. Tort claims (and automobile accidents fall in that category) typically have a two or three year limit. Some defamation claims have an even shorter limit – only one year. Unsurprisingly, claims against government entities often have shorter time limits. After all, “Whoever has the gold makes the rules.” [Read more…]

Print