How Can I Get Out Of My Oral Agreement?

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It’s not true that oral contracts aren’t worth the paper they’re printed on. In fact, for all but some small classes of agreements, oral ones are no different than ones printed on the finest of rag papers. Certainly, they are more difficult to prove their very existence, let alone their detailed provisions. That’s a good reason they should be memorialized in a written version. We’ve written, “memorialized” because, in many cases that’s the real function the writing performs. The parties will have already agreed to the terms of their intended transaction. At that stage, they have a contract – a binding agreement. Writing it down doesn’t make it any more “official,” just a lot easier to follow and a lot easier to explain the “deal” to others, attorneys included.

So as not to mislead some readers, we aren’t dismissing the “Statute of Frauds,” something most (perhaps all) states adopted based on a 1677 English law with the self-explanatory name: “An Act for the Prevention of Frauds and Perjuries.” While various states have different lists of what kind of agreements need to be in writing lest one party or the other be able to disavow their agreement just because it was oral (and for no other disabling reason), traditionally most agreements involving conveyances of real property fall or fell (depending on where the property is located) under these statutes. [Read more…]

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Who Fixes What At The Shopping Center? How Do You Know?

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A shopping center has a finite number of elements requiring maintenance, repair or replacement. Basically, in mathematical terms, it is a closed set. That means all possible points are within its boundaries. So, if you allocate responsibilities for certain parts of a shopping center to one party and then say that the other party has responsibility for everything else, you’ve covered every possibility. Given that the leased space is a sub-part of the entire shopping center, it is easier to list a tenant’s responsibilities than to list its landlord’s. That’s made even easier if you can say that the tenant is responsible for everything inside the leased space except for a short list of discrete items. Then, you can add a short list of items outside the leased space and the result will almost always be complete as to the tenant’s role. Everything else would be cast upon the landlord. [Read more…]

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Can A Tenant Just Pay-Up And Close Its Store In Violation Of A Continuous Operating Covenant?

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Continuous operation lease provisions are contentious. The ability of a landlord to impose such an obligation within a particular lease is determined by the relative bargaining power of the parties. All bargaining power, like all politics, is local. If a tenant doesn’t really “need” to be at a particular property and the landlord really “needs” that (or any) tenant, then it’s unlikely that any resulting lease will include one. At least, in a rational world, that’s the way it would be.

Today, Ruminations will describe two unusual court decisions with the caveat that the fat lady hasn’t yet sung. Each are at the “preliminary injunction” stage, actually at the stage where two courts, in geographically distant jurisdictions, have ordered two different tenants, with different landlords, to keep their stores open. That’s where the similarity ends, as today’s blog posting will tell.

[As to the two cases, each being in the preliminary injunction stage, no final decision has been reached. All the separate courts have ruled is that what the tenants were “doing yesterday,” i.e., operating a store, they need to do “today,” i.e., keep operating that store (at least until a final decision is reached). That means not all the facts and legal arguments are yet on the table. For that reason, Ruminations won’t be analyzing the living daylights out of either case. We’ll be waiting for a final “call” as to one of those cases (the Indiana one) before going down that road.] [Read more…]

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Stop Them Now – They Are Killing Me!

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  • Until about a month ago (or, perhaps until this past September), had you asked us if a court would order a tenant to keep its store open and operating, we would have said, “Probably, not,” with an emphasis on the “Not.” We think a large majority of our colleagues would have agreed. That’s not to say that there couldn’t have been very special circumstances not included within our “Not,” but we would have thought those circumstances would need to have been unique in character. Today, after an Indiana court has (for now) barred a chain store retailer from closing 77 stores located in the aggrieved developer’s malls and a Washington state court has (for now) barred a (chain) supermarket from closing a single store, we’re far less sure. We aren’t going to dissect those two court orders today. That’s for next week, another holiday weekend. Today, we’ll just glaze eyes over with some legal background. [Read more…]
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What Kind Of Property Qualifies For Like-Kind Exchange Treatment?

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We think the like-kind exchange provisions of United States tax law (IRC § 1031) have survived the careful tax law deliberations just concluded by Congress. [That’s what we thought when we wrote this blog posting. It now appears that the Senate-House compromise removed personal property from like-kind treatment, preserving only real property as qualified exchange property. Read this posting in that light and assume the current tax bill will be enacted.] So, today’s blog posting might describe the kind of property that can qualify for like-kind, tax-deferment treatment. Or, it might describe what used to be eligible. With that in mind, we remembered that a number of years ago we prepared a Q&A information sheet to explain what property might be eligible for tax deferred, like-kind exchange treatment under § 1031 of the United States Internal Revenue Code and to highlight the availability of such treatment for items of personal property. Tax free exchanges pursuant to § 1031 are subject to strict substantive and procedural rules and it is highly inadvisable to rely on summary materials when structuring such exchanges. Something came up last week that caused us to think about this topic. So, the topic of taxes being all over the press, we thought we would gussy up our prior work and share it with our readers. Some of the phrasing comes from the Regulations that explain the Internal Revenue Code. That’s a hint that any reader wanting to know more would be wise to look there as well. [Read more…]

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Whose Deal Is It Anyway – Ours Or Our Client’s?

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In a perfect world, wouldn’t everyone’s lease or other agreement comments on behalf of the same party be identical (grammar and spelling aside)? Shouldn’t everyone working on behalf of a tenant, landlord, borrower, lender or the like know exactly what her or his “client” wants to see in the agreement? We suppose so, but a perfect world is still pretty far away. And, it isn’t a lack of knowledge (perfect knowledge?) that would result in different agreements for the same client and circumstances if negotiation were done by different people. There are a lot of factors. One factor is that for a lot of good reasons that sound much like “time and money” each negotiator would have her or his own impression as to what that particular client wants or needs. Another is that, for many parts of an agreement, it doesn’t matter – “six of one; a half dozen of another. But, the one that stands out to Ruminations is that those doing the negotiating will actually be substituting their own judgment for that of the party they represent. [Read more…]

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Brokerage Statutes – Shield Or Sword?

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For some reason, it seems that the business of real estate brokerage is subject to a little more scrutiny than experienced by other businesses. For example, there is a common law principle known as the Statute of Frauds. A book could be written about this aspect of the common law and its subsequent incorporation in most state statutes (written law). We won’t write one today.

Most jurisdictions have some form of a Statute of Frauds, and it appears that all or almost all “derive from the Statute for the Prevention of Frauds and Perjuries passed by [the English] Parliament in 1677.” Despite such a lofty name, some have described these laws as “Statutes to Perpetrate Fraud.”

We aren’t going to assume that all readers already know what this kind of “Statute” covers, so here goes. When someone speaks of the Statute of Frauds, she or he is referring to a law that requires enforceable agreements to be in writings signed by the parties against whom someone wants the agreement enforced. The Statute never applied to all agreements and good quality Swiss cheese doesn’t have as many holes as does the Statute of Frauds. [Read more…]

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Landlords, Beware The Naked Assignment

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It’s been a while since we’ve pointed out that, using the words employed by a California court in 2001, “[a] lease of real property is both a conveyance of an estate in land (a leasehold) and a contract. It gives rise to two sets of rights and obligations – those arising by virtue of the transfer of an estate in land to the tenant (privity of estate), and those existing by virtue of the parties’ express agreements in the lease (privity of contract).”

Should anyone care? Yes. And, here’s an example that should concern some landlords and benefit some tenants. It deals with a lease assignment.

We’ll lift the words used by two other California courts to explain two different paths by which an assignee takes on liability as the “tenant.” The first is from 1983 and the second from 1937: [Read more…]

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