We Hold These Truths To Be Self-Evident, That All Rents Are Not Created Equal. What Does “Present Value” Mean?

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Everyone knows that a dollar received today is better than a dollar received a year from now. Many realize that it is advantageous to pay a dollar a year from now rather than pay it today. That’s the “time value of money.” It is also based on a pretty good, but not guaranteed, assumption that interest rates and inflation rates will be positive. Historically, that has been a good bet.

We’ve used the word “better” in the sense that most would understand, but “better” is actually in the eyes of the beholder. It is better for the recipient to get the dollar now, but that’s not the case for the payor. [Well, we’ve gotten that out of the way.]

So, which is better when it comes to paying or receiving monthly rent for a five year lease: (a) $12 per square foot of floor area throughout the term; or (b) $10 the first year, $11 the second year, $12 the third year, $13 the fourth year, and $14 the final year? After all, $12 per square foot is right in the middle, it is the average rent “figure” over the five year term. [Read more...]

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Electricity (For Leases, Etc.) Explained And Possibly Demystified

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Nothing in today’s Ruminations posting should shock its readers.

We’re sure that more than a few readers know that calling for 600 amp electrical service doesn’t assure that you’ll get usable electrical service. Doing so only calls for one ingredient in the recipe that gets the place properly lit, the computers to run, the HVAC to work, and … well, you get the idea. Today, we’ll try to explain what those who throw electrical specifications around (like they know what they are talking about) might want to know. It won’t be easy because it’s somewhat technical, but we’ll try to make it simple (if not interesting). [Read more...]

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Show Me The Ink! Why?

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We could be writing about electronic signatures, and we will before readers get to the end of today’s posting. Mercifully, as is our habit on holiday weekends, we’ll be relatively short today – not in height or stature, but in our use of electrons.

The “Why” in our title questions “why” many parties and a lot of their attorneys insist on getting a copy of every agreement, such as a lease, bearing “ink” or original signatures. Granted that more and more people are accepting an exchange of faxed or pdf-ed agreements (without the “beautiful” ink), but many of those “accepting” parties still want the “ink.” We think that there is little need for going through the exercise of doing this except when a jurisdiction’s recording process still “demands” ink. You can’t fight City Hall. Even at that, with electronic recording rolling across the country, even recording officers don’t need to see ink. [Read more...]

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How Much Profit Should A Landlord Make From Pass-Through Items?

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Over the last couple of months, we’ve seen bits and pieces of a discussion (or discussions) as to whether a landlord should make a profit on operating expenses or other pass-through charges. Much of what we’ve seen didn’t appear to be very responsive to that question. It was about protecting one party or the other. That gives Ruminations an opportunity to weigh in on the operative verb: “should.”

You don’t have to get to the bottom of today’s posting to get our view. Simply speaking, it is: “Why not?” [Read more...]

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Should A Grown-Up Tenant Clean Up Its Room When It Leaves For College?

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Is there something like a law that says a tenant, at the end of a lease’s term, has to surrender the leased space in the same condition as it was at the start of the term? Does a common legal stationer’s form’s rendering of this requirement, “return the Rental Space to the Landlord in the same condition as it was at the beginning of the Term except for normal wear and tear,” have a single meaning, one that everyone would agree-upon once the space was inspected post-departure?

Before we deconstruct the word “condition” as used in the described context, Ruminations will look at the broader question – “In what condition should a tenant yield up the physical space it is vacating?” We think that question cannot be answered in the abstract. What’s the business deal? [Read more...]

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Keep Writing Your Agreements That Way – The Litigators Love You

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Has Ruminations ever suggested that those who negotiate and prepare agreements take to heart the following message: “Words matter – say what you mean and mean what you say”? Yes, and more than once or twice. In fact, more than novence.

Will that stop us from doing so again? No.

Today we look at a lease that said: “All disputes under this Lease, OTHER THAN THOSE RELATING TO THE PAYMENT OF RENT OR OTHER CHARGES BY TENANT, must be submitted to arbitration.” The tenant under this lease vacated the leased premises, failed to pay rent and other charges, didn’t remove its fixtures, and didn’t restore the leased premises to the contractually required condition. With that in mind, we are going to find out what monetary claims were subject to arbitration and what claims were not. Had the parties said what they meant, Ruminations wouldn’t be able to tell you their story. [Read more...]

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A Million Dollar Lease Drafting Lesson

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An “Evergreen” contract is one that renews over and over. So does an “Evergreen” letter of credit. So does the topic that follows – how, if your documents are not written carefully, courts may do damage. And, perhaps “written” isn’t the real activity to be scrutinized and “thought-through” would be a better choice of words.

Today, we are going to look at a late April court decision from the U.S. District Court for the Southern District of New York: In re: The Great Atlantic & Pacific Tea Company, Inc. You can see it by clicking HERE.

This is about A&P’s bankruptcy and even without knowing the disputed issue, a very good guess is that the bankrupt estate will be enhanced by the court’s ruling. If that is a little cynical on the part of Ruminations, then so be it. While there are conflicting public policies involved in bankruptcy matters, one seems to loom over almost all others: “get more money into the pot to pay unsecured creditors.”

Read on; look at the decision itself; you decide. [Read more...]

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Getting On The Same Page When It Comes To Operating Expense (CAM Costs) Reporting

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A lot of trees have been cut down for the paper used to write about operating expenses or common area costs. That’s because when you talk about passing along operating costs, you are talking real money. Yet, aside from deals where the operating expense charge is a fixed (and usually escalating) amount, far less negotiation is had for a nickel or a dime per square foot of operating expenses than is the case with the same nickel or dime of basic rent. Yet, a nickel is a nickel and a dime is a dime [See: John Lee Hooker, Bottle Up & Go], whether called base rent or operating expenses. In sum, like weather, everybody talks about it, but nobody can do anything about it. But, is that really true? In part, “Yes”; in part, “No.” Here’s our attempt to start a discussion – kill more trees. [Read more...]

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