Circumventing Lease Transfer (Assignment – Subletting) Restrictions And Other Ploys (Part 3)

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Today’s blog posting may not make sense to those who haven’t read our previous two postings. In the first part of this three part series, we presented some basic assignment and subletting concepts, legal and practical. That can be seen by clicking: HERE. Last week we continued that presentation, but moved into what we titled: “The Troubles I Have Seen – General Assignment / Subletting Issues.” That posting ended with a list of shortcomings  commonly plaguing many assignment/subletting lease provisions. It can be seen by clicking: HERE.

Today, we continue by listing more practical issues faced by all of us when trying to restrict lease transfers (what most landlords seek to do) or when trying to facilitate lease transfers (what most tenants seek to achieve). Even if you’ve chosen not to look at the prior postings, we guaranty that today’s posting will make you want to do so. So, to that end, we begin with: [Read more…]

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Pro Tanto Assignments And Other Problems We’ve Seen (Part 2)

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Who isn’t in favor of tantos? Last week (click HERE to see), we ended the Ruminations blog posting with a promise to explain an “assignment pro tanto.” We’ll start with what “tanto” isn’t. In the leasing context, it isn’t “a Japanese short sword or dagger.” What it is, is a close cousin of the musical direction (try, on sheet music) of “tanto – too much; so much.” We’ve stalled enough, so here we go:

Assignments Pro-Tanto

Having raised the specter of an “assignment pro tanto, it is only proper that this unusual and possibly dangerous hybrid be described – especially in a treatment of common and uncommon assignment / subletting problems.  Simply speaking, this animal is the transfer, to another, of a tenant’s entire interest in a portion of leased premises, for the entire lease term.  Describing this creation as an animal may be an apt choice of terms as it may be somewhat uncontrollable.  In most jurisdictions, but not all, the landlord now has two tenants and, in effect, two leases.  The assignee may, and the operative word is: “may,” have a contractual relationship with the landlord.  If the original tenant defaults under its lease, giving rise to a lease termination, the landlord may still have a tenant, the assignee, for the portion of the leased space that was thought to merely be sublet.  The law is uncertain; there isn’t a lot of guiding case law.  But, if a tenant can assign freely under its lease, but not sublet freely, there is always the possibility of enjoying both “existences” by use of an assignment pro tanto. [Read more…]

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How Can We Get Out Of Here In One Piece? (Part 1)

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Vacation time and the living is easy. Ruminations has a big backlist of material and sometimes we cheat by reaching into it and putting an edited, usually lightly edited, version of “stuff from the vault” in the form of a blog posting. That’s what’s happening this week and at least next week. Just like a resale store, “it’s new to you.” [That is, new to at least nearly all, but not all, of our readers.] Today, tour approach adds up to the first part of a primer, from the Ruminations perspective, on assignment and subletting.

Under common law, absent a lease restriction, tenants were free to assign their leasehold interest to others or to sublet all or part of their leased space. That rule of law is of little consequence today because virtually all leases restrict assignment and subletting rights, often in excruciating detail. In addition, a small number of jurisdictions have reversed the rule by statute and there are certain kinds of leases, generally tied into personal services that are not, as a default matter, freely assignable. [Read more…]

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Five Or More Take-Aways From A Single Mailbox (Rule)

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There must be a backstory to the case Ruminations will look at today. But, first, we’ll ramble a little, touching on this ‘n that.

There’s a common law rule called the “mailbox rule” or if you are on the eastern side of the Atlantic in another English-speaking county, the “posting rule.” [The United States and Great Britain – two nations separated by a common language. Credit: George Bernard Shaw.] The rule says that, absent some other bar, an offer is accepted when it is presented to the postal service, put in the hands of a postal worker or placed in a mail box). Basically, absent saying otherwise, an offeror is deemed to have “appointed” the postal service as its agent for receipt of an acceptance. The risk of receipt is thus placed on the offeror. This rule applies in other situations, one of which is relevant to today’s story.

This is a good place to remind all readers to carefully review the Ruminations disclaimer at the bottom of the blog page. Today, our disclaimer clearly means that no reader should try to learn the law from our description of the “mailbox rule.” Our description is just a starting point for understanding its extent and, more importantly, its limitations. That having been said, don’t ignore that the rule exists. [Read more…]

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Subject To What Exactly?

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Today’s blog posting deals with the always “fresh” question about whether making something “subject to winding up with a signed, written agreement” allows the parties to walk away without having to look back. The answer we give today, however, may not be very satisfying to many readers. And, to those who find the answer of interest, rarely will they be able to apply today’s answer to any problems that reach their way.

Have you ever wondered what is really meant when we write that a letter of intent or other form of agreement is “subject to” one or more conditions? Basically, what is the meaning or scope of those two words: “subject to”? If there is any lesson to come out today, it might be that we should be much clearer than “subject to” before the parties are bound to an agreement or to perform an obligation under an agreement. [Read more…]

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We Never Do That Until We Do, Now Let’s Negotiate

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Why do we do this to each other? Yes, at the end of the day, bargaining power is the dominant factor in determining a negotiated result. But, does that mean reaching a deal is an act pure gamesmanship? We hope not.

We recently attended a panel program, quite a good one, featuring four landlord representatives and four counterparts on the tenant side. For the most part, those working for landlords held singular views. It wasn’t much different on the tenant side but for one factor. The represented landlords were large multi-property companies; the represented tenants included a 10 store chain, a prominent supermarket, a well-known health club chain, and a very large publicly owned franchisor. So, on the tenant-side, there was a broader range of “power.”

The issue that triggered today’s blog posting had to do with a the issue of tenants requesting protection from the big real estate tax hit that could take place if a shopping center in California was sold. Trust us, that can happen, and it can happen big time. [Read more…]

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Additional Rent Is No Rent At All

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We are aware that in New Jersey, if a lease doesn’t denominate a particular tenant’s financial obligation as some version of “rent,” then the landlord can’t get the tenant evicted for non-payment of that item. The reason we are aware of this is because we’ve seen case law that denies a landlord such relief. While the landlord can sue to collect such charges, for example, common area charges, it can’t evict the tenant if the lease doesn’t say that such charges are “rent” or “additional rent.” It doesn’t matter that Ruminations thinks that’s just plain silly. That’s the way it works even if everyone other than the court knows that such items are part of a tenant’s rent.

Nonetheless, since courts, not Ruminations, get to issue eviction documents, almost all New Jersey leases recite something like: “All monies required by this Lease to be paid by Tenant to Landlord constitute ‘Additional Rent’ and the failure to pay Additional Rent will have the same consequences as failure to pay Basic Rent.” Still, some New Jersey leases don’t say anything like that but, fortunately, almost all tenants actually pay their rent (and additional rent). So, you don’t see a lot of court decisions about the issue. [Read more…]

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Frustrated? – Bail Out Of A Lease Before It Begins – Impossible? No.

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Today, we offer a potpourri of rants: the doctrine of impossibility; good faith and fair dealing; and why did you think you could get away with that?

We’ve written about “impossibility” and “impracticality.” [Take a look at one such posting by clicking: HERE.] Basically, if the conditions are “right” (“the stars are aligned”), a party can get out of a contract if the purpose for which the agreement was reached turns out to be impossible to achieve. In the context of a Florida commercial lease dispute, the United States Court of Appeals for the Eleventh Circuit recently summarized a general principle of Florida law as follows:

Where the parties contract for the use of a property which use is not allowed by law, the consideration wholly fails, and the money paid for the contract should be returned and the parties mutually released.

That principle is not unique to Florida law.

The appellate court, in a decision that can be seen by clicking: HERE, tells the following, simple story. A shopping center lease was signed with a tenant wanting to open a tanning salon. The tenant then applied for an “Addition/Alteration Building Permit Application” in order to make needed changes to the space. It was denied. The reason given was that its zoning ordinance did not permit tanning salons at the tenant’s location. The sense one would get from the appellate court’s decision is that the city was probably on shaky ground when using such an excuse for the permit denial. [Read more…]

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