We Reap What We Sow – Let’s Read What We Write

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We’re sure that, at one time, there were no written leases. It may have been that no one could conceive that putting the arrangement in writing would be desirable. More likely, it was that writing had not yet been invented. Jump ahead – handwritten, typed, and pre-printed leases came into being. And, then, the greatest invention of all – the word-processed form.

We imagine that when you wrote out a lease by hand, you already had negotiated the “deal” and all you were doing was to write it down. Our imagination isn’t good enough to have any sense as to how that felt, but it seems that some advantages of that process have been lost. Today, we’ll only touch on one of those – the scribe (or the one dictating the text) had to know the whole deal and then, to write it out, had to hear or read the deal in its entirety. The typed lease was probably a step away because, and we are guessing, the draftsperson might mark changes on prior, similar leases so as to reflect the new “deal.” Yet, there was no “search” or “search and replace” function – the editor-negotiator had to read the lease or, at least goodly parts of the lease. [Read more…]

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As Set Forth On Exhibit A (Not Actually) Attached Hereto

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As we were reading a very recent decision issued by the Supreme Court of Alabama, we once again were preparing to write how wasteful it was for the parties to litigate the issues raised. This urge happens often enough that Ruminations has considered preparing “boilerplate” language to be inserted at the end of many blog postings. Then we got to the concurring opinion. It could apply to many of the “manufactured” disputes created by one party or the other and supported by their advocates. Though the following words by that concurring justice give away part of the story we are going to tell, its content and tone resonate with Ruminations. We suggest that we all step back each time issues like these arise and reconsider our thoughts about litigating them.

[Read more…]

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How Do You Spell Trouble? ROFR, ROFO, ROLO, ROFN? All?

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Last week we expressed the belief that very few tenants are “entitled” to receive a Right of First Refusal (First Offer, Last Offer, First Notice) and that very few landlords should give in when any of these are requested. We also wrote that we didn’t think any deals would go south if the landlord said, “No.” Well, that’s the ideal world as seen by Ruminations. But, we also live in the real world. Sometimes leases give tenants one of those rights.

On August 4, 2013, in our 125th blog posting (this is our 383rd), we used this title: “What Were You Thinking? Was It a ROFO, ROFN, ROFR or ROLO?” Those who weren’t with us five years ago and those with sieve-like memories similar to our own, may want to visit that posting. That’s easy – just click: HERE.

The biggest issue with a landlord giving one of these rights to its tenant is not a legal one; it is not a business one; it is much simpler. Most landlords forget they’ve given them. It’s one thing to know that you’ve got to look at a lease to find its notice requirements. That’s a regularly occurring event and landlords develop the habit to do so. It’s the same thing when a landlord wants to send out a default notice. It knows that every lease is a little different and every lease has such provisions. So, it becomes a habit to look. [Read more…]

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Just Say No To The Request For A ROFR [What Say?]

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A contract, such as a lease, gives one party, say a tenant, a right it would not have without the agreement. That means the other party, in the case of our example – the landlord, has an obligation it would not otherwise have had. That’s the essence of a contract – an exchange of rights for obligations or duties. Think about it, without some kind of enforceable agreement, a lease (oral or written), a license agreement or a use and occupancy agreement, what right would a tenant have to possess its premises and what obligation would the owner have to allow it?

In real property law, a lease is a conveyance of an interest in real property just like an ordinary deed is a conveyance of an interest in real property. The difference is that an ordinary deed, one that conveys what the law calls a “fee simple interest,” gives the “grantee” the entire “bundle of rights” that come with ownership. A lease gives the grantee (the “tenant”) an “estate for years.” An estate for years has a “termination date,” a date upon which the tenant loses the right to remain in the premises. Basically, the tenant does not get any “ownership” rights after that date. [Read more…]

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Who Should Write Settlement Agreements? The Courts?

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Today’s Ruminations is triggered by a court decision that may not have reached the “correct” result. If that suspicion is correct, then why do we promulgate its holding? There’s a simple answer. Had more talent been employed in negotiating the agreement dissected by the court, there would have been no court involvement. There would also be a different blog posting today.

The facts appear to be somewhat simple. They might be simpler had the court shown more of the actual agreement in its written decision. Instead, it gave us its characterization. Normally, when courts do so, they do it in a way that tilts the “story” to support its decision. So, we’ll assume that the characterization is the strongest the court could write to support the outcome. Enough with the mystery – here’s the story.

A fitness center leased space. The lease was subsequently amended, at which time the tenant’s owner signed a personal guaranty. The document was denominated as a limited guaranty, but the only “limitation” was its dollar amount cap. Otherwise, it appears to have been what we call a “come heck or high water” obligation. [Some would give it a different, but similar nickname.] The guaranty expressly said that the guarantor’s liability was “co-extensive with that of” the tenant. [Read more…]

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Chickens, Eggs, And Waivers of Claims

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When a tenant’s property is ruined by rain coming through the roof of its leased space, what caused the damage? Was it the water or was it the landlord’s failure to repair the roof? That’s today’s issue to Ruminate about.

Right after a tenant moved into its space, it noticed the presence of water after what was called, “inclement weather.” We might have called it “rain.” So, it notified its landlord. Without delay, the landlord dispatched someone to investigate. His conclusion was the water was coming from an air conditioning unit. The tenant immediately called an independent HVAC repair company. Its conclusion was that the roof was leaking and the air conditioning unit was fine. The landlord did not make any roof repairs.

After that, each time it rained, water came into the space. After one rainstorm, only four months after the tenant moved in, so much water came in that there was damage to equipment, furniture, interior walls, and to over one million dollars (at retail) of inventory. At that time, the tenant again put its landlord on notice of the leaking roof, the damage caused, and the failure of the landlord to make repairs. The landlord had the roof inspected again. This time, its foreman determined that the water intrusion was the result of the building’s improperly constructed exterior and by something wrong with its downspout. Apparently, the landlord still did nothing, not even in response to repeated notices subsequently sent by its tenant every time water came into the space. A lawsuit followed. [Read more…]

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Did They Guaranty The Lease For Its Extended Term?

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We’ve written about guaranties before, most directly in postings that can be seen by clicking: HERE and HERE. Today, we drill down to the enforceability of a lease guaranty after the lease has been modified, but without notice to or knowledge of the guarantor. Today’s Ruminating is informed by a January, 2018 unpublished opinion from the Maryland Court of Special Appeals. [Readable by clicking: HERE.]

A church’s lease was guaranteed by its Pastor, his wife, and six other church members. The church defaulted and its landlord sued for the remaining rent under a three-year extension properly signed by the Pastor on behalf of the church, but without the knowledge of the six church members. In fact, they didn’t even have a hint that the lease had been extended despite each being some form of “leader” in the church, though those roles appeared to be substantially ceremonial. Their only financial connection to the church was their obligation to tithe to it. The lower court described them as “commercially” unsophisticated.

The lease extension was by way of amendment. The lease did not have an extension option. The additional three-year term was related to a rent reduction sought by the Pastor and agreed-to by the landlord. The church performed until it didn’t with eight months to go in the lease’s term. At that time, by agreement with its landlord, the church vacated its premises. [Read more…]

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Does The Broker Get Paid? Efficient Producing Cause And The Facts

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Last week, we set the background for understanding what it means for a broker to be the “efficient producing cause” behind a lease or sale. The background was in the form of a story from a 2012 unpublished New Jersey court decision. The long version can be seen by clicking: HERE. For those who missed last week’s blog posting, here is a precis.

An individual property owner and a real estate broker executed a commission agreement. Then the owner transferred the property to a newly formed limited liability company. A drugstore lease, requiring the owner to construct the store, was signed. The drug store’s parent company guaranteed the lease. Construction (likely “non-construction”) took years. The tenant hung on. To get the project moving, the property was transferred to a joint venture, with the new 75% owner taking over operational responsibility. Under the joint venture agreement, the new entity agreed to be responsible under the original brokerage agreement. Two days after the joint venture agreement was signed, the owner terminated the brokerage agreement. More than two years after that, the original drug store lease was terminated and a new lease was signed. The new lease was between the joint venture and the original tenant’s successor by merger. Again, the drug store parent company signed a guaranty. All of the documents signed by each of the original and new drug store were signed by the same person who signed the guaranties. The business terms of the new lease differed in rent amount and lease term from the original lease. The store opened. [Read more…]

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