Have you ever bought a $300,000 house solely based on reading a classified ad? What about doing a $3,000,000 lease (30 years, including options, at $100,000 a year) without ever seeing the property or at least taking a good “look” at the property from far away? Why would you NEVER buy a house that way, yet regularly do a lease based solely on a term sheet and with no other “due diligence” investigation? Simply said, you shouldn’t. [Read more...]
So, the lease requires the tenant to carry a policy of “rent insurance” or requires the landlord to carry a policy of “rent insurance” or, worse, requires both of them to do so. What does that policy say and how does it work?
Trick question! You won’t find a rent insurance policy. You may find a commercial property insurance endorsement providing coverage for “rental value,” but don’t look for “rent insurance.” While you are at it, don’t call it: “rental interruption insurance,” “rent loss insurance,” or “rental income insurance.” Those are nice concepts, but lack any precise meaning. If you want to call it “use and occupancy insurance,” go ahead, but that form of policy is long, long gone. [Read more...]
Oldies Are Not Necessarily Goodies, Especially When You Find Such Terms In Your Leases And Other Contracts
We wanted to address “Rent Insurance” today, but got somewhat distracted when we started out by writing “there really isn’t something called ‘Rent Insurance,’ even if lease writers insist otherwise.” We then were going to describe “Business Interruption and Extra Expense Coverage” because that’s really what lease writers are thinking when they say “Rent Insurance.” That was to take us into “how all of that works” and “where it doesn’t work.” It would have been pages long. [Read more...]
And, in modern America, it seems as if someone else is always at fault, not me. [If you take no blame, it must be them; Who must then pay my fines. It's really is quite the cleverest ploy; By which illogic shines. – Gary Bachlund.]
Actually, there are times when bad things happen and the landlord and its tenant are each “good people.” Here are some examples: [Read more...]
Money, that’s the only reason a landlord and its tenant do business with each other. There are some items that, by something that approaches natural law, are firmly in the court of one or the other. For example, landlords are expected to pay their own mortgages. Tenants are expected to pay their own employees. There may not be a lot of other examples. For instance, at first blush, one might think that the tenant gets to keep its sales revenue. That’s often true, but what about percentage rent clauses? [Read more...]
When I use the word, ‘Fixture,’ “It Means Just What I Choose It To Mean — Neither More Nor Less.” [Humpty Dumpty on Retail Leasing]
What do we mean when we say something is a “fixture”? The most accurate answer is: “Who knows?” One reason for such uncertainty is that the answer depends on: (a) why you are asking; (b) who you are asking; (c) when you asked the question; and (d) where you were standing when you asked the question. The real reason is that the answer depends on the intent of the parties for whom the answer would be important.
What is not in doubt is that the question’s answer is important, for both leases and mortgages (and for taxation and some other kinds of issues). [Read more...]
When a lease makes a specific reference to “Builders Risk” coverage, we know the conversation is going to go sideways. That’s because the proponent of that provision rarely knows anything more about that kind of insurance than can be intuited from the words: “Builders Risk” itself.
Here is an opening premise: the normal (ISO) coverage form for “Building and Personal Property Coverage” does not pertain to buildings under construction. [The ISO, or Insurance Services Office, is an association of insurance companies and it promulgates commonly used insurance forms. Many, but not all carriers use these forms. So, people who really want to know what is or is not covered always need to look at the policy itself. Those who draft leases might want to requires insurance policies to be on ISO forms or be on the functional equivalent of those forms.] [Read more...]