A Word Is Not A Crystal, Transparent And Unchanged

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“If the law supposes that,” said Mr. Bumble,… “the law is a ass—a idiot. If that’s the eye of the law, the law is a bachelor; and the worst I wish the law is that his eye may be opened by experience—by experience.” [Charles Dickens, Oliver Twist.] Ruminations doesn’t exactly know what all of that means, but it hasn’t been our experience. The law is not “a[n] ass, a[n] idiot.” None of us should think that we can draft documents (lease, mortgages or other agreements) and then decide later what they mean. We can’t expect courts to go along with what we wished the document said or what we want the document to say. They are pretty good, though not perfect, when it comes to “calling ‘em right.”

Today’s blog posting is informed by a July 17 Opinion from the North Carolina Court of Justice, Superior Court Division. To see it, click HERE.

Here’s a snippet of common boilerplate, most often found in releases, but commonly found elsewhere in other agreements, whether using these very words or ones very close to them:

… and its predecessors, successors, directors, officers, managers, members, and their respective heirs, executors and designees…

Yes, your list may be different. It may be longer. It may be shorter. But, you have such a list. [Read more…]

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What’s In A Name? Gross? Net? Does It Make A Difference?

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Other than giving a general sense of the way the lease deals with variable costs of operating a rental property, the labels, “gross lease” and “net lease” give no usable information. A good rule when it comes to preparing a lease or when reviewing a lease is to look at each obligation and ask two questions: “Who does it? Who pays for it?” In the truest of “net” leases, the tenant does both. You’ll see that most often for a single tenant property where the leased premises include all of the land as well as the building. That can come about in a number of ways, most often when the tenant developed the property and then sold it to an investor (a sale-leaseback). It is also common when a developer does a build-to-suit project for the tenant. Less often, but not rare, is where an existing single-tenant property is leased. In each of those cases, the overwhelming “rule” is that the tenant will do all of the work at its own expense. A very common, though limited exception, is when it comes to the building’s structure and, less often, the building’s roof. A “smart” exception would be that the landlord maintains the property insurance, though the tenant pays that cost. Such a lease is rightly called “triple net,” “net” or, as Ruminations prefers, ‘absolute net.” [Read more…]

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Estoppels – Why? What? How A Red Light Becomes A Green Light

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What is the legal effect of an estoppel certificate or, in “shorthand,” an “estoppel”? “Estoppel” is a strange word. To understand its effect, try this non-defining, circular statement: “One who issues an estoppel certificate is then ‘estopped.’” Basically, the certifying person (or entity) is “stopped” from denying that what is said in the certificate is a fact. If one issues an estoppel saying that the traffic light was red, those reasonably relying on that certificate can act as if the light was red even if it wasn’t. In “leasing” terms, if a tenant delivers an estoppel in favor of a prospective successor landlord and that certificate says that the tenant has received all of the tenant improvement money due under the lease, the successor landlord can rely on that statement even if the tenant was mistaken. The tenant is “estopped” or “barred” from making a claim against the successor landlord for that money. The tenant, not the successor landlord, takes the risk of being wrong. [Read more…]

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Chicken Little Syndrome And How A Deal Gets Done

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Fair Warning – here’s another Ruminations screed. The sky will fall if you don’t read on. OK, not really, but we were feeling left out. It seems that’s the way some of us talk to each other.

“Tell them that if they don’t sign by noon tomorrow, I’m going to lease the space to someone else!” “If you don’t agree to my insurance language, this deal is dead.” “We have four other people who badly want this space, and each will pay more than what’s in our deal.”

The specter of each possibility is the threat. It doesn’t matter how probable it is that, late in a deal, one party or the other will “walk” if the deal is signed a week from now rather than “now.”

Yes, it’s possible that there are other prospective tenants lurking around the property and it is possible that other landlords are tossing great offers at your prospective tenant.

But, these things are true so rarely, that no one believes these threats. Yet, landlords and tenants keep trying.

Granted that under the right circumstances and with confirming facts to support the urgency of the plea, such threats should be taken seriously. After all, in a very, very small, yet disturbing number of cases, landlords and tenants walk from a late-stage deal to take another, more attractive one. That really doesn’t happen much. More often, a tenant is negotiating for a space that has been “sucking wind” and the likelihood that four prospects have shown up all at once after 18 months is quite low. It could happen, but so could two planes crash mid-air. Yet, brokers and landlords drag that old song out far too often. And, we’re not going to tag just brokers and landlords with that charge; tenants try to sing that song as well. [Read more…]

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What Does An Exclusive Use Clause Have In Common With The Affordable Care Act?

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What a diff’rence a word makes, twenty-four little meanings.

Chief Justice Roberts, last Thursday, in his majority opinion in the Affordable Care Act case, did a much better job than Ruminations has ever done in explaining how courts interpret statutes or agreements. We’d like to think that he (and the other five justices joining the opinion) learned the law by reading Ruminations, but even we don’t have that quantum of chutzpah.

We’ll save readers the effort of reading that Court’s decision in King v. Burwell, the health care law case decided last Thursday. It was decided on the basis that courts don’t interpret words or phrases independently of the host statute or agreement; they interpret entire statutes or agreements. Yes, once a court finds a word or a group of words as capable of having more than one meaning, it will interpret that word or those words in the context of, and in a way that is consistent with, the overall objective of the statute (or agreement). That’s been a regular Ruminations theme. [Read more…]

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Crafting Agreements In A Virtual Realty World

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What does it take to craft a lease provision (or, for that matter, any agreement provision) from scratch? What does it take to review any agreement provision? Can anyone just wake up one morning and honestly declare: “I can do that”? Ruminations doesn’t think so. It may be possible for just anyone to wake up one morning and decide she or he can be President of the United States, but it just doesn’t work when it comes to “doing” leases or other agreements.

Without doubt, the more knowledge someone has, the better the chance the agreement will do its job. And, that means knowing about the subject matter – the business terms and the context – of the agreement, not just the common nuts and bolts of a lease. Today, we’re going to use leases for our examples. Readers can “translate” those examples to any other kind of agreement. When we write, “context,” readers can think about “how the property works” – what is unique about the property or the parties, and consequently, the deal. Even if one memorized every word of the world’s best lease form and even remembered the order of those words and where every punctuation mark went, she or he wouldn’t have a workable lease. Ruminations could launch a diatribe on the subject, but knowing our readers, we’d be preaching to the choir. [Read more…]

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How Many Ways Can Boilerplate Clauses Be Written? How Many Good Ways?

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“Except in the most extraordinary circumstances, [courts] hold sophisticated parties to the terms of their bargain.” [That comes from a (2014) 7th Circuit United States Court of Appeals decision.]

Today’s posting will last more than a single cup of coffee. Brew a fresh pot before starting.

The actual agreement drafting examples that follow are not ones that will cause rioting in the streets. As today’s “headline” suggests, they come from part of the “boilerplate” of their parent agreements. We are using them for a number of reasons (laziness is among them). One important one is if someone can’t draft “boilerplate” to read one way and only one way, how can that person get the “one time” provisions to “say what they mean, and mean what they say.” [Read more…]

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Let’s Change Every Word Of The Proposed Lease And Send It Back To the Other Side

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One technique Ruminations and other blogs use is to write only about what they know. That minimizes the risk of being wrong and gives the impression that the writer has figured everything out. Yes, that time-honored technique hides the truth.

If you’ve found the disclaimer at the bottom of our “front page,” you’ll see that our goal is to trigger a discussion or discussions. To a greater extent than we could have imagined, we’ve achieved some piece of that goal. We get comments on the Ruminations site and many more through Linked In and similar sites. We also get direct emails and telephone calls.

Today, in violation of the first principle revealed above, we’re going to step out of our blogger’s shell and confess our inability to know where to “draw the line” when it comes to preparing agreements or preparing comments (suggested changes) to those agreements. And, in keeping with the second principle above, we’re going to urge readers, as Ernest Tubb and Loretta Lynn sang (and Dean Martin closed his shows with), to “keep those cards and letters coming in.” That’s enough prologue. Here’s what we can’t figure out. [Read more…]

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