What’s In A Name? That Which We Call A Tenant…

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We titled today’s posting with apologies to Shakespeare, who wrote for this line for Juliet: “What’s in a name? That which we call a rose; By any other name would smell as sweet.” Ruminations has wanted to explore this issue for quite some time, but hasn’t found a “handle” to latch onto until now. What issue, you ask? It should be obvious, ABC, so to speak, that when you look at a lease (or any other agreement), you should be able to know who the landlord and tenant are. Amazingly, that isn’t always the case. Allow us to continue.

But, before we begin, we’ll explain that when the problem arises, we’ve only seen it concern the identity of the tenant, not the landlord. That’s never been discomforting because lack of care or lack of knowledge is more common when the lease involves a small space and, in most of those cases, the form used comes from the landlord and the landlord knows its own name even if it isn’t already built into the form itself.

Have you ever seen a lease that names the tenant as: “Jane Doe dba Jane Doe, LLC”? How about: “Jane Doe, LLC (Jane Doe)” or “Jane Doe (Jane Doe, LLC)”? Or, try this: “Jane Doe for a company to be formed”? How about: “Jane Doe, LLC” when there is no such entity? Well, if you’ve been breathing long enough, you have. And, did you think Jane Doe was personally liable for the tenant’s obligations? What about a lease that names the tenant as “Jane Doe” right up front, but is signed by: “Jane Doe, President” or as “Jane Doe, Member of Jane Doe, LLC”? We could go on and increase this list of examples manifold times, but would never have thought of the situation that follows had we not been interested in an unrelated bankruptcy issue and encountered the following lease’s way of identifying the tenant. Here is its cover sheet:

MONTVIEW SHOPPING CENTER

LEASE AGREEMENT

BY AND BETWEEN

HIT INC.,

as Landlord

an individual,

as Tenant

Yes, the lease’s cover sheet doesn’t name the actual tenant, though it looks like the tenant is an individual. So, perhaps, the rest of the lease itself will help us out. So, here is how it begins:

THIS LEASE made and entered into this   5   day of   August , 20 11   by and between (“Landlord”) and (“Tenant”).

Well, that’s not all that helpful (unless, coincidentally, the tenant’s name was “Tenant” just like our pet parakeet’s name was “bird”).

Was there anything in the lease to help us out? How was it signed? Try: “Michelle Thomas – owner.” Owner of what, an entity with or without limited liability for its owners? Was it a proprietorship that would make Ms. Thomas personally liable? Was it a corporation, a limited liability company, a partnership, a limited partnership, or what? Yes, there are special words we use such as, shareholder, member or partner, but are those dispositive, are those exclusive? No, they are not.

So, was there more? Well, there were exhibits to the lease. Here is relevant text from two of them:

FOR VALUE RECEIVED, and in consideration for, and as an inducement to HIT, Inc., as Landlord, for entering into a certain Lease Agreement (the “Lease”) dated the     5    day of August , 20   11   with    Platinum Play   as Tenant, for that certain premises located at the Montview Plaza Shopping Center, Michelle R. Thomas  (the “Guarantor”), guarantees to Landlord . . . .

and

FOR VALUE RECEIVED, and in consideration for, and as an inducement to HIT, Inc., as Landlord, for entering into a certain Lease Agreement (the “Lease”) dated the   5   day of August , 20   11   with   Platinum Play   as Tenant, for that certain premises located at the Montview Plaza Shopping Center, James D. Thomas (the “Guarantor”), guarantees to Landlord . . . .

Well, here’s another player: Platinum Play, and it’s called the “Tenant.” What is “Platinum Play” and who owns it, and is that owner, presumably at least Michelle R. Thomas, directly liable as the “individual” tenant (as suggested by the lease’s cover sheet)?

Are there any more clues in the lease? Yes, there were additional exhibits, but none give us a direct answer. All, but one, merely use “Landlord” and “Tenant” without naming the parties. They were all signed by Michelle Thomas as the “Tenant” and, in a way that puzzles us as well, by “Kay Hong” (not Hit, Inc.) as Landlord. There was one exhibit, however, that began:

Shopping Center Lease Agreement (the “Lease”) dated   8/5/11  , 20  11  by and between   HIT Inc.  , a Landlord,    Platinum Play (James D. Thomas / Michelle A. Thomas  , a Tenant, for the premises located at   9395 Montview Blvd., Aurora, CO 80010   (“Premises”) . . . .

So, we have a little more information. We know, again, that something called “Platinum Play” is involved with the Tenant. We don’t know if it is a trade name or an organized entity. If an entity, we don’t know if it affords limited liability to its owners or not. We have just learned that it isn’t just associated with Michelle A. Thomas, but with James D. Thomas as well.

How would Ruminations describe this lease? Probably not in as pithy a way as did the Bankruptcy Court judge when he wrote: “The Lease is a hodgepodge that contains numerous internal contradictions” and “The Lease appears not to have been professionally drafted and is rife with omissions and contradictions.”

It turns out that Platinum Play was a corporation: “Platinum Play, Inc.” even though you couldn’t tell that from the lease. If you relied on the lease, you would have concluded that Platinum Play was a trade name of the business owned by at least Michelle Thomas and probably also by James Thomas. If, however, the landlord knew or should have known that Platinum Play was a corporation, the Thomases would be off the hook for its obligations (but for the guaranties they signed).

Oh, yes, those guaranties. How did they play into the court’s analysis?

It’s a funny thing about some landlords (and their compliant tenants) when it comes to guaranties. Even when an individual (not an entity) is clearly the tenant, some landlords (and, some professionals who should know better) ask that individual tenant to “guaranty” his or her own obligations. Think about that, Jane Doe should sign a guaranty agreeing that if Jane Doe doesn’t pay her bills, Jane Doe will. If you haven’t seen that, stay in this business and you will.

The court understood the “Jane can’t guaranty her own obligations” concept, so it correctly understood that the guaranties could only have meant that the Thomases were guarantying the obligations of an entity for which they would not otherwise have personal liability. From that and the other crumbs of clues, it ruled that the tenant was the corporation: Platinum Play, Inc. and not Michelle Thomas.

Do we think that any reader of Ruminations would ever be associated with a lease that fails to name the responsible parties? Actually, yes, but not many of our readers. Do we think that any readers might have their fingerprints on a lease that could be described as was this lease: “The Lease is a hodgepodge that contains numerous internal contradictions” and “The Lease appears not to have been professionally drafted and is rife with omissions and contradictions”? Ruminations wishes it could say, “No.”

Why was the outcome of this case important if, at the end of the day, Michelle Thomas was the tenant’s guarantor? Wouldn’t she (and James) be liable anyway? That’s how we found this case. The issue before the Bankruptcy Court was a claim by the landlord against the Thomases. As revealed above, the court concluded that they weren’t actually the Tenant. Rather, they insisted that their corporation was the defaulting tenant. The landlord was seeking to collect an administrative claim for post-filing rent, one that would give it priority over other creditors in the personal bankruptcy. Unfortunately for the landlord, the priority for administrative claims is reserved for the “obligations of the debtor” and, with Platinum Play, Inc. having been determined to be the tenant, the administrative rent was not a debt of the Thomases, only one that they guaranteed. Hence, it did not earn the priority in the personal bankruptcy.

This case, like many others we find for the Ruminations blog, had an extensive (read that: expensive) litigation history, in part because the landlord saved a lot of money in preparing the lease. We’ve told readers about the “identity” issues addressed by the court. If anyone is interested in the bankruptcy analysis, the court’s decision can be seen by clicking: HERE.

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Comments

  1. Excellent! I like to believe I would not make these mistakes but anybody can slip or get sloppy. Thanks for the reminder.

  2. Peggy Israel says:

    I have had several landlord clients that want to name the person as the Tenant and then also have the person sign as Guarantor. I’ve always counseled not to do that, but this gives me more ammunition re why it’s a bad idea.

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