With the help of some readers, Ruminations is spiraling in on a unified theory about remedies a “violated tenant” might have against its landlord and others for the breach of an exclusive use right granted to the violated tenant in its own Lease. We’re going to start with possible remedies against the landlord because that’s the most discussed facet of this topic when reaching a deal and when negotiating a lease. The agreed-upon remedies are important to lenders and buyers as well because what is agreed-upon can affect the economics of sales and financing transactions. For an example, think about the effect on the shopping center buyer in the Office Depot case discussed in the Ruminations entry of July 25, 2011.
Our working theory is that there are four kinds of remedies available against a landlord: (1) damages or rent/money adjustments; (2) termination rights; (3) the right to obtain an injunction ordering the landlord to “do something; and (4) the right to control enforcement.
When it comes to damages, there are the following: (1) rent (including additional rent) adjustments; (2) liquidated damages; and (3) actual damages.
When it comes to a termination right, we see such variables as: (1) how long does the violation need to continue before the termination right is exercisable; and (2) what is the violated tenant’s remedy before the termination right becomes exercisable?
With each of the damages or termination remedies, there is the question of “how long or by when,” sometimes characterized at “… or get off the pot.”
A lease could give the violated tenant the right to enforce or control the enforcement of the breaching tenant’s lease, but that is probably the most unusual remedy and as such, is probably the most controversial. There is something about “control” that drives contracting parties (think, landlords) crazy. More about that in a later posting.
In the case of each of the four categories: damages, termination, injunction, and controlling enforcement, there are the issues of “when does the remedy” begin and will some of those alternatives be retroactive to the initial violation? Also, there is the issue as to when the remedy expires.
Most of our Ruminations blog entries are quite long – longer, perhaps, than “industry standards.” Today, we’ll stop here. When thoughts haven’t yet “jelled,” it makes sense to this writer to break things down into building blocks. The building blocks will come later down the road. In the meantime, our call for “help” in getting these ideas together remains active and sincere. We know this is an “unsettling” end to a blog posting, but there is a reason to this madness – it’s like seeing the gun just before the commercial break. So, before next week, let us know if we are on the right track. Help us refine these thoughts. Please post your “help” at www.retailrealestatelaw.com.