Pro Tanto Assignments And Other Problems We’ve Seen (Part 2)

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Who isn’t in favor of tantos? Last week (click HERE to see), we ended the Ruminations blog posting with a promise to explain an “assignment pro tanto.” We’ll start with what “tanto” isn’t. In the leasing context, it isn’t “a Japanese short sword or dagger.” What it is, is a close cousin of the musical direction (try, on sheet music) of “tanto – too much; so much.” We’ve stalled enough, so here we go:

Assignments Pro-Tanto

Having raised the specter of an “assignment pro tanto, it is only proper that this unusual and possibly dangerous hybrid be described – especially in a treatment of common and uncommon assignment / subletting problems.  Simply speaking, this animal is the transfer, to another, of a tenant’s entire interest in a portion of leased premises, for the entire lease term.  Describing this creation as an animal may be an apt choice of terms as it may be somewhat uncontrollable.  In most jurisdictions, but not all, the landlord now has two tenants and, in effect, two leases.  The assignee may, and the operative word is: “may,” have a contractual relationship with the landlord.  If the original tenant defaults under its lease, giving rise to a lease termination, the landlord may still have a tenant, the assignee, for the portion of the leased space that was thought to merely be sublet.  The law is uncertain; there isn’t a lot of guiding case law.  But, if a tenant can assign freely under its lease, but not sublet freely, there is always the possibility of enjoying both “existences” by use of an assignment pro tanto. [Read more…]

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Five Or More Take-Aways From A Single Mailbox (Rule)

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There must be a backstory to the case Ruminations will look at today. But, first, we’ll ramble a little, touching on this ‘n that.

There’s a common law rule called the “mailbox rule” or if you are on the eastern side of the Atlantic in another English-speaking county, the “posting rule.” [The United States and Great Britain – two nations separated by a common language. Credit: George Bernard Shaw.] The rule says that, absent some other bar, an offer is accepted when it is presented to the postal service, put in the hands of a postal worker or placed in a mail box). Basically, absent saying otherwise, an offeror is deemed to have “appointed” the postal service as its agent for receipt of an acceptance. The risk of receipt is thus placed on the offeror. This rule applies in other situations, one of which is relevant to today’s story.

This is a good place to remind all readers to carefully review the Ruminations disclaimer at the bottom of the blog page. Today, our disclaimer clearly means that no reader should try to learn the law from our description of the “mailbox rule.” Our description is just a starting point for understanding its extent and, more importantly, its limitations. That having been said, don’t ignore that the rule exists. [Read more…]

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Subject To What Exactly?

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Today’s blog posting deals with the always “fresh” question about whether making something “subject to winding up with a signed, written agreement” allows the parties to walk away without having to look back. The answer we give today, however, may not be very satisfying to many readers. And, to those who find the answer of interest, rarely will they be able to apply today’s answer to any problems that reach their way.

Have you ever wondered what is really meant when we write that a letter of intent or other form of agreement is “subject to” one or more conditions? Basically, what is the meaning or scope of those two words: “subject to”? If there is any lesson to come out today, it might be that we should be much clearer than “subject to” before the parties are bound to an agreement or to perform an obligation under an agreement. [Read more…]

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We Never Do That Until We Do, Now Let’s Negotiate

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Why do we do this to each other? Yes, at the end of the day, bargaining power is the dominant factor in determining a negotiated result. But, does that mean reaching a deal is an act pure gamesmanship? We hope not.

We recently attended a panel program, quite a good one, featuring four landlord representatives and four counterparts on the tenant side. For the most part, those working for landlords held singular views. It wasn’t much different on the tenant side but for one factor. The represented landlords were large multi-property companies; the represented tenants included a 10 store chain, a prominent supermarket, a well-known health club chain, and a very large publicly owned franchisor. So, on the tenant-side, there was a broader range of “power.”

The issue that triggered today’s blog posting had to do with a the issue of tenants requesting protection from the big real estate tax hit that could take place if a shopping center in California was sold. Trust us, that can happen, and it can happen big time. [Read more…]

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Frustrated? – Bail Out Of A Lease Before It Begins – Impossible? No.

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Today, we offer a potpourri of rants: the doctrine of impossibility; good faith and fair dealing; and why did you think you could get away with that?

We’ve written about “impossibility” and “impracticality.” [Take a look at one such posting by clicking: HERE.] Basically, if the conditions are “right” (“the stars are aligned”), a party can get out of a contract if the purpose for which the agreement was reached turns out to be impossible to achieve. In the context of a Florida commercial lease dispute, the United States Court of Appeals for the Eleventh Circuit recently summarized a general principle of Florida law as follows:

Where the parties contract for the use of a property which use is not allowed by law, the consideration wholly fails, and the money paid for the contract should be returned and the parties mutually released.

That principle is not unique to Florida law.

The appellate court, in a decision that can be seen by clicking: HERE, tells the following, simple story. A shopping center lease was signed with a tenant wanting to open a tanning salon. The tenant then applied for an “Addition/Alteration Building Permit Application” in order to make needed changes to the space. It was denied. The reason given was that its zoning ordinance did not permit tanning salons at the tenant’s location. The sense one would get from the appellate court’s decision is that the city was probably on shaky ground when using such an excuse for the permit denial. [Read more…]

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Are The Demised Premises Really Defined The Way You Meant Them To Be?

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It doesn’t matter what we call the space, “Premises,” “Demised Premises,” “Leased Space” or whatever, but what matters is how we define it AND THEN what we do with it. And, when it comes to defining and then using what Ruminations will call the “Leased Space,” our industry doesn’t always do a very good job.

Next week we’ll drag out a 2012 court decision raising some questions about what constituted a particular shopping center, but today just we’ll Ruminate about what should be a simpler question.

One thing that has always puzzled us is what could have been intended when a lease says that the Leased Space means “Store No. 7, as shown on Exhibit A, together with all appurtenances serving Store No. 7.” Then, the lease requires that the tenant maintain the Leased Space.

Now, let’s understand what is meant by an appurtenance. As we see it, it is a pretty fluid term because it is context-sensitive. As applied to real property, it is something subservient to the main property, in our case, “Store No. 7,” but something that attaches to it. What kind of something? Well it could be physical such as an accessory building or loading dock. It could be the rooftop HVAC unit. And, it could be the sidewalks leading to the store, especially those parts that only serve the store. And, as to the foregoing list, it could be that none of them are “appurtenant” to Store No. 7. More importantly, appurtenances would include non-physical “attachments” such as the right to use the parking areas, driveways, delivery roads, and the like. [Read more…]

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Save A Tree – No More Paper Copies – No More Ink

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It seems to us that, in at least one way, ordinary consumer transactions are moving much more quickly into the future than are commercial real estate transactions. We’re thinking about the way they are replacing paper documents with purely electronic ones. Broker generated property sales contracts and leases are increasingly, completely paperless. Residential loans are moving into the paperless world with signatures directly on tablet computers.

For years, many jurisdictions have accepted facsimile signatures on entity (corporate, limited liability company, etc.) filings, including printed signatures that read: “/Jane Doe/.” More and more real property recording offices require electronic filing, mostly using pdf copies of scanned or generated documents. Again, goodbye ink. In fact, at this time, a very serious project is afoot at the federal level to create a registry where “paper” notes will be electronically filed, whereupon the “sacred” original will be destroyed, yes – destroyed. Heresy, you say? Perhaps, but the electronic version will be the one and only authentic note. [Read more…]

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Did You Get My Letter?

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We’ve always wondered about an aspect of giving “notice,” but never having faced the particular issue, never went beyond “wondering.” Then, last week, we came across a Massachusetts Appellate Court’s decision touching on the issue. Ruminations can’t say that the outcome was very satisfying. So, we thought we’d toss it out for readers to think about. [That doesn’t mean we won’t share some of our observations, just that we don’t really have a conclusion (yet).]

Here’s the setup. A lease had a self-extension provision. Its term would roll over, a year at a time, unless either the landlord or tenant gave a “don’t do it again” notice. The particular provision read exactly as follows: [Read more…]

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