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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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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Who’s On First? Keeping Track Of Basic Facts

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Please don’t ask for the central theme of today’s blog posting. We’ve done so already and came up empty-headed. The closest we’ve come is that we’re writing about how a stitch in time saves nine.

The genesis of today’s subject is a very simple case that reached a California appellate court. It probably isn’t worth looking at, but for those compelled to do so, the February 2, 2017 decision can be seen by clicking: HERE.] The court was confronted with a situation where, on its face, the signatory to an indemnification agreement was not authorized to sign the agreement on behalf of the indemnitor (the one who would have to pay). There was no indication that the document was signed with the intention of fooling anyone. It appears that the person signing the agreement was confused or ignorant as to “who” should have done the signing. We’ll explain.

There were two limited liability companies. One was the sole manager of the second. We’ll call the first company, the parent, and the second, the child. The parent had a managing member. He was the kind of person who breathes, unlike, say, Citizens United. He could sign on behalf of the parent, but when signing for the child, the “proper” signatory would be “by parent, as sole member of child, by breathing person, as managing member of parent.” Get it? If not, then realize that the “person” who could sign for the child was the parent. But, because the parent was an entity who could not hold a pen, a “real” person needs to sign on behalf of the parent. [Read more…]

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Rights Of First Refusal Transmogrify Into Purchase Options

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Rights of first refusal create difficult situations. For that reason, knowing landlords resist granting them. Unknowing ones don’t know not to resist. Then again, “resist” doesn’t mean never. So, like it or not, there are plenty of leases with such a provision.

We’ve written about rights of first refusal and alternatives to such provisions. If you’d like to get on the same page as those who have seen what we’ve written in prior blog postings, click: HERE and HERE.

A few weeks ago, we came across a case that gives a pretty good explanation about what a first of right refusal is and what it becomes. But, we’re getting ahead of ourselves. First, here’s the story.

A landlord owned two adjacent parcels. One was tenanted by a quick service restaurant, the other by a discount store. The quick service restaurant had the earlier lease and that lease gave it a right of first refusal to purchase both parcels. The later (in time) discount store lease had a purchase option (not a right of refusal). The option was exercisable during the last two years of the lease term, but was expressly subject to the right of first refusal in the quick service restaurant’s lease. Got it so far? [Read more…]

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We Can Waive Claims, Not Subrogation

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What’s an “evergreen”? An evergreen contract is one that automatically renews unless one party or the other affirmatively terminates it. An “evergreen” blogging topic is one that never dies; one that we can visit over and over. The topic of insurance waivers of subrogation is such an “evergreen.”

We just reviewed a March 22, 2017 decision from a United States District Court sitting in New Jersey. Let us tell you some things about it. It has a twist. [You can see it yourself by clicking: HERE.]

Allegedly “unsupervised, untrained, and unlicensed maintenance workers” employed by a residential landlord were accused of misusing (our euphemism) an acetylene torch and thereby setting a fire that destroyed tenants’ property. The tenants’ insurance company paid the losses and sued the landlord for recovery.
The landlord (almost certainly, the landlord’s own insurance company) responded that each tenant-insured had waived and released it from liability for such a fire. [Read more…]

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