Retail Real Estate Law

You Need To Know French To Choose Applicable Law For Your Agreement

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Today, we begin with a French lesson. The French word, “renvoi,” means “to return,” in the sense of “sending back.” In law, “Renvoi” is a doctrine, and what follows is why you’ll be pleased to know that.

Last week, we tackled the humdrum, excitement-lacking “boilerplate” of specifying, in a lease or other agreement, an exclusive venue for litigation. What we didn’t even hint at was that just because the parties are obligated to duke it out in a particular jurisdiction doesn’t mean that the law of that jurisdiction will apply to their fight. Often, but not always, parties are free to specify which jurisdiction’s (state’s) law will govern their dispute. As to the location (venue) for the match, though some states will allow contracting parties with no connection to those jurisdictions to avail themselves of that state’s courts, most still require the parties or the subject matter of the dispute to at least “touch” their state. For example, if a loan is made in State X on a property in State Y, but the lender or borrower is in State “Z,” it is likely that each of those three states would allow its courts to hear the dispute. But, which state’s law would apply? A less than comprehensive list of the factors a court will use in deciding to apply the law of a jurisdiction other than its own would be: the parties’ intent, their domiciles, where the lease or other agreement was executed, and where the property is located. In the case of “property,” a secondary analysis is made as to whether the property is primary or secondary to the agreement in front of the court. For example, a personal guaranty of a mortgage loan may only have an attenuated relationship to the property serving as collateral for the loan and the parties are able to call for jurisdiction where either the borrower or lender “resides.” It could also be, but isn’t required to be, where the property is located. [A separate issue is whether a party or either party can be served in other than its “home” state, but we’ll leave that for another day (if ever)]. [Read more…]

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Look At The Venue Language In Your Agreements

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After punishing loyal readers over the last two weeks with a two-part, 4,704-word exploration of rice, Oriental cuisine, and (yes) tenant exclusives, we will now retreat to a relatively simple, unconvoluted posting. It will be short. But, wise readers will want to look at a few sentences buried inside the boilerplate of their form agreements – leases, guarantees, and so forth.

There may be a state courthouse in every county throughout the United States, but that’s not true about federal courthouses. [We’re not even sure that every U.S. County has its own courthouse. That’s something that requires “local” knowledge.] But, you don’t have to have a courthouse in your county to be subject to a federal court’s jurisdiction. There is something called, “venue.” That’s the county or district housing the courthouse where criminal or civil cases must be heard. Courthouses are “venued” in a particular location even though they can have jurisdiction over a much larger area than just their county of venue. The trick is that the boundaries of a “district” and that of a “county” are not the same. With perhaps a very small number of exceptions (known to some readers located in those places), a federal court’s “district” encompasses a number of counties (in Louisiana, “parishes”). For example, New Jersey has one Federal “District,” the “District of New Jersey,” but it effectively has three (lower case) “districts” with courthouses in Camden, Newark, and Trenton. California and New York each have four (upper case) “Districts,” but a lot more courthouses. For example, in New York, there are 11 federal courthouses. [Read more…]

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Exclusive Use Rights: Common Language Knowledge May Not Work

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We doubt that our next paragraph, let alone the rest of today’s blog posting, will make much sense to readers who haven’t seen last week’s posting. So, if that means you, we suggest you click: HERE.

After receiving a number of “off-line” comments from readers, we took a look at the various types of rice in our pantry and found the following: Carnaroli, Jasmin, Wild Rice, Arborio, California Sushi, Basmati Light Brown, Brown Jasmin, Extra Long Grain Rice, Brown Rice, and a Rice Blend (something that offers the look of much more expensive Wild Rice, but, with some white rice in the blend, is not as expensive). Who knew? Yes, to the eye some of these types clearly are “white”; some are not; some are “different minds will differ.” Thus, an expert organoleptically examining our pantry’s selection, would call some versions “white” and call others “brown.” But, when these, other than Long Grain White Rice and the straightforward Brown Rice, were offered for sale, the merchants wanted them to be seen as something other than “white” or “brown” rice. Those two boring descriptions imply “commodity” rice. Carnaroli Rice, which by the way we highly recommend over Arborio rice, for preparing risotto, costs the consumer more even though its production costs might not support that “bump.” [Read more…]

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When It Comes To Tenant Exclusives, Forget What You Think You Know

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Ruminations has always had an interest in understanding the “why” of things. That includes understanding why we do certain things certain ways and especially how we can get led astray. We double down when it comes to the subject of exclusive uses. That’s why a July 5, 2018 decision out of the Superior Court of Rhode Island caught our interest. The original lawsuit was filed in 2005 and the dispute, one that started no later than in 2000, had already made two trips to the Rhode Island Supreme Court. Here’s the opening line from the 2018 decision, one that will probably intrigue readers: “Before this Court is the sticky question of which competing food-court vendors had the right to sell certain oriental foods – primarily various types of rice – at the [subject shopping center].” As long as we are quoting the Court, we’ll let you know that it characterized the case before it (for over 15 years) as a “saga.” Similarly, today’s posting will be a “saga,” and will conclude next week when we’ll reveal our pithy “take-aways.” [Read more…]

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Jack Of All Trades, Master Of None – Avoiding Hubris

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Several Ruminations blog posts over the years have posited that many of us, this writer included, don’t listen very well to what the person on the other end of the deal is actually saying. We already know what we think we ought to know and, certainly, that person, a/k/a “our adversary,” is only seeking an advantage over us. We don’t even play a purely intellectual game by taking the other side’s “position” in our head and rolling it over (and over). We’ve even seen this, more than a handful of times, when that other person is really trying to help us avoid a mistake. An appropriate word for this might be “hubris.” That means excessive pride or excessive self-confidence. According to one source, in Greek tragedy it means “excessive pride toward or defiance of the gods, leading to nemesis.” That same source lists these synonyms: “arrogance, conceit, conceitedness, haughtiness, pride, vanity, self-importance, self-conceit, pomposity, superciliousness, feeling of superiority.” While we are at it, that still same source defines “nemesis” as: “the inescapable agent of someone’s or something’s downfall.” [Read more…]

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Rectifying Sloppy Agreements

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A 25-page court decision out of the Supreme Court of British Columbia has triggered today’s blog posting. The decision describes a convoluted, time-extended, back-and-forth negotiation over a set of interrelated, broker-prepared offers to buy and sell. In that marketplace, such documents signed by the offering party and “accepted” by the other one become “contracts of sale and purchase.” The back and forth with these documents began in early February, After a number of handwritten changes and the addition of a couple of pages, they were finally “accepted” in late July.

There were a few issues with the wording of the three separate “contracts,” one for each of the three properties being sold. We will focus on two of those “issues,” but will describe all those we think the court described.

One of the main issues had to do with the way the buyer’s name was shown. It appeared in multiple places in each contract. The actual buyer’s name included the word “Investment,” but the broker who first prepared the documents wrote “Development.” Fortunately, for the sake of sanity, the buyer noticed these errors and made corrections, but just not thoroughly enough. By way of example, the name printed above the buyer’s signature line in one of the contracts read “Development” when it should have read “Investment.” Both companies actually existed and they, in fact, were related entities. [Read more…]

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What Is The Lifespan Of A Lease After The Stated Term Ends?

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What are the rules between a tenant and its landlord after a lease expires? In today’s blog posting, we aren’t exactly thinking about a “holdover” tenancy. In the context of this question, we’ll leave that for another day. [For those who haven’t yet read what we wrote in our November 2012 posting: “Why So Much Confusion About Holdover Tenants?,” it can be seen by clicking here: HERE. For other Ruminations about holdover tenancies, you can click: HERE or HERE.]

It is common to see a lease recite something like the following: “If the Tenant remains in possession after this lease ends, the continuing tenancy will be from month to month.” At least, that’s how the lease we learned about in a California appellate decision (of January 10, 2019) just read by us. [It, Smyth v. Berman, can be seen by clicking: HERE.]  On its face, it would seem that those quoted words are equivalent to a lease extension just as would be the case if the tenant had an extension (or, poorly named, renewal) option. Well, is it the same? [Read more…]

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Operating, Managing, Policing, Insuring, Repairing, And Maintaining

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Most retail leases have a “CAM” provision and though they are formulated in a myriad of ways, a common element can be found in the way “common area maintenance” (CAM or Operating Expenses) is defined. The words used are seen so often that many eyes glaze right over them. They are so familiar that, long ago, we stopped thinking about them. This occurred to Ruminations as we read an unpublished February 19 decision from the Court of Appeals of Arizona (an “intermediate” appellate court).

Here’s what that court told us. A bunch of shopping center tenants, as a group, sued their common landlord over a Common Area Maintenance (CAM) billing for capital expenses. Exactly what is a capital expense? There are too many definitions used for a “capital expense,” and even the Internal Revenue Code doesn’t provide much help because its “definition,” if you can call it that, relies on some principles. Here is what those might be: [Read more…]

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