Luddites Unite – Artificial Intelligence Will Replace Us

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We’ve been thinking about artificial intelligence applications and how they might change, even transform, the way we do our business. Then, we heard an interesting story on public radio. It was about a Southern California manufacturer of sex dolls who was introducing models incorporating artificial intelligence. For reasons quite obvious, the story didn’t get very deep into the details, but we learned that these new models were designed to figure out what their owners wanted and to respond appropriately.

We thought this application to be quite amazing in that here was a business way ahead of our own. Artificial intelligence is being used to read medical images with better results than even experienced radiologists achieve. It is being used to screen job applicants, much, much faster than humans doing so and with more satisfactory outcomes. Artificial intelligence is at the heart of visual recognition, allowing machines to replace people in manufacturing operations. It is used to write newspaper articles, such as those reporting sporting events. The list could go on and on. But, what it won’t include is negotiating agreements such as leases. That is, not yet.

Agreements such as leases are not zero-sum games. Though the parties exchange things of equal value, one needs to ask, “Value to whom?” Basically, when someone gets an item of value to them worth, say, $100, the other person may be giving up something worth only $60 to them. Someone may have two widgets and only need one. The duplicate widget isn’t very valuable to that person. A second person may need a widget and have two gizmos, but only need one. In each case, one widget or gizmo has a utility value of $100, but a duplicate one has a utility value of $60. Thus, if the parties trade widget for gizmo, each gives up $60 of value and gets $100 of value in return. That trade creates $200 of value out of $120 of value – a good deal for each trader. [Read more…]

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How To Cap The Very Wrong Lease Payment Obligation

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Here’s a question for commercial leasing mavens (that’s informal for: an expert or connoisseur). Have you ever seen (or contemplated) where a tenant wants to have a cap on its monthly estimated payments for its share of operating expenses, but doesn’t want a cap on its actual annual share of those expenses? If the question isn’t clear, it soon will become so.

Normally, we would give some background before presenting any lease clauses but, today, the clauses in question are the background. They come from a January 4, 2018 Court of Appeal of Louisiana decision, one that can be read by clicking: HERE[Read more…]

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Make The Lease Fit The Parties; Don’t Make the Parties Fit The Lease

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Not every lease is going to pay for the cost of a child’s college. [That raises the question, unanswered today, as to whether the cost (internal or external) to get any lease done should cover a year’s tuition and board.] Sometimes, we need to do a mental reset and ask ourselves: “What is needed here?” It’s easy to approach every deal as if all deals are the same. It’s smart to step back each time and ask: “What is needed here.”

A close relative, bearing the same family name and looking very much like this writer, recently asked us to look at an office lease for him. Our first thought was that we would finally show a member of the younger generation how this progeny’s college education was paid for. Then, the lease appeared on our screen – a two year office lease, on a new form, for space the business and his predecessor business already had been occupying for eight years. Whoa! [Read more…]

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Part 2: Are You Buying A Shopping Center? If So, Look Here:

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A few weeks ago, in response to a constant, but small, stream of requests for suggested language,” we posted a set of possible representations and warranties and a set on conditions precedent a buyer might want to consider for inclusion in a purchase agreement to acquire a leased property. We got a number of “thank you” messages following our doing so. Now, since Ruminations is not immune to adulation, we thought we’d put a lid on the topic by sharing another set of provisions a buyer might want to see in that same purchase agreement. If this pleases you, then savor today’s because it is unlikely that we’ll be taking Ruminations on this kind of detour very soon again. As always, if any reader has any suggested language to share with the many, many other readers who suffer through our postings each week, please add your contribution as a comment to today’s posting. [Read more…]

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When Do We Go Too Far In Taking Away Normal Real Property Remedies?

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Take your pick: Yellowstone National Park, Yellowstone Boulevard (Forest Hills, Queens, New York City), Yellowstone, the TV series, Yellowstone supercomputer, Yellowstone River, Yellowstone (the steamboat), Yellowstone whiskey or Yellowstone injunction. [There are more.] We have picked the injunction. That’s probably no surprise to readers in and around New York, but for others who haven’t yet figured out where this is going, we’ll briefly describe this brand of injunction. We think it is a distinctly New York thing, but even if other places have the same thing under a different name, we think today’s blog posting will make all of us do a little thinking. [That means we are not going to provide any answers today, just questions.] [Read more…]

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Abandonment, Vacancy, Default – How Are These Related?

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JDoes a tenant have a duty to occupy the leased space? No, not unless the lease requires it to do so. So, what should a lease say in that regard? We begin by contrasting two terms, vacate and abandon.

What does it mean to “abandon” leased premises? To abandon the leased space is for a tenant to relinquish its right or interest in the space with the intention of never claiming it again.  Normally that requires an understanding of the tenant’s subjective intent, a very difficult “state of mind.”  In some cases, however, that state of mind can be determined, such as when an entity tenant vacates the leased premises and is dissolved.  Mere passage of time during a cessation of active use does not constitute abandonment.  Although length of time is a factor to be considered, it is not the sole factor.  Some discontinued uses are more readily revivable than others, and the passage of time must be considered in conjunction with all circumstances, including those that caused the cessation, the nature and quality of efforts being made to resume the use, and any other objective manifestations supporting or negating the owner’s expressed intent to continue the use.  Further, just because a tenant ceases using particular leased premises does not mean that it doesn’t intend to find a subtenant for those premises.  Thus, if a tenant is otherwise performing its obligations under its lease, a landlord under a lease lacking a definition for “abandonment,” applicable to the particular circumstances, is without the ability to terminate the Lease or recapture the space. [Read more…]

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Are You Buying A Shopping Center? If So, Look Here:

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Looking back at the almost 400 prior Ruminations blog postings, we realized that in the early days, and far less so over the last couple of years, we included a fair number of “forms” or, if not complete forms (as was rarely the case), at least substantive lease provisions or provisions from other commercial real property agreements. A number of readers also noted the same, and some of them have let us know. Generally, those who let us know do so by asking, “When are you going to give us some” agreement provision text to chew over? Well, to satisfy such requests and also because we have been traveling and got a little lazy while doing so, we dedicate today’s blog posting to providing a lot of suggested language for a property acquisition agreement where the property is leased to multiple tenants.

The provisions that follow cover a seller’s representations and warranties and a set of conditions precedent. In each case, they are edited to cover only items related to tenancies at the property to be purchased. You’ll see that what follows includes capitalized defined terms, but their definitions are not in the text provided. In all cases, the definitions are intuitive. Also, there are references to exhibits and no exhibits have been provided. If you are really curious, email us and we’ll look to see if we have a sample to send you. Now, without further ado, here we go: [Read more…]

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Again: Say What You Mean; Mean What You Say!

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It’s been a while since we used these words: “Say What You Mean; Mean What You Say!” Well, we’re back (and, no, this isn’t going to be a dinosaur’s story.) Today, we report on an unremarkable, unpublished January 22, 2018 Order out of a United States District Court in Illinois. That’s what brings us back to those words.

Before we reveal exactly what we saw in that Order, we’ll start with a simple thought: How many times have you seen the following formulation?

If Grantor begins such repair work or to performs such obligations, but fails to promptly and diligently prosecute the same to completion within thirty (30) days of so beginning, … [Ed. – Note the underlined words]

Well, that drives us crazy. Obviously, the parties meant “within thirty (30) days after.” Yes, “after” is obvious in our example, but every time you encounter this formulation, think about whether, in the case in front of you, you really meant to say that the action could happen within the 30 days BEFORE. [Read more…]

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