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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It Might Be Negligence To Leave Out The Word Negligence (Unless It Isn’t)

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Are there “magic words” or are there not? Once again, we feel compelled to warn readers that “we need to know what we are doing.” A lot of people in this “business” of ours cross over jurisdictional lines whether rightly or not. There is a lot of material out there about the ethics of doing so. That’s a reasonable concern to have, but there is a far less discussed, but more serious, problem. It is called malpractice. That term is not limited to attorneys. It isn’t even limited to professionals. It is hard enough to know the law in a single jurisdiction. Know the “law” in every jurisdiction (e.g., state) is, frankly speaking, impossible.

If we are going to “practice” in the real estate world, we need to practice well, not malpractice. “Mal” is a “combing form,” one that is added to words. It comes from the French “mal,” and that came from the Latin “male” which meant “badly.” [We sure hope the word is pronounced differently than is the gender.] The bottom line, however, is that “malpractice” is practicing in a faulty or improper or inadequate manner. No reader of this blog wants to come within a million miles of anything “mal” in her or his practice. So, we need to know that we don’t know the law everyplace. One example is how various jurisdictions view liability waivers. Today, we write only about one aspect of that question – whether to effectively be released from one’s own negligence, a waiver must expressly say that “negligence” is being waived or whether waiving “all” claims for damage really means “all,” including those claims arising out of negligence. [Read more…]

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Hindsight Isn’t Always 20/20

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Guilty! Ruminations and its author have done this, though we’ve long been conscious of its flaws. What is “this”? It is that we’ve criticized documents prepared by others when we “weren’t there.” Before we proceed with today’s rant, a small clarification is in order. There will be no apology for our pointing out unnecessarily vague or ambiguous language. In fact, we think there is a place for intentional ambiguity and remain firmly behind the thoughts we expressed seven years ago in a piece titled: The Artful Use of Intentional Ambiguity in Document Drafting. It can be seen by clicking: HERE. What we are pleading guilty to is to the crime of criticizing others based on business terms that have included or omitted from their documents. Often, that’s the wrong thing to do. Let the ones among us, those who have not done this, throw the first stone.

Experience and intellect qualify us to analyze a lease or purchase agreement or loan document or whatever. Those qualify us to question why some things have been included and others omitted. We are not alone. Many, many readers (and non-readers) of Ruminations are similarly or even better qualified. But, having the ability to do so doesn’t mean we should be doing so. Why do we feel that way? [Read more…]

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How Good Is A Lease Guaranty After The Original Term Expires?

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It’s a funny thing about this business. After all is said and done, you still need to know the “law.” And, by “law,” we aren’t thinking about the “law in general.” Instead, we are thinking about the “law” in the place where it matters. Almost always, that’s the state where the property in question is located. In today’s world, it’s not possible to know everything, everywhere. But, what is possible is to know the “questions.” There are some universal concepts. Not all of those concepts are universal, fixed rules such as the rule that if valid rent is unpaid, the tenant can’t stay. The most important universal concept is that the law is not the same throughout the more than 51 jurisdictions that make up the United States. In most cases, the law is similar, but the law is not the same. As with many “learned professions,” knowing the questions to ask is the hard part. That’s the real challenge we face. Finding answers is easy. Said another way, if you want to have your agreements, such as leases and guaranties, mean what you have said, then you have to be aware of the way the law differs jurisdiction to jurisdiction. [Read more…]

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Is “Display” A Verb Or A Noun; More About Exclusives

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If exclusive use rights are so important to some tenants and if landlords almost always resist granting such rights, why is it that, when agreement (compromise) is reached, the parties keep making the same mistakes? We’ve written before about the generality of “exclusives” and also about some specific approaches. For the benefit of new readers and to remind others, Ruminations holds that the presence or absence of an exclusive use right (and the scope of that right) is purely a function of bargaining power. Basically, how much does each party want the lease? That having been said, here are more of our thoughts.

To the extent that an exclusive use right is justifiable, tenants should be entitled to protection for their primary business, not for items of tertiary importance. A pizzeria sells pizza. If a pizzeria couldn’t sell pizza, then it isn’t one. Selling pizza is its “primary” use. So, to the extent that the presence of a second pizzeria at a particular property would seriously cannibalize sales at the first one, it is entirely appropriate for a landlord to be barred from allowing that second one. But, a tenant that holds itself out to be a pizzeria shouldn’t be entitled to keep others (such as a health food store) from selling frozen pizzas or to keep others from selling “Italian-style” sandwiches. If a pizzeria can’t co-exist with a sandwich shop, then it is a sandwich shop, not a pizzeria. Of course, defining a tenant’s primary business may not be as easy as looking at the tenant’s name, but we all get the idea (provided we are willing to step out of our uniforms – landlord or tenant – and look at the entire picture). [Read more…]

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I Surrender! Here’s Your Property Back: As-Is. Sue Me

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We are no fan of a particular type of “surrender” clause commonly found in leases, the “style” that calls for a tenant to “leave the property in as good condition as when it moved in, save normal wear and tear.” These clauses come in a variety of flavors, none of which Ruminations will offer today. In 2014, we shared some thoughts on this same topic in a posting that can be seen by clicking: HERE. We’ve also said (too) much about “wear and tear.” For those Ruminations of ours, search the blog site for (what else?) “wear and tear.” For the most part, our earlier writings have focused on the downside to tenants of this type of lease clause. Today, we’ll introduce a court decision that illustrates a giant shortcoming of the “same or better” condition requirement, one that should make landlords leery. Even readers who take a different approach to the condition of the leased property when its tenant departs will be interested in what the same court had to say about a property’s “move-in” condition and the implication for provisions dealing with the “move-out” condition. [Read more…]

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Experience Matters: Words Have Meanings (And An Insurance Pointer)

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Last week, we wrote about the need for competence when it comes to crafting deal documents such as a lease. Among the over 400 Ruminations prior blog postings are more than a dozen dealing with insurance. This week, we get to combine the two subjects thanks to a December 5, 2018 unpublished ruling from a New Jersey appeals court resolving an insurance dispute. The facts are mundane, but provide a roadmap for us today.

A tenant’s employee “injured himself using a freight elevator inside the leased premises.” He sued the landlord for negligence. [The workers compensation law barred him from suing his employer, the tenant.] Relying on the lease’s indemnification provision, the landlord claimed back against the tenant. It also demanded that the tenant’s insurer honor the landlord’s status as an additional insured under the tenant’s liability policy. As will be seen, the appellate court made the landlord unhappy. To understand why we’ll start with the lease’s indemnification clause. It read as follows: [Read more…]

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Don’t Know How To Do It? Then, Don’t!

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Some concepts are so simple that we never think that we’d have to point them out. But, today, one of those concepts occurred to us, and we’d like to share it with our readers. Here it is:

If you are going to craft documents, be they leases, purchase agreements or ‘whatever,’ you should know what you are doing.

Experience can be a good teacher, if your experience is good. Bad experiences could be a good teacher as well if you learn (quickly and correctly) and especially if they were someone else’s bad experiences.

Today’s blog posting was triggered by a nearly year-old Maryland court decision. The particular problem pointed out by the court, however, is something we’ve seen played out more than several times over the years. In this version, it involved a right and option provision amended into an existing lease. The relevant text read as follows: [Read more…]

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