You Snooze; You Lose; Maybe; Probably

Print

What is in the water that many, too many, landlords drink? What can they be thinking? The same can be said (though not as often) about tenants, and we will do so. What is in the water that many, too many, tenants drink? What can they be thinking?

The subject is asking for money rightfully owed to those drinkers. It might be for taxes or it might be for operating expenses, percentage rent, insurance premiums, reimbursable expenses or refunds for the payment of any one or more of those. It might even be for other things such as overdue rent. Yes, why do rightfully billable charges or rightful claims go unbilled or unclaimed until years later when someone wakes up, often, but not always, a successor landlord or tenant?.

[If you] SNOOZE, you [can] LOSE. “Do not spend your days gathering flowers by the wayside, lest night come upon you before you arrive at your journeys end, and then you will not reach it. [Isaac Watts].

If you haven’t experienced the situation or been asked about the following situation yet, it is just that you haven’t been at this real property leasing thing long enough: After “X” years (“X” often being 5 or more) of failing to bill a tenant for taxes or other monies genuinely owed, a landlord sends out a (BIG) bill. Both the tenant and its landlord turn to trusted advisors and ask: “How far back can the landlord go and still have the right to collect what is owed?” [Read more…]

Print

For Want Of A Parenthesis A King’s Ransom Could Have Been Lost

Print

What is every document writer’s nightmare (or at least one of their nightmares)? How about a mere “typo”? “Typo,” short for “typographical error,” is (as all readers already know), “an error (as of spelling) in typed or typeset material.” Count both the “open” and “close” parentheses in the following recital from a 17-1/2 million dollar loan guaranty:

WHEREAS, NNN Cypresswood Drive, LLC, NNN Cypresswood Drive 1, LLC, NNN Cypresswood Drive 3, LLC, NNN Cypresswood Drive 4, LLC, NNN Cypresswood Drive 5, LLC, NNN Cypresswood Drive 6, LLC, NNN Cypresswood Drive 7, LLC, NNN Cypresswood Drive 9, LLC, NNN Cypresswood Drive 10, LLC, NNN Cypresswood Drive 11, LLC, NNN Cypresswood Drive 12, LLC, NNN Cypresswood Drive 13, LLC, NNN Cypresswood Drive 14, LLC, NNN Cypresswood Drive 17, LLC, NNN Cypresswood Drive 18, LLC, NNN Cypresswood Drive 19, LLC, and NNN Cypresswood Drive 20, LLC, each a Delaware limited liability company (as defined in the Security Instrument), the “Borrower”), have obtained a loan (the “Loan”) in the principal amount of Seventeen Million Five Hundred Thousand and No/100 Dollars ($17,500,000.00) from ….

The counts don’t match. Most likely you think there is a missing parentheses. Why aren’t you thinking that there is an extra one? [Read more…]

Print

Let There Be No More Blog Postings Similar In Concept To Ruminations; We Have An Exclusive

Print

Many businesspeople reach agreement as to a principle expecting that someone else will express it in words that can be understood, in a common way, by others. So, when it is agreed that a landlord will not allow any “diner similar in concept to the tenant’s diner,” what were the landlord and tenant agreeing-upon? We would think that the tenant didn’t want competition in the form of having another restaurant that drew on the same kind of customer base. Of course, every restaurant competes with every other one, but the marketplace distinguishes between Michelin 3-star establishments and burger joints. That’s a key point whenever an exclusive use restriction is on the bargaining table.

So, was the tenant thinking that some diners would be acceptable and others would not be acceptable? If so, how does one slice and dice the category: diners? [Read more…]

Print

Once Upon A Time The Parties Agreed To Execute This Agreement

Print

Once again, we’ve been pondering the utility of using recitals for agreements, for example, within a lease amendment. There seems to be three perspectives: that of the author, that of the counter-author, and that of someone who comes across the document later, often years and years later.

One of the recurrent Ruminations’ themes is explaining that words matter and we all have an obligation to choose the right ones. By “the right ones,” we mean the ones that express the intent of the contracting parties. The commercial world works on the assumption that the parties to an agreement share the same intent and will honor that intent. To that end, when an author uses a recitals section to explain the purpose of an agreement, the counter-author (that being the person on the other side of the deal) gets a first look at what the author thinks is the deal. Just as the first chapter of a (non-fiction) book is almost always an introduction to the book itself, the recitals can serve a similar purpose. [Read more…]

Print

Curiosity Doesn’t Really Kill Cats; It Makes Them Better Cats: A Lesson For All Of Us

Print

Today’s thoughts are universal – they can apply to every endeavor we undertake. That’s no reason to pass over them and move on to highly real estate industry-focused ones. Sometimes, we need to look at the forest.

A few weeks ago, we were privileged to be able to hear Elizabeth Blackburn speak. [Use your favorite search engine for the answer.] She was asked what it was that got her to be who she turned out to be. Her answer – “curiosity.” She believed that her most important distinguishing feature was that one trait. Of course there were others, but her curiosity was the one from which all of the others could be derived.

Everything we see, everything we hear, everything we read: these are all learning opportunities. Often, we can learn more from failures and errors than from successes. Yet, in our experience, we are more comfortable relying on our successes than on the errors we and others make. What a difference it would make if we were more curious about why we think, what we think, and why others think what they think. [Read more…]

Print

Parallel Construction, Consequential Damages, And Use Of A Dictionary

Print

Questions about damages and remedies are not simple to answer and, often, the answers are less than fully satisfying. The overriding framework is that business people don’t really focus on these “leave it to the lawyers” issues until a problem rears its head. Unlike many lease and other agreement issues that are worked out between cooperating parties, when one starts to look at a document or at the law to see “what are my rights, what can I do, how can I be made whole,” the relationship has already broken down. That’s when each side starts counting commas and looking for all of the “notwithstandings.”

Today, we’re going to look at an actual case, one decided at the end of October by a California appellate court. It can be seen by clicking HERE.

It involves the concept of “consequential damages, “exclusive remedies,” and “rent and other charges.” And, as will come as no surprise to regular readers, it teaches us something about using the right words. Oh, yes, it also describes a very familiar process, that process being where lawyers are hired to try to find a way to argue that the words in a lease or other agreement support a conclusion contrary what any objective observer would see as the plain intention of the parties. In the course of that process, the dispute we’ll be describing became the subject of four, count them, four separate appellate proceedings. [Read more…]

Print

You’ve Got To Know What Words Mean – Was Arbitration Mandatory?

Print

Arbitration (and other alternate dispute resolution methods) have their place in agreements such as leases. Another possible way to say that, and one that brings out a bit of nuance, is that arbitration is a specialized tool, not a Swiss Army knife.

Even its strongest advocates, those who would like to sidestep litigation entirely, recognize that there are things that courts can do and arbitrators can’t. One prime example is to evict a tenant for non-payment of rent. In most jurisdictions courts do that well and do it quickly. They have a direct relationship with the officials empowered to throw tenants out. Arbitrators would need to get judicial enforcement of what would be the equivalent of a warrant of removal. Courts have a summary disposition procedure for eviction cases. As a practical matter, the arbitration process doesn’t and won’t. [Read more…]

Print

Beware Of Boilerplate: Sword Or Shield?

Print

There is no shortage of commentary and reference material covering the drafting and negotiating of a real property lease. As a result, it is tempting to try to cover more ground or to go further than others have gone when analyzing a lease’s provisions. Ruminations will make a deliberate effort not to succumb to that temptation.

The scope of today’s posting is to look at four “boilerplate” clauses in a typical lease. If we get a positive response, we may cover a few more clauses over time.

What, really, is “boilerplate”? The word’s common meaning is a provision that is ordinary, common, and by implication generally acceptable. In reality, there are very few, if any, such clauses in a form lease. They may be ordinary and common, but they aren’t necessarily generally acceptable – especially to a tenant. No bias is intended today. Nonetheless, it is impossible to be entirely balanced as between a landlord’s concerns and a tenant’s concerns. After all, pre-printed forms are designed for sale to landlords, not tenants, and most leases begin on landlord-generated forms. [Read more…]

Print