Exculpation Lost On Assignment?

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We’ve written about “exculpatory” clauses before. The on-line version of Black’s Law Dictionary explains such clauses as follows: “An agreed-to condition (1) preventing blame or liability on one party due to the improper behavior of the other party; (2) preventing liability on one party due to not meeting all of the contractual performance expectations.”

In past blog postings, we’ve pronounced such clauses as overwhelmingly common in leases and almost always included to protect landlord-parties. We’ve suggested tenant-oriented versions. And, we’ve suggested tenant-protective modifications to this ubiquitous landlord-tilted lease provision. If interested, click HERE to read our thoughts.

We thought we had shot our load (an expression more acceptable than its more unsavory version, one that originated with early rifles) – until about a month ago when we saw a decision out of a California Court of Appeals, one that can be seen by clicking: HERE. The facts may be unusual, but the lesson is unsettling. Ruminations may not agree with the outcome, but denial, in this case, seems to be a big river in Egypt and not an effective legal strategy. [Read more…]

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Is The Next Landlord Liable For The Brokerage Commission?

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We’ve always been a little murky as to whether a successor landlord always becomes obligated to pay renewal commissions to the original broker responsible for the presence of an existing tenant. After all, there is no actual agreement between that later landlord and the broker whose original commission agreement calls for the payment of a renewal commission. The broker can’t point to where it and the successor landlord “shook hands.”

But, it is pretty common for leases themselves to include provisions such as: [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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Three Gems (Or So We Think)

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We’ve been doing Ruminations since 2011 and yet this is the first time we’ve deliberately done a multi-topic blog posting. Generally, when we choose a topic (400+ thus far) we dig in and treat(?) our readers to several pages of our ramblings. That approach has precluded our covering simple or easily contained topics, ones undeserving of deep drilling down. So, today, for the first time (but, perhaps not the last), we present a little of this and a little of that.

Overnight Delivery. In New York, service of lawsuit papers upon an attorney in a pending matter may be accomplished in a number of ways, including: [Read more…]

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Tenant Escapes Eviction Based On Pre-Sale Unpaid Rent (And Possibly Ever Paying That Delinquent Rent)

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Can a new landlord sue a tenant for unpaid rent from before closing? Can it evict the tenant based on that unpaid, pre-closing rent? An Illinois appellate court says “No” to each question. And, it awarded attorneys’ fees to the delinquent tenant.

[By the time you reach the end of today’s posting, you’ll want to read the court’s decision yourself. You can do so by clicking: HERE.]

The facts are simple. Readers could even write the following themselves, but we won’t let them. A radio station leased commercial space. It had a guarantor. At the time its original landlord sold the property, the tenant was delinquent in an amount of more than $72,000. Its lease had the usual “no waiver” and rent is due “come heck or high water” provisions. The new landlord filed a collection action and sued to evict the tenant. The tenant’s basic response was: “we don’t owe you the money; if we owe any money, it would be to the old landlord and the old landlord can’t assign its claim to you.” [Read more…]

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Can A Tenant Walk Out And Lawfully Stop Paying Rent When It Tires Of The Space?

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A restaurant’s lease permitted leasehold mortgages with the following proviso:

Tenant shall have the right … to encumber Tenant’s leasehold interest under this Lease … through a Mortgage (`Leasehold Mortgage’) with an institutional lender…. Landlord agrees that in the event the Leasehold Mortgagee succeeds to Tenant’s interest under this Lease (in which event it shall assume all of Tenant’s obligations under this Lease), Landlord shall, at the time of such succession, recognize such mortgagee, trustee or lender as the then Tenant under this Lease upon the same terms and conditions contained in this Lease and for the then unexpired portion of the Term.

Any such leasehold lender had the right under the lease to take over the tenant-borrower’s leasehold interest through a foreclosure. [Read more…]

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Landlords, Beware The Naked Assignment

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It’s been a while since we’ve pointed out that, using the words employed by a California court in 2001, “[a] lease of real property is both a conveyance of an estate in land (a leasehold) and a contract. It gives rise to two sets of rights and obligations – those arising by virtue of the transfer of an estate in land to the tenant (privity of estate), and those existing by virtue of the parties’ express agreements in the lease (privity of contract).”

Should anyone care? Yes. And, here’s an example that should concern some landlords and benefit some tenants. It deals with a lease assignment.

We’ll lift the words used by two other California courts to explain two different paths by which an assignee takes on liability as the “tenant.” The first is from 1983 and the second from 1937: [Read more…]

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Circumventing Lease Transfer (Assignment – Subletting) Restrictions And Other Ploys (Part 3)

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Today’s blog posting may not make sense to those who haven’t read our previous two postings. In the first part of this three part series, we presented some basic assignment and subletting concepts, legal and practical. That can be seen by clicking: HERE. Last week we continued that presentation, but moved into what we titled: “The Troubles I Have Seen – General Assignment / Subletting Issues.” That posting ended with a list of shortcomings  commonly plaguing many assignment/subletting lease provisions. It can be seen by clicking: HERE.

Today, we continue by listing more practical issues faced by all of us when trying to restrict lease transfers (what most landlords seek to do) or when trying to facilitate lease transfers (what most tenants seek to achieve). Even if you’ve chosen not to look at the prior postings, we guaranty that today’s posting will make you want to do so. So, to that end, we begin with: [Read more…]

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