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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Pro Tanto Assignments And Other Problems We’ve Seen (Part 2)

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Who isn’t in favor of tantos? Last week (click HERE to see), we ended the Ruminations blog posting with a promise to explain an “assignment pro tanto.” We’ll start with what “tanto” isn’t. In the leasing context, it isn’t “a Japanese short sword or dagger.” What it is, is a close cousin of the musical direction (try, on sheet music) of “tanto – too much; so much.” We’ve stalled enough, so here we go:

Assignments Pro-Tanto

Having raised the specter of an “assignment pro tanto, it is only proper that this unusual and possibly dangerous hybrid be described – especially in a treatment of common and uncommon assignment / subletting problems.  Simply speaking, this animal is the transfer, to another, of a tenant’s entire interest in a portion of leased premises, for the entire lease term.  Describing this creation as an animal may be an apt choice of terms as it may be somewhat uncontrollable.  In most jurisdictions, but not all, the landlord now has two tenants and, in effect, two leases.  The assignee may, and the operative word is: “may,” have a contractual relationship with the landlord.  If the original tenant defaults under its lease, giving rise to a lease termination, the landlord may still have a tenant, the assignee, for the portion of the leased space that was thought to merely be sublet.  The law is uncertain; there isn’t a lot of guiding case law.  But, if a tenant can assign freely under its lease, but not sublet freely, there is always the possibility of enjoying both “existences” by use of an assignment pro tanto. [Read more…]

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How Can We Get Out Of Here In One Piece? (Part 1)

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Vacation time and the living is easy. Ruminations has a big backlist of material and sometimes we cheat by reaching into it and putting an edited, usually lightly edited, version of “stuff from the vault” in the form of a blog posting. That’s what’s happening this week and at least next week. Just like a resale store, “it’s new to you.” [That is, new to at least nearly all, but not all, of our readers.] Today, tour approach adds up to the first part of a primer, from the Ruminations perspective, on assignment and subletting.

Under common law, absent a lease restriction, tenants were free to assign their leasehold interest to others or to sublet all or part of their leased space. That rule of law is of little consequence today because virtually all leases restrict assignment and subletting rights, often in excruciating detail. In addition, a small number of jurisdictions have reversed the rule by statute and there are certain kinds of leases, generally tied into personal services that are not, as a default matter, freely assignable. [Read more…]

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Be Reasonable, Whatever That Means

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Why is it reasonable to Ruminations to have steered clear of the “reasonableness” issue, i.e., what does “reasonable” mean? Despite having posted more than 280 times on similar issues, we’ve avoided this question. That’s because, like pornography, we think that when it comes to “what qualifies as ‘reasonable’,” you’ll know it when you see it. [Thanks to Justice Potter Stewart for his concurrence in Jacobellis v. Ohio, 378 U.S. 184 (1964), where he wrote the following explanation of pornography: “But I know it when I see it, and the motion picture involved in this case is not that.”]

We think one has to “see” the circumstances to get a “feel” as to what would constitute a reasonable denial of consent The Alabama Civil Court of Appeals gave us such an opportunity with its August 12, 2016 Opinion in Steve Evans v. W.G. Waldrop, an Opinion that can be seen by clicking: HERE.

There are a number of “main” lessons coming out of this Court’s Opinion and there are some interesting side issues. So, we’ll start with a short version of the story. Our reading of the Opinion shows (to us, at least) that the case was not well presented at trial. Therefore, our telling of the story will “bridge” some gaps and “resolve” some discrepancies in the testimony and in the evidence presented.

A retail tenant with a shopping center lease that ran from April of 1999 until March of 2004 stopped paying its rent in May of 2000 and moved out the next month. Then, it began looking for an assignee or subtenant. After some disappointments, it located someone interested in operating an “electronic-bingo parlor” at the leased premises. [Read more…]

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