In Good Faith, Would Your Agreements Say That A Party Can Act In Bad Faith?

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Would you write that a tenant’s or landlord’s consent was required but that consent could be withheld in bad faith? We don’t think so. We’ve never seen such. We doubt we ever will.

There is no need for a contract, such as a lease or mortgage, to say that the parties will act in good faith. The obligation to act in good faith and deal fairly with the other party or parties is implied by law into every agreement. As such, it is a contractual obligation, not a fiduciary duty. So, we think that, as a contractual obligation, it can be negated by a voluntary and knowing agreement between the parties to an agreement. That’s what expressly allowing one party or the other to act in bad faith would do.

Admittedly, we haven’t done any legal research that would support or undermine our thinking. That’s because we strongly doubt anyone ever included a “bad faith allowed” provision in their agreement. If any reader knows otherwise, let us and other readers know through the comment feature of this blog site. [Read more…]

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What Should A Landlord’s Consent To A Sublease Say Beyond: “I Consent?”

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What concerns would a landlord have with its tenant entering into an otherwise acceptable sublease? It isn’t our intention to hypothesize about a landlord’s legitimate concerns about the transaction itself, but only over its details. For today’s posting, we’re assuming that the landlord is consenting to the sublease, but is that the end of the story? We think not.

Fundamentally, absent some agreement between a property-owning landlord and its own tenant’s subtenant, there is no privity of contract between the landlord and the subtenant. Basically, the landlord can’t sue the subtenant for breach of the Master Lease or for breach of the Sublease. They are not parties to the same agreement. [Read more…]

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How Should A Landlord Respond To A Lender’s Request For A Consent And Lien Waiver; Should A Tenant Care?

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Landlord’s lien waivers deal with more than just the pure statement that a landlord waives its lien rights to, (or subordinates its lien rights against), the rights of a lender or of an equipment lessor. Certainly, those parties have a legitimate concern about the integrity of their collateral and their ability to sell the goods and equipment in place or to remove the collateral for sale elsewhere. For that reason, landlord lien waivers include, among other terms, provisions defining the personal property covered, waiving and subordinating liens, providing for storage or holdover, and dealing with removal. [Read more…]

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