Though today’s posting isn’t really about “radius restrictions,” that’s what’s behind today’s observations about liquidated damage lease provisions. A radius restriction is a restrictive covenant. Thus, they have to be reasonable as to distance, duration, and scope. We’ve seen few modern cases centered on those parameters. So, we think restrictions that are coterminous with the lease term are reasonable as to time. Distances corresponding with a shopping center’s market area also seem reasonable. Limiting their scope to a lease’s use clause also seems to pass muster. [Read more…]
Liquidated Damage Remedy Or Just A Bargained For Higher Rent?
October 5, 2020 By Leave a Comment
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Rights, Powers, And Forgiveness – Let’s Loosen Up
August 9, 2020 By 3 Comments
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Today, we’re going to engage in some pure Ruminating. Most of the time, we (and others who are deeply engaged in this side of the “business”) focus on the “documents.” We think about how they are drafted and often mis-drafted. We read articles and (in “olden” times”) participate in programs focused on how better to do our “job.” But, there are some “rules” that get short shrift. These are rules that regularly have more force than do laws.
One is that there is a difference between having the “right” to do something that is required (or to abstain from doing something) and the “power” to do that thing (or not). Another comes in two versions: It’s easier to ask forgiveness than to get permission; and it’s easier to apologize than to get permission.
The success of either approach might be related to another aphorism: Might makes right. Each reveals two deficiencies found even in the best-crafted agreements. There aren’t enough trees in the world (proverbially speaking) to create enough paper to contain all of the words needed to regulate every possible permutation of conducts or situations. And, much of what we write (and agree-upon) just plain isn’t important; the provisions aren’t really needed. [Read more…]
PrintHow Can One Enforce A Continuous Operation Lease Provision? Not Easily.
August 2, 2020 By 3 Comments
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Rarely will a court enforce a continuous operation obligation by ordering a tenant to stay in business at its leased space. Yet, from time to time a landlord will seek an injunction to force a tenant to keep its store open. A simplistic explanation as to why courts don’t issue such orders is because landlords need to show an irreparable injury, and if a landlord can be compensated by the payment of money, its injury isn’t irreparable.
Landlords confronted with a tenant bound by a covenant to be “open and operating,” but on the verge of breaching that obligation by closing its store, usually plead the “domino effect,” expressed by Benjamin Franklin thusly: [Read more…]
PrintCan You Evict A Tenant For Failure To Carry Required Insurance?
July 26, 2020 By Leave a Comment
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Ruminations hasn’t researched commercial eviction law as it exists in every state, but wherever it has, one principle stands out. Eviction is an equitable, not a legal, remedy. Courts don’t have to evict a tenant and won’t do so for minor defaults. This approach is a subset of a legal “equitable” maxim: “Equity abhors a forfeiture.” A tenant’s “leasehold estate” is a property interest, and taking away a valuable property over a triviality is not what courts are supposed to do. Volumes have been written about this (and other) legal maxims. Not here; not today.
As to evictions, what varies from court to court, even in the same jurisdiction, is what judges consider to be “minor.” We’ll illustrate that today using “failure to maintain lease-required insurance coverages” as an example. [Read more…]
Print“And, If Not” – The Question Left Unasked: Crafting A Lease Requires Thoughtfulness
June 14, 2020 By 2 Comments
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The court opinion we wrote about last week continues to bother us. It wasn’t only about the court decision’s primary question of whether an “election,” once made, can be revoked. There is a second aspect that bothers us, one that we will get to about 300 words from now. First, we’ll summarize what bothered us about how the lease didn’t “do the right thing,” “didn’t keep the question out of a court.” And, if the parties went to court, the lease didn’t give the court a rule or even guidance.
As to whether a notice, once given, can be revoked, we know that the parties crafting an agreement should cover that in their agreement. We also know that if the non-electing party reasonably incurs damages when relying on such an election notice, it should be made whole. If they don’t, then what should the rule be? Last week, we saw a court look at a lease that was silent on the question as to whether a landlord that sent a 12-month notice requiring a tenant to temporarily vacate its premises could change its mind two months before the required move-out date. It ruled that the election made by the landlord requiring such a move-out could not be rescinded. What the court failed to do was to adequately explain why it ruled that way. [Read more…]
PrintLiquidated Damages: How Much Is Too Much?
May 17, 2020 By 1 Comment
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Imagine a landlord delivers promised space 84 days beyond the target delivery date, and the tenant gets 755 days of rent credit. That’s a little over two years’ of free rent for a delay of a little less than three months. Is that appropriate? Is it lawful? Is it a proper measure of damages? Is it a penalty imposed on the landlord? At the end of March, a federal judge in Pennsylvania, applying New Mexico law, answered the legal questions. She ruled that the 755-day rent credit was an acceptable approximation of damages and was not an unenforceable penalty. Ruminations has no argument with the court because, when it comes to whether an agreed-upon damages provision in a lease is enforceable, the unvarying answer is: “It depends.” [Read more…]
How Gross Are “Gross” Sales? And More.
May 3, 2020 By 3 Comments
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A few weeks ago, we wrote about the distinction between “rights” and “remedies,” but in somewhat theoretical or even esoteric terms. Today, we’ll present a situation that demonstrates a practical intersection of the two. Our story comes from an April 24, 2020 decision from the Appellate Division of the Supreme Court of New York. [That’s New York’s name for its intermediate appellate court.]
Imagine a mall with approximately 150 tenants. One of those tenants (and possibly others) was listed as a “Named Retail Tenant” or as a “Suitable or Successor Replacement Anchor Store,” a “Required Tenant” or “Upscale Tenant” in the “co-tenancy” provisions within the leases of many other tenants at the mall. Basically, if this “Named Retail Tenant” left the mall, dominos could fall. [Read more…]
PrintRights Without Remedies: Moratoriums And Real Estate
April 5, 2020 By 3 Comments
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If blog postings, law firm memorandums, newspaper articles, televised pundits, and the like were effective medications for COVID-19 infections, this crisis would be over. Without even asking readers, we know that all of you are inundated with reliable [and less than reliable] information and guidance about this virus and how to deal with it. Unfortunately, more and more, it seems like we’re hearing Arthur “Guitar Boogie” Smith and Don Reno performing “Feudin’ Banjos” on their seminal 1955 recording. We don’t play the banjo. Therefore, we won’t be joining the COVID-19 legal advice band today.
One thing, however, bothers us more than the many others. We’ve seen a lot of words speculating on what “laws” were needed. Some opinions have been sage. Many have been uninformed. What bothers us is that much of what we are reading ignores or blurs the difference between “rights” and “remedies.” Almost all lawyers know the following; many of our other readers may not. One way to explain what is going on is to use an example that comes right out of our current news. An increasing number of jurisdictions are legislating (or administratively imposing) rent relief for (usually only residential) tenants. [Read more…]
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