Words Are The Skin Of A Living Thought

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“A word is not a crystal, transparent and unchanged; it is the skin of a living thought and may vary greatly in color and content according to the circumstances and time in which it is used.” [Justice Oliver Wendell Holmes, Jr. in Towne v. Eisner, 245 U.S. 418 (1918).] We have loved that quote for nearly 40 years. It tells a lot about the agreements we write.

Consider the word: “maintain.” We looked at how web-based dictionaries define it. According to www.merriam-webster.com, it means: “to keep in an existing state (as of repair, efficiency, or validity).” https://www.ldoceonline.com/dictionary offers that “maintain” means to: “look after something: to keep a machine, building, etc. in good condition by checking and repairing it regularly.” www.collinsdictionary.com similarly offers: “If you maintain a road, building, vehicle, or machine, you keep it in good condition by regularly checking it and repairing it when necessary.” www.lexico.com (powered by Oxford) agrees when it tells us that “maintain” means to: “keep (a building, machine, or road) in good condition by checking or repairing it regularly.” [Read more…]

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Why? Why Not?

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Many have a tradition of making (and breaking) resolutions at this time of year. In fact, many have a tradition of making (and breaking) the same resolutions every year. So, why not try a new one this time?

Ruminations suggests that we all resolve to ask two questions, over and over: “Why?” and “Why not?” Let’s stop mindlessly copying and pasting from documents in our files. Let’s start by reading them carefully, something we think most of us haven’t done for a long time, if ever. We’re not just suggesting that the provisions be read as if being proofread. Instead, let’s really read them. Why does this work this way? Why wouldn’t it work another way? [Read more…]

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I Just Got A Tax Or CAM Bill Three Years Late

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A common question we get (or see) has to do with very, very late billings for taxes or common area charges. Though one would think that a landlord would be anxious to send timely, periodic bills, for some reason, some don’t. If any reader can explain the advantage a landlord gets by sending a bill for three years of charges in one fell swoop, please do so. Otherwise, we’ll continue to think it’s crazy. If nothing else, tenants and leases turn over. Go chase a tenant whose store or even whose business closed years earlier. [Read more…]

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What Makes An Agreement’s Provision Illusory Or An Unenforceable Penalty?

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What would you think if Ruminations told you that it is perfectly fine in California for a tenant to terminate its lease if a co-tenancy condition isn’t met, but not to exercise a rent waiver, even if it hasn’t opened its store? Well, we’re telling you that based on our seeing a January 12 court decision from a California Court of Appeal. That’s how we began our February 1, 2015 blog posting, where we introduced readers to a California court decision lots of us now refer to as the “Grand Prospect Partners” case. [See that posting by clicking: HERE.] Two months ago, Grand Prospect Partners came up in a Nevada court decision and, there, the court had no trouble with the validity of the agreed-upon rent reduction. [See that one by clicking: HERE.]

Well, “it’s déjà vu all over again,” a Yogiism, except that it’s Oklahoma’s turn to deal with the appropriateness of a termination remedy for a co-tenancy failure. The case also gives us a chance to look at some conventional lease language through the eyes of a court. To begin with, (with some editing) this is how the court summarized a lease’s co-tenancy clauses: [Read more…]

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Knowledge Is Power. Get Some.

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There is a story about a brilliant legal scholar who, after penning an outstanding legal analysis, would turn it over to his students for review and editing. He was asked why he would have young students do the editing instead of doing the work himself. After all, what could they know that he didn’t? How could they, even collectively, know better than he could know? He had a simple response: his students, at that moment, were engaged in the process of learning the very subject matter in the paper. Because their learning was “active,” they were more knowledgeable at that moment. The information was fresh in their minds. [Read more…]

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Co-Tenancy Rights – Use Them Or Lose Them

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It’s been a while since we wrote about rules of contract construction or about the consequences of dilatory behavior. Now, we’ve just seen a September court decision from the United States District Court for the District of Minnesota that gives us a good opportunity to cover both. As a bonus, it deals with a lease’s continuing co-tenancy provision.

The co-tenancy provision was pretty typical. In principle, to be an “Anchor Tenant” meant almost any “large, well-known national or regional retail store.” A co-tenancy failure was where certain identified space at the shopping center lacked such an Anchor Store for 120 days. Absent such an Anchor Store for that period, and if certain other conditions existed, the tenant with the continuing co-tenancy right could begin to pay “Alternative Rent” equal to the lesser of the lease’s stated rent or 3% of its gross sales. None of that was at issue at the Minnesota shopping center. The landlord agreed that the tenant’s co-tenancy right had been triggered and that it would be entitled to pay Alternative Rent, but for one issue. It claimed the tenant waited too long to exercise its right to the reduced rent. It wasn’t because an Anchor Tenant was found for the empty space. It was because the now-gone Anchor Tenant had vacated at the end of July 2016 and the claiming tenant, after paying full rent for 30 months, made a $250,000 retroactive claim in January 2019 for excess rent paid. [Read more…]

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Two Lease Guarantees Gone Awry

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We wanted to a “hit and run” this week based on what we think is a peculiar and wrong court decision about language in a personal guaranty. Then, we came across a second court decision concerning a guaranty, though with no other connection to the “peculiar” one. Given that electrons are plentiful and essentially free, we’ve chosen to tell readers about the later-discovered one first.

The story begins with a 15-year lease that was assigned by the named tenant to a successor only five months after the lease terms started. In connection with that assignment, a guaranty was given to the landlord, one in which the guarantor guaranteed:

[T]he payment and performance by the [a]ssignee of all its obligations under the [l]ease and all of the obligations of the [t]enant as defined under the [l]ease effective as of the date hereof.

The awkwardness of that text is immaterial to what then happened. About 2-1/2 years later, the lease was further assigned. In connection with this second assignment, the guarantor, in a writing dated about a month later, “confirmed that its guarantee would remain in effect despite [this] assignment….” Then, about eight years after that, the shares of the then tenant were acquired by yet another “tenant,” actually the same one, but with a new shareholder. The parent company of the new shareholder guaranteed the tenant’s lease obligations, the landlord waived its right to cancel the lease by reason of the shareholder change, and, importantly, the landlord received another letter from the original, lease-signing tenant. That letter confirmed the ongoing validity of the original guaranty, using the following language: [Read more…]

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Zero-Based Thinking And Our Leases

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Recently, a 7- year old asked us a couple of questions. The first was: “How old will you have to be to drive a self-driving car?” The second was: “Will you need a driver’s license.” Our immediate, gut thought was that one won’t really “drive” such a car. You’d be a passenger. We’re not thinking about transitional vehicles; we’re thinking about fully-functional ones without driver controls. Then, upon reflection, all of this taking place before we uttered a response, we “knew” that states will set a “driving” age and require a license. Even after we get to control-less vehicles, those requirements, already in place, will exist for at least many years. [Read more…]

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