Whose Deal Is It Anyway?

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Two stubborn mature men arguing with each other isolated on white background

Rules are made to be broken even if no one knows there was even a rule. In this case, it is Ruminations violating its own rule against two consecutive screech-blog postings. Over the last 300+ postings, we’ve “salted” Ruminations with observations about our own bad habits and those we’ve seen in our generally great real estate community. We’ve tried to space them about a month apart. Last week, we wrote about an all too common way that a minority, but a disturbing minority, of our colleagues try to put the “other” negotiator down. This week we address another one of our “bugs.” That’s a rule-breaker.

To make matters worse for us, we are breaking another one of our rules – the one that has kept us from singling out one subset of our community – this week, the lawyer subset (of which this writer is a very proud member). Our distress isn’t limited to this subset. Certainly we of that persuasion hold no monopoly on the tendency to be complained-about today. Yet, we in that profession certainly suffer more frequently from this affliction than do members of any other subset of the real estate community.

Alright already, what is it? It is thinking that we are the business people who are actually making the deal – forgetting that it is our client’s (or principal’s) deal. How do we do this? We do it by arguing pure business terms as if the money to be paid or received will be coming out of our own pockets. [Read more…]

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Just Because The Agreement Allows It Doesn’t Mean It Is Allowed

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First, Ruminations is not expanding its coverage to all that would be considered “contract law.” It’s just that leases, mortgages, and all of the other documents we encounter on a daily basis are just a subset  of the broader category of contracts, ones dealing with real property. Second, although we mostly write about memorializing agreements, from time to time we bring up the topic of how people act once their agreements are executed. Today is such a day.

So, today, Ruminations will be focusing on some post-contract behavior we read about in a January 20, 2017 decision from the Supreme Court of Delaware. For readers who don’t already know this, here’s a valuable piece of information. The Delaware Supreme Court is held in extremely high regard by courts of other states – it is “persuasive.” And, when it overrules the very highly regarded Court of Chancery of the State of Delaware, ears should perk up. [Read more…]

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Why We Can’t Write Damage/Destruction Clauses That Work

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No lease can be written that will answer every post-damage question that will arise. The “law” (whatever that is) provides some gap fillers, but not many. That’s because much of the case law concerns itself with answering epistemological questions – that is, “analyzing the nature of knowledge and how it relates to truth, belief, and justification.” Courts try to divine: “what would the parties have agreed-upon had they known this post-damage question would arise.”

The biggest single factor in determining how things will turn out after a fire, flood, explosion or some other damage-causing event is: do the landlord and tenant still love each other? Do they want to cooperate and get back in business together, or do they want to divorce. If they want to get the property restored as quickly as can happen so that the tenant’s cash register starts ringing and rent checks begin to flow again, they will make that happen and things will work out. If they each want to end the tenancy, they’ll make that happen pretty easily – the issue might be money, and if that is the case, believe it or not, money issues are the easiest to work out. Basically, if a landlord and its tenant share the same post-damage goal, they’ll work it out. [Read more…]

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Rely On Your Own Insurance And Stop Arguing About It (Again)

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It doesn’t matter how much you want to continue riding. Beating a dead horse isn’t going to get you anywhere. Or, so we have been told. Nonetheless, we are going to say, for the umpteenth time, landlords and tenants should carry AND RELY UPON their own insurance policies.

But, why should I? After all, can’t I just be happy knowing that I am an “additional insured” on the other’s commercial liability policy? [Just to make the Ruminations position clear: NO.] Before we elaborate on “here’s why,” we’ll digress. [Casablanca: “I am shocked – shocked – to find out” that Ruminations will digress.] Find us the person that couldn’t have spent more time with friends and family if she or he hadn’t been on the phone arguing with someone over the “additional insured” language in a lease, mortgage or other agreement. [Read more…]

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Are Your Agreements Well Drafted?

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Are there really a lot of ways to skin a cat? Ruminations can’t think of many (or even any, mostly because it doesn’t make for a good picture). Basically, we don’t know. How many ways are there to go from a napkin’s worth of deal notes (a/k/a a letter of intent) to the first draft of an agreement? Will today’s posting have a lot more questions than answers? Who’s asking? Yes, it will.

We think there are three categories of agreements to be considered, each with a different starting point. One is the form agreement, whether designed to be so or by use of an existing one (from a prior deal); another is “from scratch,” and the third being the “hybrid” agreement, one that is partly an existing “form” and partly a blank screen (or piece of paper). Cleverly, our three categories are fully inclusive.

We’ll start our Ruminating with the “adapt the form” approach. Do you take the letter of intent in hand and, point by point, then look for the matching lease provision to change or fill-in? Do you start at the top of the form and read down until you reach a provision that intersects with the letter of intent? Whichever approach you take (and even if you claim to do a little of each and then some), how confident are you that you’ve adapted the form to the deal? What we are asking is how sure are you that you’ve “adjusted” every place in the form that is affected, even tangentially, by any non-standard part of the deal? How well do you “know” the form before you start? [Read more…]

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Special Tip: You Don’t Want To Call For Broad Form Property Insurance

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Last week, we left off just before the “good stuff.” We wrote that the most commonly encountered commercial property insurance policy, the one promulgated by Insurance Services Office, Inc. (ISO), was a four-part insuring agreement. One of those parts, the “coverage part,” is where you find out what is covered. That’s today’s topic. If you want to start with last week’s posting, click: HERE. Otherwise, here we go.

Insurance buyers can choose from among three levels of coverage, each beginning with these four words: “Covered Causes of Loss. The three available (ISO) forms are: Special, Broad, and Basic. Here is a spoiler: “The butler did it.” For today’s purposes, that means: “Go for the Causes of Loss – Special Form coverage part.”

“Broad Form” coverage sure sounds enticing. Well, if that’s how it seems to you, pay attention to this. Basic Form coverage covers 11 specific perils. Ruminations won’t waste your time listing them. Under such coverage, if your damage wasn’t caused by one of those 11 perils, you might as well not have had insurance. [Read more…]

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So, Wise Guy, What Replaced “All Risk” Insurance?

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Ruminations looked to see how many times it had written that there hasn’t, since 1983, been something called “All Risk” insurance, the year the insurance industry “deep-sixed” that policy form (and name). Well, to put it bluntly, it was a lot. Yet, an overwhelming number of agreements coming across our desk “asking” for insurance still call for this long-dead (33 years dead) policy form. What our searching revealed, however, was that we never ever completely described its replacement. Today, we will do so, though “completely” would be an overstatement.

First, let’s get some background out of the way. As in the past, we are writing based, in large part, on the terminology and forms used and promulgated by Insurance Services Office, Inc. (“ISO”), a company that creates those things for most insurance companies. Its forms probably account for 95% of the ones you’ll ever see. Yes, there are other “forms” and insurers will add or substitute their own, but with ISO dominating the field, time spent on the subject is best spent focusing on the ISO forms. [Read more…]

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How Insured Is An “Additional Insured”?

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Why carry your own insurance when you can have the tenant (or landlord) name you as an additional insured under its own commercial general liability policy? After all, isn’t it obvious that if the insured (tenant or landlord) has good coverage, adding your own name in “addition” to that of the policy holder must mean that you have the same coverage as that policy holder. NOT!

At this point, we’ll repeat a frequent Ruminations refrain: “Carry your own insurance.” Here are more reasons why that remains good, solid advice.

[Today, as we commonly do, our examples derive from the most common set of insurance forms, those promulgated by the Insurance Services Office, Inc., a company that provides a whole bunch of services to that industry. For short, it is known as ISO and its forms are known as “ISO” forms.] [Read more…]

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