Did They Guaranty The Lease For Its Extended Term?

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We’ve written about guaranties before, most directly in postings that can be seen by clicking: HERE and HERE. Today, we drill down to the enforceability of a lease guaranty after the lease has been modified, but without notice to or knowledge of the guarantor. Today’s Ruminating is informed by a January, 2018 unpublished opinion from the Maryland Court of Special Appeals. [Readable by clicking: HERE.]

A church’s lease was guaranteed by its Pastor, his wife, and six other church members. The church defaulted and its landlord sued for the remaining rent under a three-year extension properly signed by the Pastor on behalf of the church, but without the knowledge of the six church members. In fact, they didn’t even have a hint that the lease had been extended despite each being some form of “leader” in the church, though those roles appeared to be substantially ceremonial. Their only financial connection to the church was their obligation to tithe to it. The lower court described them as “commercially” unsophisticated.

The lease extension was by way of amendment. The lease did not have an extension option. The additional three-year term was related to a rent reduction sought by the Pastor and agreed-to by the landlord. The church performed until it didn’t with eight months to go in the lease’s term. At that time, by agreement with its landlord, the church vacated its premises. [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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Luddites Unite – Artificial Intelligence Will Replace Us

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We’ve been thinking about artificial intelligence applications and how they might change, even transform, the way we do our business. Then, we heard an interesting story on public radio. It was about a Southern California manufacturer of sex dolls who was introducing models incorporating artificial intelligence. For reasons quite obvious, the story didn’t get very deep into the details, but we learned that these new models were designed to figure out what their owners wanted and to respond appropriately.

We thought this application to be quite amazing in that here was a business way ahead of our own. Artificial intelligence is being used to read medical images with better results than even experienced radiologists achieve. It is being used to screen job applicants, much, much faster than humans doing so and with more satisfactory outcomes. Artificial intelligence is at the heart of visual recognition, allowing machines to replace people in manufacturing operations. It is used to write newspaper articles, such as those reporting sporting events. The list could go on and on. But, what it won’t include is negotiating agreements such as leases. That is, not yet.

Agreements such as leases are not zero-sum games. Though the parties exchange things of equal value, one needs to ask, “Value to whom?” Basically, when someone gets an item of value to them worth, say, $100, the other person may be giving up something worth only $60 to them. Someone may have two widgets and only need one. The duplicate widget isn’t very valuable to that person. A second person may need a widget and have two gizmos, but only need one. In each case, one widget or gizmo has a utility value of $100, but a duplicate one has a utility value of $60. Thus, if the parties trade widget for gizmo, each gives up $60 of value and gets $100 of value in return. That trade creates $200 of value out of $120 of value – a good deal for each trader. [Read more…]

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To A Hammer Everything Looks Like A Nail

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Knowing what you don’t know is a good thing. A practical application of that statement comes when you are trying to figure out how a particular jurisdiction will treat a particular agreement such as a lease. There are some legal principles that suffuse state law throughout the United States. The law of damages is NOT one of those principles. Yes, the generality of “damages” is pretty much the same all over, but the details are not. Here’s an example from a just-decided Colorado case from its Supreme Court.

The question that court considered was whether a seller could really make the choice of remedies provided-for in the following contract clause: [Read more…]

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You Can’t Get An ALTA/ACSM Land Title Survey Anymore

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Today, we write about surveys, but in a pretty narrow way. We assume readers know enough about surveys for our posting to make sense and be useful – useful as in “it’s time to update our lease, mortgage, and other forms.” If you are still calling for an “ALTA/ACSM Land Title Survey,” start calling for an “ATLA/NSPS Land Survey.” In 2012, the American Congress on Surveying and Mapping (ACSM) merged into the National Society of Professional Surveyors (NSPS). Earlier this year, in February to be more specific, the survey standards were changed to reflect that change. So, if any reader wants to be “hip,” start practicing “ALTA/NSPS.”

That wasn’t the only change to the 2011 survey standards; they became the 2016 standards. Thus, we’ll all want to refer to the “2016 ATLA/NSPS” ones.

What are the other changes, trivial and a little less trivial? Here are some highlights. [Read more…]

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I Paid For Replacement Cost Insurance Coverage, Where Is the Rest Of My Money?

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We were Ruminating about the reasons some people, instead of asking for “replacement cost” insurance coverage, ask for “full replacement cost” or “100% replacement cost” coverage. That made us think about the difference between a quart of milk and a full quart of milk. We don’t have any better answer than anyone else, so that was a dead-end for a Ruminations blog posting. Fortunately, those thoughts led us to today’s topic. So, our Ruminating was not for naught.

What is “replacement cost” coverage and what other kinds of property insurance coverage levels are there? We’ll start with the second question first. There are two basic ways a loss to insured property can be valued: (1) based on its replacement cost; and (2) based on its actual cash value (ACV). [Read more…]

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If You Don’t Understand It, Don’t Pretend You Do: Builder’s Risk Insurance (Part 2)

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The take-away from last week’s Ruminations posting was supposed to be that if you really don’t understand “insurance,” align yourself with someone who does. Not doing so is like cutting and pasting text from a foreign language document hoping that is says what you’d like it to mean. If that point didn’t come across last week, perhaps this second part on the topic of “Builder’s Risk” insurance will push readers into finding an insurance mentor.

Last week, we wrote about policy forms for builder’s risk insurance and how there is really no standard form. We also wrote about who could and should be covered. Those who read last week’s posting would have seen some thoughts about what property is covered, what is not, and what can be added to the coverage. If you missed that, click HERE to see what was said. You’ll also see some thoughts about some additional coverages that can be included along with the basic coverages under the builder’s risk typical policy. So, that will be our launching point. [Read more…]

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Yes-O-Phobia, A Barrier To Quickly Negotiating Agreements

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Yes-o-phobia: The fear of saying yes, often in the course of negotiating agreements. Usage example: “No.”

This phobia is more prevalent among those new to their field or job, but not exclusively to lesser experienced negotiators. It is also much more common among lower level staff than it is among principals or senior management. That’s because fear on the part of the phobicis not so much fear of giving up complete control over whatever may possibly happen in the future as it is a fear of being criticized by a superior. In law firms, “senior” partners, almost always, are willing to say “Yes” whereas newly minted attorneys and newly minted partners are commonly reticent. [Read more…]

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