In 1970, the Harvard Business Review published an article by Peter Pyhrr in which he promoted the idea of zero-based budgeting. Different descriptions of this approach have been offered. Most explain that one should begin each periodic budgeting process tabula rasa – with a blank slate, and then justify every expense anew, not just adjust the last period’s budget by adding or removing items. A simpler explanation is that one should “rigorously review every dollar” in each successive budget. We doubt many have truly adopted this approach. It’s just too much work. It’s easier to cut and paste last year’s budget. In fact, momentum causes a repeating of last year’s expense items. Perceived “new” needs often result in just adding more expenditures each year. Only when income shortfalls force a review, do items get dropped. [Read more…]
Where Were You When The Revolution Began? – Revisiting How We Work Our Deals
Kick-Out Clauses as Circuit Breakers – A Contrarian View
Here at Ruminations, we often short-cut any deep thinking about proposed agreements or about provisions within those agreements when we see something we call a “circuit-breaker.” For example, we don’t drill down into rent damage clauses when a lease’s term is one year. After all, it takes time for a tenant to fail, and how much time will really be left on the lease after that date? The same goes for an agreement that allows either party to terminate it on 30 or 60 days’ notice for any reason or no reason at all. Why cogitate when a party can “kick-out” of an unfavorable agreement or relationship? [Read more…]
The Chickens Come Home To Roost – Pretext And Tenant Control Over Development
According to Lawrence Peter “Yogi” Berra (May 12, 1925 – September 22, 2015), late of Montclair, New Jersey, “You can observe a lot by just watching.” That’s how we get our “experience” – by watching what we ourselves have done and by what others have done. We can learn from those experiences, “ours” and “theirs.” That’s one reason we read court decisions. Doing so allows us to safely observe what others have done without getting burned, even when the situations covered by these decisions invoke another Yogiism: “It’s deja vu all over again.”
We came across a late August court decision out of the U.S. District Court for the Northern District of Alabama. It involved a lease dispute at an enclosed mall, one emblematic of the history of such malls. At 300,000 square feet, it opened in 1970 with 32 inline tenants and two department stores as anchors. By 1982, one had disappeared and its parent company soon followed. The following year, a national retailer relocated its own department store from downtown to the now-vacant space. In the mid-1990s, plans were made to expand the mall, based in part on the addition of a third department store building. Some physical impediments delayed those plans and then the contemplated additional department store chain was acquired by yet another. This resulted in a further delay. But, the mall’s expansion opened in 2000, and the mall grew to 700,000 square feet of space. [Read more…]
PrintDocument Creep – Longer, But Not Better?
Congress ordered that the Declaration of Independence be “fairly engrossed on parchment.” [“Engross” means to “write in a large, clear hand.”] In olden days, lease, notes, mortgages, purchase and sales agreements, and all other documents were also “engrossed,” though unfortunately for researchers, not always in a large, clear hand. Then, copies were made. Where money was short or where the perceived value was absent, those copies were also made by hand. This is a craft no longer in much demand. For more important documents, a printer’s services were used, both for original documents to be executed and for copies of handwritten ones. The reproductions weren’t always faithful to the originals. For example, an early printing of the Declaration of Independence omitted one of the signatories. He was Thomas McKean, and he served as a President of Congress, President of Delaware, Chief Justice of Pennsylvania, and Governor of Pennsylvania. That was no small omission, and to more than just his family.
Our early handwritten legal documents had another thing in common with the Declaration of Independence. They were sparse. There were only 1,458 words in the Declaration, fewer than the average length of Rumination blog postings. [There is a message there, one we’ll ignore.] Here we have a founding document, a revered one (the Declaration, not this blog), yet it is remarkably short. So were leases before typewriters came into everyday use. With their introduction, it became easier to “include and expound.” Combined with the help of carbon paper and onionskin, faithful copies were now economically available. No longer would the copy differ from the original (other than when it came to margin notes and interlineations, a problem sometimes still seen). Along with these advantages, economy, speed, and faithful copies, the documents grew in length. [Read more…]
PrintHow Long Do I Have To Wait?
There’s a song, Hesitation Blues, first recorded in 1916, that begins with this line: “How long do I have to wait?” It is also a question often asked when a lease or other agreement is silent as to a deadline or permissible period. And, almost always, that question is asked when something has gone wrong. That’s evidence it should be asked at the outset when people memorialize their agreement or expectations.
We just looked at an August 12 decision by a New York lower court. In it, the judge wrote what is generally the law: [Read more…]
PrintDéjà vu All Over Again. How Our Documents Are Written Or Miswritten
We think we’ve found an example that will illustrate one of our long time contentions – we need to skeptically re-read our documents and ask “why” with every line. We need to ask: “Why did we write that? What does it add to the document?” It might be safe to skim right over the “gender” clause, but equally “humdrum, boring” sentences and clauses really need attention.
Here are some provisions from an otherwise uninteresting retail lease. They are discussed in a June 15, 2020 court decision that can be seen by clicking: HERE. [Read more…]
PrintRights, Powers, And Forgiveness – Let’s Loosen Up
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.
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…]
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