Wear And Tear Are Not Boilerplate Words

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Leases commonly assign maintenance, repair, and replacement liabilities to one party or the other, as they should. Just as commonly, as to items for which the landlord takes responsibility, leases deal with the consequences of a repair or replacement needed because of something the tenant has done wrong. In some cases, the responsibility for doing the work shifts to the tenant; in others, the landlord still has to do the work, but the tenant has to pay for that work.

This is a good place to make a few points about the relatively simple observations made thus far. So, before proceeding further, here are some thoughts. First, a key point that a lease needs to cover are these three responsibilities: maintenance, repair, and replacement. They do not have to be assigned as if they were co-joined obligations. A party can be responsible for doing one, two, or all three. Second, the party that does the work doesn’t have to be the party that pays for the work. Simply stated, “who does the work” and “who pays for the work” are separate concepts and must both be described in the lease. [Here is an old blog posting that expands on that thought: CLICK HERE:] Third, there are some kinds of work, usually major things, that a landlord should always do even if necessitated by misuse of the property by the tenant. By example, when it comes to a roof repair or replacement or a structural repair, the landlord has a greater interest in how the work is done than does a tenant without an investment interest in the property. Of course, there are some exceptions, such as where the tenant is sophisticated, technically competent, and generally reliable. Fourth, a lease should establish what “the tenant did something wrong” means. [Read more…]

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What Do You Mean When You Write: “Subject To”?

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The augurs of ancient Rome prognosticated by inspecting the entrails of birds. Similarly, courts divine meaning by interpreting the detritus of our documents. When we don’t leave a clear message behind, those who follow get to tell us what the words we used meant. Sometimes they are right; sometimes not.

Ruminations now rushes in where fools fear to tread. We’re going to extract some lessons from a Supreme Court of Texas decision about mineral rights and royalties. Bless those who labor in that world. If we get something wrong in this world of oil and gas and other things extracted, we’re sure to hear from those whose world we are about to invade.

When a married couple purchased a certain 55-acre property, their seller “reserved” a 1/4 mineral interest (actually an NPRI – a non-participating royalty interest) in the property. That means the original owner would continue to get 1/4 of the benefits from all oil, gas, and minerals extracted from beneath the property.

Property ownership involves what is likened to a “bundle of sticks.” That means there are many rights embodied within the concept of ownership. These rights can be separated and different owners can own different rights in the same property. So, in the “mineral rights” concept, one party can own the property’s surface and another can own the subsurface portion. Similarly, one can own all of a property’s land right down to the earth’s core, excluding the minerals in that “dirt,” and those can be owned by another. Just like a “total” property can have multiple owners, so can those minerals. So, here, the married couple had a 3/4 interest in the property’s minerals and their seller kept a 1/4 interest. So far, so good. [Read more…]

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Tenant Escapes Eviction Based On Pre-Sale Unpaid Rent (And Possibly Ever Paying That Delinquent Rent)

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Can a new landlord sue a tenant for unpaid rent from before closing? Can it evict the tenant based on that unpaid, pre-closing rent? An Illinois appellate court says “No” to each question. And, it awarded attorneys’ fees to the delinquent tenant.

[By the time you reach the end of today’s posting, you’ll want to read the court’s decision yourself. You can do so by clicking: HERE.]

The facts are simple. Readers could even write the following themselves, but we won’t let them. A radio station leased commercial space. It had a guarantor. At the time its original landlord sold the property, the tenant was delinquent in an amount of more than $72,000. Its lease had the usual “no waiver” and rent is due “come heck or high water” provisions. The new landlord filed a collection action and sued to evict the tenant. The tenant’s basic response was: “we don’t owe you the money; if we owe any money, it would be to the old landlord and the old landlord can’t assign its claim to you.” [Read more…]

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Where Can I Sue You?

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Is your forum selection provision mandatory or permissive? What’s a forum selection provision? That’s the one your agreement says where you can file suit to enforce your agreement. What is often confused with a forum selection provision? That would be a choice of law provision. That’s where the parties agree as to which state’s law will apply to their agreement. Once you are properly in any state’s courts, those courts can apply whatever law you’ve agreed should be used. It doesn’t have to be the law of that state. [Yes, there are exceptions, but that’s the overriding principle.]

This isn’t going to be a treatise over whether a court will accept jurisdiction over an out-of-state dispute. One reason is that it varies from state to state. Some states don’t want to get involved, but others “almost” solicit the business. For example, New York’s General Obligations Law (GOL) says that, with certain commercially irrelevant exceptions: [Read more…]

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No Shopping Clauses (Not What You Think)

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Here’s a scenario that doesn’t happen often but happens much too often. A tenant and a property owner work out a tentative deal. They put the basic terms down on paper and call it a deal sheet or elevate its name to a Letter of Intent. Either way, they don’t intend to be bound to make a lease, but they understand that they’ve agreed to negotiate in good faith to reach one.

So, they then start to work on the lease. There are some issues, but nothing that would thwart agreement UNTIL a better deal comes along. Perhaps the landlord finds another prospective tenant and negotiates with that prospect in parallel with the first one. Perhaps a nearby location that the initial prospective tenant had seen and liked better has come back on the market and discussions with its landlord are now taking place. Fair enough, but didn’t the two parties with the deal sheet or letter of intent explicitly or implicitly agree to negotiate in good faith? Yet, even as late as when one party, usually the tenant, has signed what was thought to be the final, execution copy of a lease, the other party pulls out. Then, it turns out that a few days later the retracting party signs a lease with someone else. [Read more…]

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Bye Bye LIBOR (And Friends)

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Yes, many readers may have heard whispers (or stage whispers) about the demise of LIBOR. Well, it goes on life support on December 31, 2021 and that might also be the date of its death. That’s when the banks that provide its underlying data will no longer be obligated to do so. Who cares? Those who set borrowing interest rates certainly do. Those who have loan documents based on some spread over a LIBOR rate where those documents didn’t consider a back-up rate if LIBOR ever went away care even more. [Read more…]

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Price; Quality; Time – Pick Two

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It is Labor Day weekend (and the start of Labor Day week). Ruminations has tried to present short blog postings on such weekends. Frankly, we’ve not been successful. Today’s posting is yet another attempt. So, with 30 words already behind us, here we go.

In the management field of study, there is something called the “Project Management Triangle.” We’re not sure when we first heard the term or discovered the concept it describes. So, when we went to research some “history,” we discovered it isn’t really an obscure secret in other fields of endeavor. Based on long experience though, our industry doesn’t yet seem to have discovered the concept. The “Project Management Triangle” has a number of other names: “Triple Constraint,” “Project Triangle,” and “Iron Triangle.” [“Iron Triangle” is also used to describe an aspect of Washington politics, and we leave the reader to explore that form of its use on her or his own.] [Read more…]

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Notwithstanding Anything To The Contrary Contained Herein

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When a carpenter or other craftsperson needs to make “that final adjustment,” she or he reaches into the toolbox and out may come a shim. We’ve all seen shims used, but not everyone knows they have a name. Those wedges, washers, and thin strips of material used to align parts or make them fit are called “shims.” We who draft agreements of every type also use shims. Reluctant as Ruminations is to use the word “all” and mean “all,” today’s use seems accurate. Who among us hasn’t slipped in at least one “notwithstanding anything to the contrary” into every agreement longer than several pages? That’s using a shim because it makes the parts of the agreement “fit” together.

Basically, this shim is used in two circumstances. The first is where, after reading what we’ve written, we realize that our crafted provision isn’t exactly right. We realize that there are one or more circumstances that don’t fit what we’ve written. We realize that what we’ve written needs adjustment. We’ve got to carve out some exceptions. So, instead of rewriting the provisions to make them say what they should say, we append a list of those things we realize don’t fit – but not of those things we didn’t realize don’t fit. [Read more…]

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