Don’t Believe What I Told You Clauses

Print

Here’s a story with a few different lessons. One aspect of it won’t be of great utility to our readers, so we’ll get it out of the way right now. The tenant in this story appeared to sign a lease without counsel and without fully reading it. We don’t think that aspect casts any shade on the lessons we’ll be covering, but keep the tenant’s approach in mind as you read the rest of today’s blog posting.

The owner of a successful chain of quick-service, ethnic restaurants developed a new concept – a mall restaurant that would sell gourmet hot dogs. W.C. Fields might have called those “Gourmet Tube Steaks,” but that’s for another industry’s blogs. He honed in on a large mall, one that only had three remaining spaces in what appeared to be its food court (though the court never explicitly identified it as such). One of the existing tenants in that food court was a well-known, national, premium hamburger quick-service restaurant. No, it wasn’t the one with the golden arches. Although that hamburger restaurant sold hot dogs, they were only a sideline. So, this was of no concern to the owner’s gourmet hot dog plans. [Read more…]

Print

You Can’t Be A Rogue Tenant If You Haven’t Gone Rogue (Yet)

Print

Imagine you leased a large space at a shopping center for your sports bar and restaurant. In that lease, you negotiated for the right to be the only “sports themed restaurant/bar larger than 5,000 square feet” at the shopping center. About four years later, a new, 7,000 square foot tenant signs a lease “for the purposes of operating [] indoor golf simulators, to include the sale of golf-related apparel, a ‘fast casual’ restaurant, and a bar.” You might be a little on edge until you see that the new tenant’s lease included just what you had bargained for. It included that this golf-related tenant “may not, among other restrictions, use its premises for ‘a sports themed restaurant/bar larger than 5,000 square feet.’”

So far, so good. [Read more…]

Print

Exculpation Lost On Assignment?

Print

We’ve written about “exculpatory” clauses before. The on-line version of Black’s Law Dictionary explains such clauses as follows: “An agreed-to condition (1) preventing blame or liability on one party due to the improper behavior of the other party; (2) preventing liability on one party due to not meeting all of the contractual performance expectations.”

In past blog postings, we’ve pronounced such clauses as overwhelmingly common in leases and almost always included to protect landlord-parties. We’ve suggested tenant-oriented versions. And, we’ve suggested tenant-protective modifications to this ubiquitous landlord-tilted lease provision. If interested, click HERE to read our thoughts.

We thought we had shot our load (an expression more acceptable than its more unsavory version, one that originated with early rifles) – until about a month ago when we saw a decision out of a California Court of Appeals, one that can be seen by clicking: HERE. The facts may be unusual, but the lesson is unsettling. Ruminations may not agree with the outcome, but denial, in this case, seems to be a big river in Egypt and not an effective legal strategy. [Read more…]

Print

Cross A State Line And Co-Tenancy Failure Remedies Can Become Valid/Invalid

Print

In early 2015, we characterized a California court’s decision in a co-tenancy clause case as: “[A] California appellate court has found a typical lease provision to be an unenforceable penalty.”  There, a tenant’s lease gave it the right to take a rent reduction and, after a period of time (if the landlord did not replace the lost co-tenant), it could terminate the lease. The California court allowed the tenant’s lease termination but made the tenant pay full rent during what was supposed to be the reduced rent period. Basically, it agreed with the landlord by holding that the substantial loss from the lower rent constituted an unenforceable penalty. For those interested in our description of that case and implied criticism as well, click HERE to step back to February 2015. [Read more…]

Print

We, The Real Estate Professionals, Are Fighting The Last War(s)

Print

We’re thinking of renaming the Ruminations blog: Incoherencies. Not really, but today’s non-technical posting would sure support such a name change. [We also rejected a change to Ramblings, but only because that would give fuel to all of those who have tried to pin that moniker on us.] Here we go. Fortunately for readers, today’s blog posting will be short (for Ruminations).

The Times They Are A Changin’ – by Robert Zimmerman – has these lyrics:

Come writers and critics

Who prophesize with your pen

And keep your eyes wide

The chance won’t come again [Read more…]

Print

Who Wrote Your Lease, Loan Agreement, Or Other Document?

Print

“A committee is a cul-de-sac into which ideas are lured and then quietly strangled” — Sir Barnett Cocks. Much the same can be said about the documents we read and, sadly, write. Sir Cocks didn’t necessarily mean only that ideas were strangled to death. We want to think he also was thinking about damaged survivors, the ones that survived, but with a life-long injury.

Think about the process we follow to create a written agreement, whether that is a lease, an easement, a loan agreement or any of the others we, Ruminators, can list. In most cases, we start with a form written by predecessors. The words in those forms aren’t “ours.” The “voice” isn’t “ours.” In some cases, we cut and paste from a selection of related forms, each with its own voice. Then, we modify this “base” document, adapting it to the deal in front of us. In simple cases, we fill in some blanks, delete some provisions, and add a few. In others, we make significant changes, some to the very core or philosophy of what the form’s original authors had in mind. Our additions might have been written solely from our own thoughts; they are never tabula rasa (def.: an absence of preconceived ideas or predetermined goals); they never are. In fact, our additions often are snippets from something else we or others have written. [Note that we’ve written “authors,” not just author. That’s because our selected foundational document or document very likely was put together in the same way we are describing.] [Read more…]

Print

Insurance Proceeds: Use Them Or Lose Them

Print

When it comes to some property insurance proceeds, the tag line is: “Use it or lose it.” Most agreements such as leases and mortgages, even poorly written ones, call for one party or the other (or both) to carry property insurance for “replacement cost.” [By the way, “full replacement cost” isn’t one barleycorn larger than plain, old “replacement cost.” A full quart of milk takes up no more space than a lowly quart of milk. And, it isn’t “replacement value,” it is “replacement cost.”] But, “replacement cost” doesn’t mean that the insurer goes out and writes a check for what is determined to be the damaged property’s replacement cost, even if the property is totally destroyed. The insured only gets paid for the cost of what is actually repaired. Note that we’ve just written “repaired,” not “replaced,” even though the coverage is called “replacement” cost. That’s because “replacement cost” is a limit, not the amount that is going to be written on the check. [Read more…]

Print

How Do I Lose An Exclusive Use Right? Let Me Count The Ways

Print

If you operate a liquor store at a shopping center, would you like to be the only one there? Of course, you would. It isn’t like a dress shop where other stores would have different styles and price points and those other dress shops will bring you business as well. But, when it comes to wine and liquor, everybody carries the same core items. Some will skew their wine offerings in one direction; others may have a different wine focus. But, when it comes to wine and liquor, all merchants have the same merchandise available to them and all can sell whatever everyone else sells.

So, it will come as no surprise that a large-scale liquor store at a shopping center negotiated and was granted some exclusive use protection. This is exactly what its lease provided: [Read more…]

Print