Does The Broker Get Paid? Efficient Producing Cause And The Facts

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Last week, we set the background for understanding what it means for a broker to be the “efficient producing cause” behind a lease or sale. The background was in the form of a story from a 2012 unpublished New Jersey court decision. The long version can be seen by clicking: HERE. For those who missed last week’s blog posting, here is a precis.

An individual property owner and a real estate broker executed a commission agreement. Then the owner transferred the property to a newly formed limited liability company. A drugstore lease, requiring the owner to construct the store, was signed. The drug store’s parent company guaranteed the lease. Construction (likely “non-construction”) took years. The tenant hung on. To get the project moving, the property was transferred to a joint venture, with the new 75% owner taking over operational responsibility. Under the joint venture agreement, the new entity agreed to be responsible under the original brokerage agreement. Two days after the joint venture agreement was signed, the owner terminated the brokerage agreement. More than two years after that, the original drug store lease was terminated and a new lease was signed. The new lease was between the joint venture and the original tenant’s successor by merger. Again, the drug store parent company signed a guaranty. All of the documents signed by each of the original and new drug store were signed by the same person who signed the guaranties. The business terms of the new lease differed in rent amount and lease term from the original lease. The store opened. [Read more…]

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When Do We Go Too Far In Taking Away Normal Real Property Remedies?

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Take your pick: Yellowstone National Park, Yellowstone Boulevard (Forest Hills, Queens, New York City), Yellowstone, the TV series, Yellowstone supercomputer, Yellowstone River, Yellowstone (the steamboat), Yellowstone whiskey or Yellowstone injunction. [There are more.] We have picked the injunction. That’s probably no surprise to readers in and around New York, but for others who haven’t yet figured out where this is going, we’ll briefly describe this brand of injunction. We think it is a distinctly New York thing, but even if other places have the same thing under a different name, we think today’s blog posting will make all of us do a little thinking. [That means we are not going to provide any answers today, just questions.] [Read more…]

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Stop Them Now – They Are Killing Me!

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  • Until about a month ago (or, perhaps until this past September), had you asked us if a court would order a tenant to keep its store open and operating, we would have said, “Probably, not,” with an emphasis on the “Not.” We think a large majority of our colleagues would have agreed. That’s not to say that there couldn’t have been very special circumstances not included within our “Not,” but we would have thought those circumstances would need to have been unique in character. Today, after an Indiana court has (for now) barred a chain store retailer from closing 77 stores located in the aggrieved developer’s malls and a Washington state court has (for now) barred a (chain) supermarket from closing a single store, we’re far less sure. We aren’t going to dissect those two court orders today. That’s for next week, another holiday weekend. Today, we’ll just glaze eyes over with some legal background. [Read more…]
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Brokerage Statutes – Shield Or Sword?

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For some reason, it seems that the business of real estate brokerage is subject to a little more scrutiny than experienced by other businesses. For example, there is a common law principle known as the Statute of Frauds. A book could be written about this aspect of the common law and its subsequent incorporation in most state statutes (written law). We won’t write one today.

Most jurisdictions have some form of a Statute of Frauds, and it appears that all or almost all “derive from the Statute for the Prevention of Frauds and Perjuries passed by [the English] Parliament in 1677.” Despite such a lofty name, some have described these laws as “Statutes to Perpetrate Fraud.”

We aren’t going to assume that all readers already know what this kind of “Statute” covers, so here goes. When someone speaks of the Statute of Frauds, she or he is referring to a law that requires enforceable agreements to be in writings signed by the parties against whom someone wants the agreement enforced. The Statute never applied to all agreements and good quality Swiss cheese doesn’t have as many holes as does the Statute of Frauds. [Read more…]

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Exclusive Use Clauses And Antitrust Concerns

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It’s been a thousand or more leases since Ruminations did any serious thinking about the intersection of exclusive use restrictions, radius clauses, and their respective lawfulness. This isn’t a current topic of discussion in leasing circles, though it certainly was 40 to 50 years ago. Yes, there is comfort in knowing that, with the passage of time, we aren’t seeing the “anti-trust” or “unfair methods of competition” armies marching into the shopping center arena. That is, possibly, until now.

Readers can research the law on their own. It isn’t worth wasting electrons on hyper-technical legal background. Suffice it to write that there is a Federal Trade Commission Act barring “unfair methods of competition in commerce … .” The lessening of competition is a danger also addressed in the Robinson-Patman Act, the Sherman Act, and the Clayton Antitrust Act. Further, some states have their own anti-competition or antitrust laws. [Read more…]

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You Snooze; You Lose; Maybe; Probably

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What is in the water that many, too many, landlords drink? What can they be thinking? The same can be said (though not as often) about tenants, and we will do so. What is in the water that many, too many, tenants drink? What can they be thinking?

The subject is asking for money rightfully owed to those drinkers. It might be for taxes or it might be for operating expenses, percentage rent, insurance premiums, reimbursable expenses or refunds for the payment of any one or more of those. It might even be for other things such as overdue rent. Yes, why do rightfully billable charges or rightful claims go unbilled or unclaimed until years later when someone wakes up, often, but not always, a successor landlord or tenant?.

[If you] SNOOZE, you [can] LOSE. “Do not spend your days gathering flowers by the wayside, lest night come upon you before you arrive at your journeys end, and then you will not reach it. [Isaac Watts].

If you haven’t experienced the situation or been asked about the following situation yet, it is just that you haven’t been at this real property leasing thing long enough: After “X” years (“X” often being 5 or more) of failing to bill a tenant for taxes or other monies genuinely owed, a landlord sends out a (BIG) bill. Both the tenant and its landlord turn to trusted advisors and ask: “How far back can the landlord go and still have the right to collect what is owed?” [Read more…]

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Parallel Construction, Consequential Damages, And Use Of A Dictionary

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Questions about damages and remedies are not simple to answer and, often, the answers are less than fully satisfying. The overriding framework is that business people don’t really focus on these “leave it to the lawyers” issues until a problem rears its head. Unlike many lease and other agreement issues that are worked out between cooperating parties, when one starts to look at a document or at the law to see “what are my rights, what can I do, how can I be made whole,” the relationship has already broken down. That’s when each side starts counting commas and looking for all of the “notwithstandings.”

Today, we’re going to look at an actual case, one decided at the end of October by a California appellate court. It can be seen by clicking HERE.

It involves the concept of “consequential damages, “exclusive remedies,” and “rent and other charges.” And, as will come as no surprise to regular readers, it teaches us something about using the right words. Oh, yes, it also describes a very familiar process, that process being where lawyers are hired to try to find a way to argue that the words in a lease or other agreement support a conclusion contrary what any objective observer would see as the plain intention of the parties. In the course of that process, the dispute we’ll be describing became the subject of four, count them, four separate appellate proceedings. [Read more…]

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Open For One Day? Why Bother?

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Last week, we put forth the view that tenants with limited bargaining power will have little choice but to accept a continuous operation obligation (assuming they really want to be at the property). We offered some suggestions that could protect a tenant, otherwise acting in good faith, from uninvited consequences that could result from an unintentional violation of such an obligation. Is there anything left to write on the subject? [That was a rhetorical question.]

Warning: Today’s blog posting will wander a bit. Hopefully, by its end, it will “all add up.”

Tenants with significant bargaining power almost never sign a lease with a continuous operation obligation. Are there exceptions? Sure. The most common is where, in effect, a shopping center developer “gives” land at the project to an anchor tenant to build its own store. The understanding is that this “gift” is being made with the belief that a shopping center with one or more solid anchors will attract smaller tenants, and those smaller tenants are the “real” tenants whose rent goes to the developer. The anchor stores understand that bargain and agree to operate, BUT (usually) only for a given number of years, say 20 or 25. This won’t be a persuasive explanation, but we think readers will get the idea: the anchor tenant will have spent its own money to build a 150,000 to 250,000 square foot store at a cost of $15 million or more. How likely is it that such a tenant will close that store and write down the cost of its construction? [Read more…]

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