My Tenant Ruined Its Premises, How Much Does It Owe Me?

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So, the tenant, without the required permission, made significant changes to its space and failed to properly maintain the property as it was required to do. Further, as readers might expect, at the end of the lease’s term, it didn’t return the space to its landlord it the same condition as it was when the lease started. What damages might be available to the landlord?

For one, it can’t recover more than it lost. The underlying principle is that the landlord is entitled to the amount of money that would put it in the same position it would have been had its tenant not “misbehaved.” But, it isn’t open season on the tenant. The losses claimed must be shown to flow from the tenant’s breaches. And, in making that determination, courts look through the eyes of a “reasonable person” viewing proven facts.

There are two approaches to quantifying what a tenant should pay to put its landlord in the same financial position it would have been. They are either the amount by which the fair market value of the damaged property falls below the value of the same property without the damage caused by the tenant. The other is the amount it would take to repair or otherwise restore the property to the condition in which it should have been. [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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Old And Cold – Audit Rights And Claim Cut-Offs

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Is there a time to let old things die? We are qualified to answer that question when it comes to matters emotional, but when it comes to “business,” Ruminations only has some thoughts. Today, we’ll discuss chasing people who owe money but, because money isn’t everything, we’ll start with a little digression intended to make a point.

How long should the government (that’s us, by the way) be permitted to chase a criminal? Many (but not all) states have laws that answer that question. Here’s New York’s answer:

6 years for felonies punishable by 8 or more years in prison

3 years for felonies punishable by less than 8 years in prison

No limit for murder or other capital offenses.

Three years for misdemeanors committed against children 13 and younger.

One year for other misdemeanors.

Though the time limit to file civil claims also varies by state and by the type of claim being made, they also butt up against time limits. Typically, general contract claims must be made within 6 years after the claim can first be made. Claims arising out of the sale of goods have a 4 year limit. Tort claims (and automobile accidents fall in that category) typically have a two or three year limit. Some defamation claims have an even shorter limit – only one year. Unsurprisingly, claims against government entities often have shorter time limits. After all, “Whoever has the gold makes the rules.” [Read more…]

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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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