I Surrender! Here’s Your Property Back: As-Is. Sue Me

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We are no fan of a particular type of “surrender” clause commonly found in leases, the “style” that calls for a tenant to “leave the property in as good condition as when it moved in, save normal wear and tear.” These clauses come in a variety of flavors, none of which Ruminations will offer today. In 2014, we shared some thoughts on this same topic in a posting that can be seen by clicking: HERE. We’ve also said (too) much about “wear and tear.” For those Ruminations of ours, search the blog site for (what else?) “wear and tear.” For the most part, our earlier writings have focused on the downside to tenants of this type of lease clause. Today, we’ll introduce a court decision that illustrates a giant shortcoming of the “same or better” condition requirement, one that should make landlords leery. Even readers who take a different approach to the condition of the leased property when its tenant departs will be interested in what the same court had to say about a property’s “move-in” condition and the implication for provisions dealing with the “move-out” condition. [Read more…]

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Personal Or General Misfortunes

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We’ve stolen our title from an article (or possibly it is a blog piece) dealing with the same concept but in a completely different field of endeavor. It wasn’t even about anything objective. But, its title and subject matter got us thinking about just what its author was discussing: that is “who should bear the risk?” We wrote about this a long time ago and, at the time, thought we had written a definitive piece on the subject. Now, we know we had not. Neither will be today’s posting. [For those intent on visiting the past, here’s a link to our 2013 rambling: LINK.]

Who deserves to lose when uncontrollable events present such an opportunity? We think few would argue that a tenant whose business goes south at all or most of its locations shouldn’t blame itself and should not blame any particular landlord. Similarly, if the neighborhood turns for the worst, and rental values fall, individual tenants are blameless when it comes to the landlord’s investment loss. But those examples aren’t entirely correct. [Read more…]

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You don’t have a tenant; you have a guest. Tenants pay rent; guests raid your refrigerator

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If your days are spent on behalf of a landlord with (internally or externally) professionally managed properties, then think of a topic you’d like to read about and search for it through Ruminations’ back library of over 400 blog postings. If, however, you have a relationship (even in a mirror) with the owner of a property or two, read on.

Too many times over too many years, our phone has rung with this question: “I have a tenant who is now five months behind, what should I do?” Self-help, even where “lawful,” is illusory. The risk of “doing it wrong” is pretty great and the damages a tenant can rightly claim aren’t pretty. So, we never advise “lock ‘em out.” We get pretty uncomfortable when asked, “Can I cut off the water or the electricity?” If your answer would be “Yes,” stop reading now.

Before we give advice, our reply is: “Have you spoken to your tenant? Is this a case of ‘won’t pay’ or is it ‘can’t pay’?” Far too often, what we hear back is: “No, I haven’t.” In such cases, our advice begins with: “Talk to your tenant.” [Read more…]

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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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