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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Landlords, Beware The Naked Assignment

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It’s been a while since we’ve pointed out that, using the words employed by a California court in 2001, “[a] lease of real property is both a conveyance of an estate in land (a leasehold) and a contract. It gives rise to two sets of rights and obligations – those arising by virtue of the transfer of an estate in land to the tenant (privity of estate), and those existing by virtue of the parties’ express agreements in the lease (privity of contract).”

Should anyone care? Yes. And, here’s an example that should concern some landlords and benefit some tenants. It deals with a lease assignment.

We’ll lift the words used by two other California courts to explain two different paths by which an assignee takes on liability as the “tenant.” The first is from 1983 and the second from 1937: [Read more…]

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Do It Perfectly And Still Get Sued

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Isn’t perfect better that good? In a perfect world, it might be. But, in our own, perfection may be flawed. We’re not thinking about the incremental cost of going from good enough to perfect. We’re not talking about the impossibility of achieving perfection (points beyond which being unattainable, because there is nothing more perfect than perfect). We’re not talking about different views as to what constitutes “perfect.” We’re talking about cutting disputes short when one chooses practicality over perfection.

We’re going to illustrate our view by way of a September 20, 2017 court decision dealing with interpreting an insurance policy. Insurance-adverse readers, don’t tune out at this point. This is not about insurance. It is about drafting and language. [Read more…]

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Is There A Limit To Waiving A Non-Waiver Clause?

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When we first wrote about the loophole in non-waiver clauses that recognizes parties can orally agree to waive such clauses even one that explicitly say that there can be no oral waivers, we got some notes expressing incredulity. After the reality set in, the notes started asking whether there were any limits to this “loophole.” We at Ruminations didn’t know how to answer until we came across a May 12, 2017 decision from the Texas Supreme Court in a case where one of the parties has this name: Boo Nathanial Bradberry. The decision can be seen by clicking: HERE. It ruled there was a limit and its reasoning makes pretty good sense. [Read more…]

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How Complicated Can We Make It?

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Last week, we presented a wonky piece about present value calculations and their use. We won’t repeat that or extend those thoughts this week, but within last week’s quantitative jungle was a qualitative thought. Basically, we showed that stepping through annual rent increases doesn’t really produce a much different “total rent” than “keeping it simple” by using a level, average rent over the term of the normal lease. Today, we will spit out some other places where “going complicated” or trying to “refine” the financial terms in a lease also show little benefit and some offsetting detriment.

Before we do so, here’s a little more about setting rent. Last week, we suggested that instead of doing a five year lease with per square foot rents of $10, $11, $12, $13, and $14 over the five years, using the average rent of $12 per square foot would be almost the same in “present dollars” as using the $1 annual increases. We thought a reader or two would point out that there are non-economic reasons to use a graduated rent table. We would point out, that aside from the gender clause (and the like), all provisions of a lease are economic. No reader pitched in. So, we’ll do so (a little) on our own. [Read more…]

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Wonky Ruminations About Present Value

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Everyone knows that a dollar received today is better than a dollar received a year from now. Many realize that it is advantageous to pay a dollar a year from now rather than pay it today. That’s the “time value of money.” It is also based on a pretty good, but not guaranteed, assumption that interest rates and inflation rates will be positive. Historically, that has been a good bet.

We’ve used the word “better” in the sense that most would understand, but “better” is actually in the eyes of the beholder. It is better for the recipient to get the dollar now, but that’s not the case for the payor. [Well, we’ve gotten that out of the way.]

So, which is better when it comes to paying or receiving monthly rent for a five year lease: (a) $12 per square foot of floor area throughout the term; or (b) $10 the first year, $11 the second year, $12 the third year, $13 the fourth year, and $14 the final year? After all, $12 per square foot is right in the middle, it is the average rent “figure” over the five year term. [Read more…]

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Are All Constructions Structural?

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Again, we ask: “What is a structure?” We say, “again,” because Ruminations explored (mined) this topic a little more than three years ago in a blog posting titled: “What Is A Structural Component? Do You Know?” To see it (anew or again), click: HERE.

We’ll start with the take-away for today. It is that we might want to define important words that we ponder at times. “Structure” and the form “structural” come to mind. After all, if you’ve been in business of “reading leases (or other real property agreements)” for any decent period of time, you’ve faced the need to answer whether some “thing” is a structure. For sure, buildings are structures. Are fences or retaining walls structures? Perhaps the answer is fact-dependent. Perhaps we need to call an expert in the mold of Justice Potter Stewart (who wrote, in 1964, “I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description [‘hard-ore pornography]; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it, and the motion picture involved in this case is not that.”). [Read more…]

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To A Hammer Everything Looks Like A Nail

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Knowing what you don’t know is a good thing. A practical application of that statement comes when you are trying to figure out how a particular jurisdiction will treat a particular agreement such as a lease. There are some legal principles that suffuse state law throughout the United States. The law of damages is NOT one of those principles. Yes, the generality of “damages” is pretty much the same all over, but the details are not. Here’s an example from a just-decided Colorado case from its Supreme Court.

The question that court considered was whether a seller could really make the choice of remedies provided-for in the following contract clause: [Read more…]

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