It Might Be Negligence To Leave Out The Word Negligence (Unless It Isn’t)

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Are there “magic words” or are there not? Once again, we feel compelled to warn readers that “we need to know what we are doing.” A lot of people in this “business” of ours cross over jurisdictional lines whether rightly or not. There is a lot of material out there about the ethics of doing so. That’s a reasonable concern to have, but there is a far less discussed, but more serious, problem. It is called malpractice. That term is not limited to attorneys. It isn’t even limited to professionals. It is hard enough to know the law in a single jurisdiction. Know the “law” in every jurisdiction (e.g., state) is, frankly speaking, impossible.

If we are going to “practice” in the real estate world, we need to practice well, not malpractice. “Mal” is a “combing form,” one that is added to words. It comes from the French “mal,” and that came from the Latin “male” which meant “badly.” [We sure hope the word is pronounced differently than is the gender.] The bottom line, however, is that “malpractice” is practicing in a faulty or improper or inadequate manner. No reader of this blog wants to come within a million miles of anything “mal” in her or his practice. So, we need to know that we don’t know the law everyplace. One example is how various jurisdictions view liability waivers. Today, we write only about one aspect of that question – whether to effectively be released from one’s own negligence, a waiver must expressly say that “negligence” is being waived or whether waiving “all” claims for damage really means “all,” including those claims arising out of negligence. [Read more…]

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Why Do I Want/Need A Waiver Of Subrogation?

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Two weeks ago, we cautioned against thinking that because we know the “general” law, we know the law in a particular jurisdiction. Yes, there is a lot of commonality on a broad level – if a tenant doesn’t pay the rent, it can lose its right to stay – but just what a landlord has to do (the needle it needs to thread) varies greatly from place to place. Today, we’ll give a more focused example in the context of explaining why the (misnamed) waiver of subrogation is important.

At the end of the day, who really pays the insurance premiums for the property – landlord or tenant? When a lease requires the tenant to pay or reimburse its landlord for insurance premiums, isn’t the tenant really paying the premiums? When the stated rent includes the then-existing amount of insurance premiums and the tenant pays only for increases beyond that “base” amount, isn’t the tenant really paying the premiums? Even when the stated rent is “all-in,” might it not be that the tenant is really paying the insurance premiums? [Read more…]

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Fighting The Last War

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In 1934, Edward P. Warner, writing about the implementation of the National Recovery Act (N.R.A.), expressed the following: “There is a saying that is rather common among the critics of the military profession that ‘soldiers are always preparing to fight the last war.’ Business must not incur the rebuke that it is devoting itself to preparing to sell goods under the conditions of the last economic cycle.”

The language is a little “1934” stiff, but the message remains relevant. We shouldn’t be structuring deals for the future as if the future will be unchanged from the past. That’s not to say we should fashion every deal tabula rasa (as if on a blank slate). Of course, much of what has worked in the past remains valid today. But, “much” falls short of “everything.” The trick is knowing what to save and what to discard. Until a genuine “crystal ball” is invented, we’ll need to divine the future unaided by a magical device. Instead, what we all need to do is to pay attention to early trends, some of which have been in front of our eyes for years, even decades. [Read more…]

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How Good Is A Lease Guaranty After The Original Term Expires?

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It’s a funny thing about this business. After all is said and done, you still need to know the “law.” And, by “law,” we aren’t thinking about the “law in general.” Instead, we are thinking about the “law” in the place where it matters. Almost always, that’s the state where the property in question is located. In today’s world, it’s not possible to know everything, everywhere. But, what is possible is to know the “questions.” There are some universal concepts. Not all of those concepts are universal, fixed rules such as the rule that if valid rent is unpaid, the tenant can’t stay. The most important universal concept is that the law is not the same throughout the more than 51 jurisdictions that make up the United States. In most cases, the law is similar, but the law is not the same. As with many “learned professions,” knowing the questions to ask is the hard part. That’s the real challenge we face. Finding answers is easy. Said another way, if you want to have your agreements, such as leases and guaranties, mean what you have said, then you have to be aware of the way the law differs jurisdiction to jurisdiction. [Read more…]

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Is “Display” A Verb Or A Noun; More About Exclusives

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If exclusive use rights are so important to some tenants and if landlords almost always resist granting such rights, why is it that, when agreement (compromise) is reached, the parties keep making the same mistakes? We’ve written before about the generality of “exclusives” and also about some specific approaches. For the benefit of new readers and to remind others, Ruminations holds that the presence or absence of an exclusive use right (and the scope of that right) is purely a function of bargaining power. Basically, how much does each party want the lease? That having been said, here are more of our thoughts.

To the extent that an exclusive use right is justifiable, tenants should be entitled to protection for their primary business, not for items of tertiary importance. A pizzeria sells pizza. If a pizzeria couldn’t sell pizza, then it isn’t one. Selling pizza is its “primary” use. So, to the extent that the presence of a second pizzeria at a particular property would seriously cannibalize sales at the first one, it is entirely appropriate for a landlord to be barred from allowing that second one. But, a tenant that holds itself out to be a pizzeria shouldn’t be entitled to keep others (such as a health food store) from selling frozen pizzas or to keep others from selling “Italian-style” sandwiches. If a pizzeria can’t co-exist with a sandwich shop, then it is a sandwich shop, not a pizzeria. Of course, defining a tenant’s primary business may not be as easy as looking at the tenant’s name, but we all get the idea (provided we are willing to step out of our uniforms – landlord or tenant – and look at the entire picture). [Read more…]

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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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Three Gems (Or So We Think)

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We’ve been doing Ruminations since 2011 and yet this is the first time we’ve deliberately done a multi-topic blog posting. Generally, when we choose a topic (400+ thus far) we dig in and treat(?) our readers to several pages of our ramblings. That approach has precluded our covering simple or easily contained topics, ones undeserving of deep drilling down. So, today, for the first time (but, perhaps not the last), we present a little of this and a little of that.

Overnight Delivery. In New York, service of lawsuit papers upon an attorney in a pending matter may be accomplished in a number of ways, including: [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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