We Can Waive Claims, Not Subrogation

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What’s an “evergreen”? An evergreen contract is one that automatically renews unless one party or the other affirmatively terminates it. An “evergreen” blogging topic is one that never dies; one that we can visit over and over. The topic of insurance waivers of subrogation is such an “evergreen.”

We just reviewed a March 22, 2017 decision from a United States District Court sitting in New Jersey. Let us tell you some things about it. It has a twist. [You can see it yourself by clicking: HERE.]

Allegedly “unsupervised, untrained, and unlicensed maintenance workers” employed by a residential landlord were accused of misusing (our euphemism) an acetylene torch and thereby setting a fire that destroyed tenants’ property. The tenants’ insurance company paid the losses and sued the landlord for recovery.
The landlord (almost certainly, the landlord’s own insurance company) responded that each tenant-insured had waived and released it from liability for such a fire. [Read more…]

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What Can Humpty Dumpty Recover If His Wall Wasn’t Finished On Time?

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Today, we return to the topic of “damages.” Our context will be “waiving” them. That way, we won’t feel as if we are duplicating postings of long ago such as the ones you can review by clicking: HERE or HERE or HERE.

The core “damages” one can expect to collect are designed to give the injured party “the benefit of its bargain.” That’s not the same as being made “whole.” Those core damages, ones that probably should never be “waived” are designed to give a party the money necessary to get what it “bought” in the first place. So, if the buyer was promised a car with a spare tire and the trunk turned out to be empty, the measure of its damages would be the cost of a spare tire. If a tenant was supposed to get trash removal “included” and the full container is surrounded by overflowing trash bags, the tenant is entitled to enough money to get the trash hauled away. If a builder contracted to put up a building and didn’t finish it, the customer would be entitled to the quantum of money that would pay to finish the building.

But, what about the cost of going out to buy that tire? What about the lost business from customers who ran from the store because of the “stink”? What about the cost to rent alternate space because the building was not completed by the contracted-for time? [Read more…]

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Don’t Expect A Thank You Card From The Insurance Carrier

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We’ve written about many of the “elements” implicated by today’s blog posting, but don’t think we’ve ever illustrated them in the context of a specific lease provision. Among them are the concepts of “no-fault, risk shifting” and “not spending negotiating capital, effort, time or money” on protecting an insurance company (unless you happen to be working for one).

Take a look at the following provision. We don’t offer it as the “perfect” text for every lease or, for that matter, any lease. You’ll have to decide that for yourself. We offer it so that we don’t have to stop writing this posting when you reach the upcoming period.

None of Landlord or Landlord’s agents, partners, members, employees or any other person acting on behalf of Landlord will be liable for, and Tenant waives all claims against Landlord and Landlord’s agents, employees, members, directors, contractors, and those acting for or under Landlord for any and all loss, cost, liability, damage and expense (including attorney’s fees and disbursements), penalties or fines incurred in connection with, or arising out of, any damage to, or loss (by theft or otherwise) of, any of Tenant’s property or of the property of any other person, irrespective of the cause of such injury, damage or loss (including the acts or negligence of any other tenant or occupant of the Shopping Center or of any owners or occupants of adjacent or contiguous property) and whether occasioned by or from explosion, falling plaster, broken glass, electricity, smoke, wind, water, snow or ice being upon or coming through or from the street, roof, subsurface, skylight, trapdoor or windows, electric wiring, plumbing, dampness, water, gas, steam or other pipes or sewage, or the failure of the air conditioning or refrigeration system, or the breaking of any electric wire, the bursting, leaking or running of water from any tank, washstand, water closet, waste pipe, sprinkler system, radiator, or any other pipe in, above, upon or about the Leased Premises or the Building or the Shopping Center, or which may at any time hereafter be placed therein, or from any other cause whatsoever.

[Read more…]

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How To Write Your Agreements So As To Get Away With Fraud

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Court opinions coming out of the Delaware Chancery Court are a delight to read. They are almost always clear and incisive. They are important and influential. That court doesn’t often “see” real estate disputes, but that doesn’t mean its work is irrelevant to our chosen day jobs. One such decision, published on November 24, does an incredible job of dealing with an agreement’s “we didn’t rely on any representations you don’t find in the text of this agreement” provision and that agreement’s “integration” or “merger” clause. As a bonus, it sheds some light on how and whether the fairly standard indemnification provision covers damages directly incurred by the indemnified party (a “first” party), or just for claims against the indemnified party by a “third party.” Unless you go directly to the Court’s written decision, you’ll need to keep reading if you want the answers [to all but the “indemnification” part; for that, you’ll need to wait until next week’s posting]. [Read more…]

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But, The Lease Guaranty Had All Of The Right Words – What Happened?

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“I guarantee the full performance of the Lease by the Tenant. This Guarantee is absolute and without any conditions. … This guarantee will not be affected by any change in the Lease whatsoever, including, but not limited to any extension of time or renewals.” “The Guarantor further agrees that this guaranty shall remain and continue in full force and effect as to any renewal, change or extension of the Lease.”

Those were two ways in which two different landlord’s forms of guaranty were intended to give the landlord comfort that a guarantor would not weasel out of the guarantee based upon amendments, extensions, etc. to the guaranteed lease. They didn’t work.

What went wrong? Basically, including such language in a guarantee helps make the guarantee bullet-resistant, not bullet-proof. [Read more…]

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What Kind Of Help To A Tenant Is Self-Help? Part 2

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Last week, we opened the topic of tenant self-help rights. We’re not going to do much repetition. So, if you haven’t seen it yet or, if you are like us, you’ve forgotten most of what you’ve read, click HERE to see that posting.

In that posting, we gave some examples of when a tenant with the right to do what its landlord should have done, won’t. In short, a tenant occupying one percent of a property isn’t very likely to plow an entire parking lot or replace a lot of roof area. That caveat doesn’t make the tenant’s self-help right entirely useless. Not all tasks are so extensive or expensive. Here are easy examples: a manageable roof leak or a rooftop HVAC replacement (in each case, assuming the landlord had responsibility to take care of those items). [Read more…]

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Do I Have To Pay Operating Expense Charges Or Taxes That My Landlord Just Billed Me For After Five Years?

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We’ve pondered, actually struggled, to post a piece exploring the answer to the often asked, “Do I have to pay operating expense charges or taxes that my landlord just billed me for after five years?” What we’ve found is that there is no simple answer if the lease in question doesn’t specifically cover delayed billings like this. That’s also true for related questions such as, “We never increased our rent payment after extending its term and now, five years later, our landlord wants all the back rent – do we have to pay?” Or, to, “We’ve been paying the wrong rent, can we get our money back? [Read more…]

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Landlords Rejoice – Your Tenant Is Borrowing Money

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Everyone accepts that property owners borrow money for their businesses. Very few properties are unencumbered by a mortgage. Other than in a very, very limited number of situations, tenants readily, perhaps automatically, accept that their lease will be subordinate to at least the lien of a mortgage. If a tenant can be insulated from the bad effects of a lender taking over a property or from the fallout of a foreclosure, it will or should be somewhat indifferent to having a lender or a new owner step in when its then-landlord can’t financially support the property any longer. Yes, it is messy, but think [Read more…]

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