Comments for Retail Real Estate Law Ruminations

Comment on A Pig In A Poke And Other Lease Negotiation Sad Tales Of Woe by Nathan K Smith

Nathan K Smith — Wed, 22 May 2013 13:48:26 +0000

Sue that is a great tip! I have never heard of that. I plan on using this for now on when speaking with landlords.

Comment on A Pig In A Poke And Other Lease Negotiation Sad Tales Of Woe by Lawrence Jensen

Lawrence Jensen — Tue, 21 May 2013 23:37:57 +0000

The list should include zoning designation and review of permitted uses under that zone. How about signing a 10 year lease only to discover that the tenant’s proposed use, while perfectly fine with the landlord, is not legal under the existing zoning? Or requires a conditional use permit – which may end up having unacceptable conditions attached to it? I’m a bit shocked this wasn’t on the list as it is almost the first thing I want to know…

Comment on A Pig In A Poke And Other Lease Negotiation Sad Tales Of Woe by Lew Lefkowitz

Lew Lefkowitz — Tue, 21 May 2013 22:40:05 +0000

Most of these (other than title and survey) are items that the tenant’s site location team and/or broker should be looking into before a term sheet is even agreeded to. They should also ask the landlord to complete an environmental questionaire and/or provide a copy of the most recent Phase 1.

When a new lease comes in I always check Google Earth(tm) as well as LoopNet(tm) and other real estate for lease websites; they sometimes provide valuable information. Also, checking tax records will oftentimes reveal the landlord’s payment record and any mortgagees of record.

Comment on A Pig In A Poke And Other Lease Negotiation Sad Tales Of Woe by Nathan K Smith

Nathan K Smith — Mon, 20 May 2013 14:44:53 +0000

One of the main things that I see tenants overlook is “who pays for what”. In retail space tenants are almost always responsible for tenant improvements, electricity, signage, hvac maintenance, repair and/or replacement, and anything else within the premises.

However tenants never ask the right questions and always assume the landlord is paying for certain items. It’s important that they ask and get all the answers in writing on the lease contract..
AND NEVER ASSUME!

Comment on A Pig In A Poke And Other Lease Negotiation Sad Tales Of Woe by Sue

Sue — Mon, 20 May 2013 14:38:00 +0000

If you’re a tenant that uses large delivery trucks, ask the landlord to have his architect superimpose a WB-67 template (or whatever size truck you use) on the engineered site plan. This will ensure that you can actually receive your deliveries without the truck taking out a corner of the building or a fence. It’s not a happy thing to get to the end of a lease negotiation and find out that there is no way to receive our stuff, especially when a little more due diligence would have revealed the issue.

Comment on What Would Rent Insurance Be If There Were Such A Thing? by David Graham

David Graham — Mon, 13 May 2013 15:41:36 +0000

Love that you said:

“If you don’t understand how “rental value” coverage works, you’ll be wasting your team’s time (and money) and the other team’s time (and money) in negotiations by making up “stories” about how you can’t do this or that and about how the other side shouldn’t worry because “insurance covers that.” You may also damage your own credibility, and that shouldn’t be taken lightly.”

Everybody, please write the Ruminator’s paragraph on the cover of your form book and say it to yourself and your counsel a million times:

If you don’t understand how [___FILL IN CRE or RETAIL BUSINESS TOPIC__] works, you’ll be wasting your team’s time (and money) and the other team’s time (and money) in negotiations by making up “stories” about how you can’t do this or that and about how the other side shouldn’t worry because [__FILL IN FAV. HACKNEYED EXCUSE__]. You may [WILL] also damage your own credibility, and that shouldn’t be taken lightly.

If LL’s counsel tells me with fists-a-poundin’ how wise and experienced he is and how he’s never ever, seen it done that way, and how his client will never, ever agree to that–all in the first phone call–then he is willing to spend all his credibility before the dance has even really begun. Such a man is dangerous to himself and his clients. Steer clear.

Thank you, Ruminator, for the reminder!

Cheers,
David

Comment on What Would Rent Insurance Be If There Were Such A Thing? by Ira Meislik

Ira Meislik — Mon, 13 May 2013 15:23:12 +0000

I’m replying publicly because your observation is quite astute. It is a rare situation where one would seek Additional Insured status on a property insurance policy, the real important status being that of a loss payee (and there are three kinds of loss payees, so be sure what you are getting – search Ruminations for the words “loss payee” to read about that). As to coverage for “rental value,” ISO has its CP 03 15 endorsement specifically naming the landlord as an additional insured, but only as to the rental value portion of the tenant’s Business Income coverage. That’s pretty narrow. As to the general concept of being an Additional Insured on a property policy, the benefits are pretty confined, although some believe that, as an additional insured, the person or entity holding that status would have a first party claim against an “evil” insurance company for bad faith, and hence might be able to collect punitive damages under the proper set of facts. More likely than alien abduction (with apologies to true believers in that stuff), but not really a good reason, in our mind, to muck around with another party’s insurance coverage. If anyone learns more about this from a true insurance guru, please share. Until then, we’re pretty negative about requiring Additional Insured status on the other party’s property insurance policy (other than for “rental value,” a “special” endorsement).

Comment on What Would Rent Insurance Be If There Were Such A Thing? by Stephan L. Cutler

Stephan L. Cutler — Mon, 13 May 2013 15:09:56 +0000

Ira,

I had a question about the following passage in this week’s article.

“If the tenant has to obtain and maintain “rental value” coverage (and, as we now know, the rent doesn’t abate), its landlord will want to be an “Additional Insured” as to the “rental value” coverage. By the way, that isn’t the same as being a “loss payee.” Get a copy of the endorsement and a copy of the tenant’s policy Declaration page to make sure the endorsement is listed on it. Look for the specific Landlord as Additional Insured (Rental Value) endorsement [form CP 03 15]”

I was not aware that the “Additional Insured” concept had applications outside the commercial general liability (CGL) insurance policy. Are there other instances in which the “Additional Insured” concept arises in the context of commercial property insurance (as distinguished from CGL)?

Comment on What Would Rent Insurance Be If There Were Such A Thing? by Ira Meislik

Ira Meislik — Sun, 12 May 2013 16:42:51 +0000

Your comment raises an important point. Insurance is a contractual relationship and is governed by the terms of the insurance agreement, i.e., the “policy.” It’s difficult enough understanding how policies work in the United States; living in the United States and trying to understand what is “normal” elsewhere, as in Turkey, is near to impossible. If the Unite States insurance market has been an influence in Turkey or elsewhere, then one wouldn’t expect thee to be any Business Income coverage for economic turndowns, only for traditional physical destruction-related business interruptions or suspensions. For that reason, real insurance questions should always be directed to “real” commercial insurance professionals – brokers, agents or consultants, ones who deal in commercial insurance issues every day.

Comment on What Would Rent Insurance Be If There Were Such A Thing? by SUKRU ASLANYUREK

SUKRU ASLANYUREK — Sun, 12 May 2013 15:57:02 +0000

We have been able, in the past ten years in Turkey, to provide for clauses in leases which make a provision for covering insurance costs that protect the landlord against “loss of income”. The conditions on which such lss can be based are, however, not as certain as the wording in the leases and it is very difficult to persuade insurance companies that such loss of income has arisen in spite of full goodwill of both parties-landlord and tenant. The crux of the matter lies, in my opinion, on the coverage in leases for definition of conditions “beyond the controlf of both parties”; however I would question the validity of such contol matters in questions related to cases such as the 2008-2009 crisis. It seems to me that such loss arises from “normal business risk” and should not be a subject of insurance.