Security Deposits – Fugetaboutit (From A Tenant’s Perspective)

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A tenant derives no particular benefit from posting a security deposit other than its use as a means to conclude lease negotiations. A security deposit is merely part of that package of rights and duties we call a lease. Every single term and condition of a lease is economic in nature, and it takes no giant intellectual step to recognize that security deposits are merely a matter of dollars and cents. For a landlord—it is dollars; for a tenant—it makes no sense.

Being a “landlord” issue, security deposit clauses in leases are almost always drafted by the landlord, in its favor. Like most other lease provisions prepared for a landlord’s benefit, the proposed language may be only a starting point for a fair and balanced outcome. Knowledge being power, the following exploration of security deposit issues should serve as useful armament for a tenant willing and able to do battle with a landlord over this often ignored area. [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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Did You Want To Read Something About Radius Restrictions?

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At this moment, when we are about to set pen to paper (so to speak), it is our intention to raise a single topic; get in; and, get out. That hasn’t worked well for Ruminations in the past, but that’s no reason to stop trying.

On its face, today’s posting will deal with “radius restrictions.” Actually, we are going to write about judicial interpretation (again), restraints against alienation, and “blue penciling.” All that will be in the context of a 2014 decision by the Court of Appeals of Georgia in Fab’Rik Boutique, Inc. v. Shops Around Lenox, Inc. Readers can see that decision by clicking: HERE.

The facts are pretty simple and were undisputed. The clothing store had a three-year lease. Either in the lease, or by a later agreement, the tenant had a renewal option. When the tenant tried to exercise the renewal option, the landlord refused to accept the exercise and asserted the tenant had defaulted under the lease, specifically because the following radius restriction had been violated: [Read more…]

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If You Don’t Understand It, Don’t Pretend You Do: Builder’s Risk Insurance (Part 2)

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The take-away from last week’s Ruminations posting was supposed to be that if you really don’t understand “insurance,” align yourself with someone who does. Not doing so is like cutting and pasting text from a foreign language document hoping that is says what you’d like it to mean. If that point didn’t come across last week, perhaps this second part on the topic of “Builder’s Risk” insurance will push readers into finding an insurance mentor.

Last week, we wrote about policy forms for builder’s risk insurance and how there is really no standard form. We also wrote about who could and should be covered. Those who read last week’s posting would have seen some thoughts about what property is covered, what is not, and what can be added to the coverage. If you missed that, click HERE to see what was said. You’ll also see some thoughts about some additional coverages that can be included along with the basic coverages under the builder’s risk typical policy. So, that will be our launching point. [Read more…]

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Is It Enough To Write: “X Must Also Carry Builder’s Risk Insurance”? – A Rhetorical Question

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After re-reading today’s blog posting, Ruminations became more convinced than ever that its only real purpose is to scare all of us out of thinking we agreement writers know about how to write insurance provisions that really work. For people who don’t “do” insurance every day, reading about how to “do” insurance is like reading about how to juggle swords. Unless you really, really, deeply, deeply understand what can and can’t be done with insurance policies, leave it for professionals. That’s not to say that, working with insurance professionals, one can’t get some pretty decent “stock” provisions, but those are rarely the ones one finds in almost anyone’s form lease, mortgage or other agreement. Also, if a person who writes a lease, mortgage or other agreement doesn’t understand the insurance provisions in their own document, why are they putting them in there? [Read more…]

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How One Tenant Can Become Two Different Tenants Without A Landlord Knowing What Happened

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We think today’s subject is quite interesting, though we know that its greatest appeal will be to law “wonks.” [A “wonk” is variously “a person preoccupied with arcane details or procedures in a specialized field” or “a student who spends much time studying and has little or no social life” or “one who studies an issue or topic thoroughly or excessively” (Various sources)].

Even readers with no need to see a definition of “assignment,” might be puzzled as to the words “pro tanto.” Even those who know what those words mean probably don’t realize that you can combine “assignment” with “pro tanto” and do serious harm to one party or the other to a lease.

Simply speaking, an assignment results in one party (the assignor) turning over all of its rights to another party (the assignee). The assignor (say, a tenant), absent some other agreement with the person or entity on the other side of an agreement (say, a landlord and a lease), retains obligations under that agreement (e.g., under the “lease”), but not any rights. [That’s not entirely accurate because there are ways to retain certain rights by way of agreement between the originally contracting parties, but that’s for another day. Today, we’re going to confuse readers enough with the “pro tanto” concept, such that we don’t need to go down a tangent at this point in the posting.] Basically, the effect of a tenant assigning its interest in a lease is that the tenant under the lease changes and the landlord now has to deal with a new tenant, the assignee. [Read more…]

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Will, Must, May, Should, Or Nothing At All – But Not Shall.

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Legal documents love the word “shall.” At one time, not long ago, we did as well. We don’t any more.

We did a search within a few form leases and a few form mortgages. Here’s what was found: 433 (landlord’s form office lease); 588 (tenant’s form retail lease); 988 (lender’s loan agreement); 405 (landlord’s form retail lease); and (only) 88 (lender’s form of simple mortgage).

In case readers don’t know, while our legal document world has a love affair with “shall,” normal people ordinarily prefer “will.” Here’s what one stylebook writer says about this: [Read more…]

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Smart Isn’t Enough. Ours Is A Craft.

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There are those readers who will charge that Ruminations has gone “off-topic” with today’s posting, but they would be wrong for two reasons. First, and convincingly so, like the United States Supreme Court, it is Ruminations that makes such call, not anyone else. If anyone would like to a citation to Justice Harlan or Justice John Marshall on that topic, let us know. [But, don’t anyone think that we see ourselves in the same class as that Court; we don’t even hold a candle to the Justices.] Second, though what we’ll be bringing up has significant general implications for far more important areas than reaching agreements about “dirt,” that doesn’t mean that we “in this business” don’t have responsibilities, one to the other, not to accept the “that’s the way it is.” Yes, that’s pretty cryptic, but please read on.

We had queued up another posting for today, but a news article last week gave us pause. Further, we’ve been holding an “Op-Ed” since January, waiting for a posting that would benefit from our including its “link.” [Read more…]

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