This Is A (Leasing, Sale, Loan) Deal. Why Have You “Gone Missing”?

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If you don’t like screeds, stop right now and we’ll see you next week after the extended July 4 holiday. Otherwise, tread lightly as you read on.

Doing a lease, a loan or a sale (and things like that) shouldn’t be like doing a divorce; it should be like doing an adoption. These are just business deals; just “money.” No one is or should be besmirching anyone’s reputation, seeking revenge or taking children away. And, even if that were the case, the negotiators are not the angry parties. Presumably, they are professionals. [Read more...]

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How Much Should It Cost To Kick-Out Of A Lease? Not As Much As Is Being Asked.

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Today, we’ll start in the middle of our thoughts by opening with an example that we’re going to return to several times in this week’s posting. You can have a five year lease with an option (in favor of the tenant) to extend its term by five years, or you can have a ten year lease with the tenant having the option to end it at the five year point. In fact, you can do those numbers any way you want. So, what’s the difference?

Psychology aside, probably nothing if the math wizards are at work. Perhaps, one party or the other can play around with the tax treatment given to the lease. But, basically, the present value for each five year segment should be the same. If someone were to suggest that having the right to terminate the lease early protects a tenant against [Read more...]

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What Is A Structural Component? Do You Know?

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Ruminations took a crack at answering this question a whole lot of blog postings ago, but we never felt fully comfortable with the way we tried to fashion an answer. Basically, we tried the “ejusdem generis” approach. [What are you talking about – you behind the keyboard? Our definition used a list of items followed by, “and thing like that.” That’s the essence of the “ejusdem generis” approach.]

Here’s a spoiler. Ruminations isn’t going to do much better today. If you make it to the end of this posting, you’ll also have figured that out. [Read more...]

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Same Tenant? New Lease? Watch Out!

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When the terms of an existing lease between a tenant and its landlord are dramatically changed, the parties frequently terminate their old lease and enter into a brand new lease.  The consequences of doing so are rarely considered by the parties, and they may be surprised to learn the following.

Any particular lease is affected by the terms of other leases at a project, recorded documents (such as Declarations of Restrictions), and the terms of financing documents.  In most cases, the tenant entering into a “replacement” lease had no control over, and no input into, any of those documents.  Frequently, landlords are unaware of important terms of those other agreements. [Read more...]

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What Is This Thing Called Quiet Enjoyment?

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Ruminations doubts that most readers know what is really meant by the “covenant of quiet enjoyment.” Understandably so. Because quiet enjoyment is a common law concept; case law being the sole source of its definition. The definitions constructed in real property treatises come from case law. Even in civil code jurisdictions, where an implied covenant of quiet enjoyment in leases is imposed by statute, the definition of quiet enjoyment is found only in case law. The Restatement (Second) of Property – Landlord and Tenant tells where the law is going, or where its authors think is ought to be going, not where it is.

[For reasons hinted at the end of this posting, Ruminations will sound a lot more lawyer-like than usual today. Don’t let that confuse you. Our website’s disclaimer is still very much in effect.]

[Also, the “quiet” in “quiet enjoyment” has nothing to do with decibel levels, and the “enjoyment” has nothing to do with pleasure.]

Dealing with quiet enjoyment would be a lot easier if the concept was implicated and analyzed in only a small number of well reasoned opinions which were consistent both over time and from state to state. Alas, were that the case. Anyone who has ever searched cases for a point and come up dry should remember the ancient Chinese proverb, “be careful what you wish for, you may get it.” Thousands of reported cases deal with the covenant of quiet enjoyment. [Read more...]

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A Shortcut To Drafting A Sublease That Might Be The Long Way To Get The Job Done

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A sublease is really no different than a lease other than its title and the use of different labels (subtenant instead of tenant; sublandlord instead of landlord; sublease instead of lease; etc.). It needs to convey an interest in real property and it needs to establish the contractual relationship between the subtenant and its sublandlord. One might think it to be “special” because it is constrained by a superior lease (master lease; overlease; etc.), but that’s not any different than a lease being constrained by a superior mortgage, a restrictive easement agreement, zoning laws, etc. In each case, the grantor (landlord or sublandlord) can’t give greater possessory rights than it, itself, has and can’t give any contractual rights that it has agreed (say in a mortgage) it won’t give or that the law won’t allow. Neither can a sublandlord.

But, there is an approach that crafters of subleases often use that is not available to crafters of leases. That’s by using an “incorporation by reference” form of sublease. [That’s not to say leases never incorporate parts of other documents by reference to those documents, references to laws being one example. And, its also not to say that there couldn’t be a publication with “standard lease terms” that might be incorporated by reference, as is done when requiring one party or the other to abide by ASTM, ASHRE or similar standards, just that, if that is being done out there, it’s a rare occurrence.] [Read more...]

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Lease Negotiators Need To Be Agents Of Reality And Counselors, Not Just Gladiators

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A good friend of Ruminations contacted us to discuss the kinds of provisions one might include in a retailer’s lease when the floor above it houses a residential apartment. We’re not going to share the “fruits” of that discussion today, but for one. And that one is: “Lease provisions won’t paper over the most common problems.”

The most common problem is related to the reality of the situation. A residential tenant needs more protection from the activities related to a retailer than does the retailer need from the apartment dweller. What is more, just because the retailer may be well within its lease rights to do whatever annoying thing it might be doing, that’s no insulation from continuous complaining by the residential tenant. [Read more...]

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Wave The White Flag – “I Give Up” Agreements For Landlords and Tenants

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Surrender really does mean, “I give up.” And, that’s the case in war and also with respect to leasing. Draw any other connections you’d like, but do so on your own.

At the end of a lease’s term, the tenant is required to “surrender” the leased premises. Yes, “give it up” to the landlord. Though leases may say that directly, there really isn’t any need to do so. That’s just the way it works. All we are going to say about this case of an ordinary, implied surrender is that wise people write down, in the lease, just what the tenant’s return obligations will be – “what condition the leased premises must to be in at the end of the lease’s term.”

Today, we’re going to ramble about early lease terminations and how that relates to the concept of “surrender.” There are basically two ways an early surrender comes about: inadvertently; and by negotiated agreement. [Read more...]

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