Once Upon A Time The Parties Agreed To Execute This Agreement

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Once again, we’ve been pondering the utility of using recitals for agreements, for example, within a lease amendment. There seems to be three perspectives: that of the author, that of the counter-author, and that of someone who comes across the document later, often years and years later.

One of the recurrent Ruminations’ themes is explaining that words matter and we all have an obligation to choose the right ones. By “the right ones,” we mean the ones that express the intent of the contracting parties. The commercial world works on the assumption that the parties to an agreement share the same intent and will honor that intent. To that end, when an author uses a recitals section to explain the purpose of an agreement, the counter-author (that being the person on the other side of the deal) gets a first look at what the author thinks is the deal. Just as the first chapter of a (non-fiction) book is almost always an introduction to the book itself, the recitals can serve a similar purpose. [Read more…]

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Curiosity Doesn’t Really Kill Cats; It Makes Them Better Cats: A Lesson For All Of Us

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Today’s thoughts are universal – they can apply to every endeavor we undertake. That’s no reason to pass over them and move on to highly real estate industry-focused ones. Sometimes, we need to look at the forest.

A few weeks ago, we were privileged to be able to hear Elizabeth Blackburn speak. [Use your favorite search engine for the answer.] She was asked what it was that got her to be who she turned out to be. Her answer – “curiosity.” She believed that her most important distinguishing feature was that one trait. Of course there were others, but her curiosity was the one from which all of the others could be derived.

Everything we see, everything we hear, everything we read: these are all learning opportunities. Often, we can learn more from failures and errors than from successes. Yet, in our experience, we are more comfortable relying on our successes than on the errors we and others make. What a difference it would make if we were more curious about why we think, what we think, and why others think what they think. [Read more…]

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Who Should Pay To Replace the HVAC, Landlord Or Tenant?

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Should a tenant be required to pay for the replacement of pieces of the real property within or serving its leased premises? We don’t know. That’s because it isn’t a legal matter. It isn’t a moral matter. It isn’t a matter of logic. It isn’t a matter of fairness. It is part of the economics of the deal, one whose answer will be determined by the negotiating process.

At the end of the day, the issue isn’t about the “money,” it is about the risk – the uncertainty. Why does Ruminations dare to say it isn’t about the money when virtually every reader has already thought: “Are you out of your mind”? That’s because the “market” needs to make a profit one way or another. To assure there is a real estate market, the aggregate tenant rent at a property needs to be sufficient to generate that profit. In the aggregate, the industry will either generate acceptable investment returns or property values will drop to a point where an investment in property will “again” generate an appropriate return. [Read more…]

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Parallel Construction, Consequential Damages, And Use Of A Dictionary

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Questions about damages and remedies are not simple to answer and, often, the answers are less than fully satisfying. The overriding framework is that business people don’t really focus on these “leave it to the lawyers” issues until a problem rears its head. Unlike many lease and other agreement issues that are worked out between cooperating parties, when one starts to look at a document or at the law to see “what are my rights, what can I do, how can I be made whole,” the relationship has already broken down. That’s when each side starts counting commas and looking for all of the “notwithstandings.”

Today, we’re going to look at an actual case, one decided at the end of October by a California appellate court. It can be seen by clicking HERE.

It involves the concept of “consequential damages, “exclusive remedies,” and “rent and other charges.” And, as will come as no surprise to regular readers, it teaches us something about using the right words. Oh, yes, it also describes a very familiar process, that process being where lawyers are hired to try to find a way to argue that the words in a lease or other agreement support a conclusion contrary what any objective observer would see as the plain intention of the parties. In the course of that process, the dispute we’ll be describing became the subject of four, count them, four separate appellate proceedings. [Read more…]

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Ruminations Goes Bowling – Scores A 300!

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300 is a pretty good score for a single bowling game. It is a score of perfection. While the same can’t be said about reaching our 300th Ruminations blog posting today, perfection not even being on our wish list, we’re pretty pleased at having reached this benchmark. Some call it ranting; we call it Ruminating, and that’s what we’ve done weekly 300 times. Why?

We love doing it because of our readers, over 2500 each week. We love doing it because of our subscribers, about 1300 of you. We love doing it because of the discussions it generates by way of comments directly to this blog site, on LinkedIn, and by various side channels. We who facilitate real estate deals, and that’s almost every one of you, are a community. We don’t need to see each other eye-to-eye, though (admittedly) we’re always thrilled to meet a reader in person, in order to know one another. We all care enough about doing better work today than we did yesterday, to share our ideas. Lurker or active correspondent – it doesn’t matter, we are all Ruminators – we all think and care about what we are doing, about what we sign our names to. [Read more…]

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You’ve Got To Know What Words Mean – Was Arbitration Mandatory?

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Arbitration (and other alternate dispute resolution methods) have their place in agreements such as leases. Another possible way to say that, and one that brings out a bit of nuance, is that arbitration is a specialized tool, not a Swiss Army knife.

Even its strongest advocates, those who would like to sidestep litigation entirely, recognize that there are things that courts can do and arbitrators can’t. One prime example is to evict a tenant for non-payment of rent. In most jurisdictions courts do that well and do it quickly. They have a direct relationship with the officials empowered to throw tenants out. Arbitrators would need to get judicial enforcement of what would be the equivalent of a warrant of removal. Courts have a summary disposition procedure for eviction cases. As a practical matter, the arbitration process doesn’t and won’t. [Read more…]

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When Does A Holdover (“Sufferance”) Tenancy Begin?

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The most popular Ruminations blog posting, by far, is the one dealing with holdover tenancies [It can be seen by clicking HERE.] We write, “holdover tenancies” only because that is how people speak about tenants who remain in the leased premises after their right to stay there has ended. Yes, they are some kind of “tenant,” but Ruminations sees them as trespassers, someone who is on another’s land without permission.

Today, we are going to work with a 2014 unpublished decision from the Appellate Division of the New Jersey Supreme Court. It can be seen by clicking HERE. The case covers a couple of interesting points beyond that of “holdover,” and we’ll try to discuss those as well. So, expect to read about oral leases and license agreements as well as about “holdover.” We’ll begin with this court’s comments about holdover tenancies, more accurately called “tenancies at sufferance.” Here they are: [Read more…]

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Why Can’t I “Go Dark” If The Lease Says I Can?

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Just because a lease doesn’t have a continuous operation provision doesn’t mean that the tenant, even an anchor tenant, can “go dark” by boarding-up the premises if it continues to pay rent. Especially if doing so harms the landlord without a proper benefit to the tenant. That’s a lesson we learned a long, long time ago and which was reinforced long ago in a New Jersey unpublished court ruling. We’re thinking of a 1998 unpublished decision in the case of Berardi v. Acme Markets, Inc. It doesn’t appear to be available on-line so, after you’ve read to the end [and gotten at least an 80 on the final exam (just kidding)], just email meislik@meislik.com for a copy.

OK, we’ve gotten you this far by making a pretty broad statement – too broad and too general, designed to capture your interest – but one that could be the case if the facts are right. The real outcome depends on an unwritten provision in almost every kind of agreement. What, unwritten? Yes, the “implied covenant of good faith and fair dealing.” We’ve Ruminated about that before, such as HERE. Nonetheless, please read on and see how that covenant can work. [Read more…]

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