Options: Two Wrong Ways To Write It Right

Print

Weekly, Ruminations looks for a topic. Now, two short of 250 blog postings [who’d a thunk?], finding unique ones is a challenge. Don’t worry, we’ve got a few lined up. But, today, we’re returning to a central theme: the failure to write what you mean. This isn’t theoretical. It that regard, we respectfully disagree with the late, great Judge Benjamin N. Cardozo, in particular when he wrote:

The law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal. It takes a broader view to-day. A promise may be lacking, and yet the whole writing may be “instinct with an obligation,” imperfectly expressed. If that is so, there is a contract. [Wood v. Lucy, Lady Duff-Gordon, 118 N.E. 214 (N.Y. 1917)]. [Read more…]

Print

We All Scream For Ice Cream – But Don’t Do That As Your Exclusive Use Protection

Print

We were planning a family Thanksgiving turkey-centric dinner and ice cream as a dessert came to mind. Now, in our world, turkey and real ice cream don’t play together well, so the gears cranked on. What was the appeal of ice cream? Well, to figure that out, we flew to 30,000 feet for an overview. At that altitude, you can’t tell ice cream from any other frozen dessert. And, when we in the “doing leases” business think of frozen desserts, we think of a 1988 court decision. [Well, not really, but a good story is always a good way to start a Ruminations blog posting.] The case we thought about is: Draper and Kramer, Inc. v. Baskin Robbins, Inc. out of the U.S. District Court for the Northern District of Illinois. The decision can be seen by clicking HERE. [Read more…]

Print

The Most Likely Obligation Parties To A Letter Of Intent Will Incur Is …

Print

Way back in July of 2012, we Ruminated about the enforceability of a letter of intent (LOI). Last month, we revisited the subject at a presentation to the International Council of Shopping Center’s Law Conference in Phoenix. There, five possibilities were explored, one of which was that an LOI imposed an obligation on the parties to negotiate in good faith even if the terms of the LOI weren’t otherwise binding on the parties. Today, we’re going to expand on that “good faith obligation to negotiate” concept because that is the most likely decision a court would reach. To see the entire 2012 blog posting and read about the other four possible outcomes, click: HERE.

There are more than a few court decisions with the outcome that entering into an LOI imposes the duty to negotiate in good faith. They don’t require that the parties ever reach an agreement, only that they really try to do so. Last month (October 27, 2015 to be more precise), a Delaware Superior Court decision was published and it dealt with just this point. The facts were complicated, but not complex. The decision didn’t go to the merits of the case, leaving the parties to fight over the facts, but it did explain this aspect of the law pretty well. For those whose appetite has been whetted (archaically speaking) and want to see the court’s decision, click: HERE. [Read more…]

Print

Just What Is It You Want To Restrict? A Business? An Activity?

Print

Last week Ruminations wrote about the legal niceties involved when a lease says: “Landlord will not lease for the sale of widgets” as contrasted with saying “Widgets can’t be sold at the property.” Today, again writing about use restrictions, we’ll be less “legal,” but not entirely so.

Basically, there is a difference between banning a particular kind of business and banning a particular activity. In simple terms, by way of example, there is a difference between saying that no one can operate an office supply store and saying that no one can sell office supplies (or staplers). We’ll illustrate the issues involved by reference to a May 22, 2015 Florida District Court of Appeal’s decision. It isn’t the best example because of the political and social baggage the case carries, but that may also be why it is a good example. The political and social aspects are not up for discussion in this forum. That’s enough mystery: the case is Planned Parenthood of Greater Florida v. MMB Properties and the decision can be seen by clicking HERE. [Read more…]

Print

Exclusive Use Clauses – Writing Them Wrong

Print

An “evergreen” (or timeless) discussion topic at law conferences, such as the recently concluded ICSC Law Conference in Phoenix (a highly, highly recommended annual event) is the “exclusive use clause.” We’ve written about exclusive use restrictions, too many, many times, too many to furnish only a link or two. [If you want to see one or more of those postings, use “exclusive use” in the search box.] Today, we’ll talk a “little” law and we’ll throw in a bonus at the end.

Basically, Ruminations will look at the difference between writing “Landlord will not …” and “No part of the Property may be used … .” [Read more…]

Print

Tenants Don’t Need To Carry Insurance (Maybe)

Print

We’ve shared many of these insurance thoughts before, but not all in the same place. Today, we’ll be staying out of the “weeds,” not because “there be snakes,” but we don’t want “detail” to drown out some basic messages.

Insurance is a credit enhancement. If you have a lot of money (think Exxon, Bill Gates, etc.), you can cover your own obligations, pay your own liabilities. You don’t need a sugar daddy back-up. And no one should require you to have one. A landlord who does an absolute-net lease of an entire $100 million building to Exxon, doesn’t need Exxon to buy property insurance from insurance companies. Exxon can buy the insurance companies. It can handle the loss. Its net worth is about $500 Billion. It has more than $50 billion of cash on hand. Chubb Insurance has equity of about $16 Billion. We would have said “only,” but that’s “only” when compared to Exxon. [Read more…]

Print

Horace Walpole Didn’t Have Landlords On His Mind

Print

Last week, Ruminations advocated that a lease giving the tenant a right to extend the term should include a provision wherein the landlord can/must send a “reminder” to the tenant that the extension option date was about to occur or had already occurred. [For those who haven’t yet looked at last week’s blog posting discussing some aspects of a lease extension option, it can be seen by clicking: HERE.] We also tacked on a specimen lease provision doing just that.

[Oh, Yes – we’ll explain Horace Walpole at the end of today’s posting.]

It would be fair to ask about the key features of a “reminder” provision. One very key aspect is that a landlord should be able to have the lease end at the agreed-upon time if its tenant doesn’t elect to exercise it extension option. So, a landlord should be able to send the reminder notice 30 or 60 days before last day the tenant should be sending its exercise notice. Another key aspect is that if the lease doesn’t end because neither party realized (or cared) that the date for exercise of the extension option had come and gone, the landlord should get the same period of time to find a replacement tenant as would have been the case if there were no requirement for a “reminder” notice from the landlord. To say that differently, if there was a 9 month notice requirement to extend the term, then the tenant would have to stay for 9 months after it gets the landlord’s “reminder.” If no “reminder is sent and the tenant didn’t timely notify its landlord that it was not going to exercise its extension option, it would be bound by the lease until 9 months after it then notifies the landlord that it wasn’t going to exercise the lease option. That way, a landlord would be allowing the lease term to continue running even though its tenant did not timely send an extension notice, but the landlord can cut the lease term off after 9 months just by sending a reminder notice to its tenant. [Read more…]

Print

Lease Term Extensions (Renewals) – You Snooze; You Lose

Print

We’ll begin with some controversial thoughts about a tenant’s right to renew its lease or, as we prefer, to extend the lease term. They are all grounded in the position that the right of a tenant to extend the term of its lease is not a gift from the landlord. It is bought and paid for, much as is any other right in the lease. It is part and parcel of the deal. “How much is the rent if I lease the space for five years and get the right to extend the lease term for another five years?”

We’ve tread on some of this ground before. To see what is in the Ruminations archives, click HERE and HERE.

Let’s make it clear, Ruminations is neither a poll follower nor a flip-flopper. We still abide by the principle that the terms of a lease (or any other agreement for that matter) are the result of negotiation and that the outcome of such negotiation is heavily influenced by the relative bargaining powers of the parties. But, we also think that the marketplace has norms or starting points and (also) if you don’t ask, you don’t get. [Why some attribute this axiom to Stevie Wonder, we don’t know. But, we didn’t ask, so we didn’t get.] [Read more…]

Print