What Lease Writers (And Others) Don’t Understand About Builders Risk Insurance Coverage

April 7, 2013 By 2 Comments
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When a lease makes a specific reference to “Builders Risk” coverage, we know the conversation is going to go sideways. That’s because the proponent of that provision rarely knows anything more about that kind of insurance than can be intuited from the words: “Builders Risk” itself.

Here is an opening premise: the normal (ISO) coverage form for “Building and Personal Property Coverage” does not pertain to buildings under construction. [The ISO, or Insurance Services Office, is an association of insurance companies and it promulgates commonly used insurance forms. Many, but not all carriers use these forms. So, people who really want to know what is or is not covered always need to look at the policy itself. Those who draft leases might want to requires insurance policies to be on ISO forms or be on the functional equivalent of those forms.] [Read more…]

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Filed Under: Financing Properties, Retail Leases, Retail Real Estate Law Tagged With: , , , , , , , , , , ,

Asking For Option Rights – Negotiators Need To Be Credible. Let’s Help Them Out.

March 31, 2013 By Leave a Comment
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Today, from 30,000 feet down to only 5,000 feet, we’re going to ruminate over purchase and expansion rights. We’re not doing any sample lease provisions.

We know from long experience and from a whole bunch of comments to previous postings that there is the following negotiation philosophy: “We really don’t need it; we’ll give it up just for the asking; we’ll ask for it anyway; and, sometimes we get it.” In most cases, that applies to tenant-form leases that include a right of first refusal to buy the property or to expand into adjacent (and sometime non-adjacent) space. Yes, generic provisions that have nothing to do with the “deal” and weren’t part of the letter of intent, even though quite material. Landlord forms often do the same thing when it comes to tenant relocation provisions. We’re not going to address those relocation provisions today. That’s for down the road. [Read more…]

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Filed Under: Buying and Selling Properties, Financing Properties, Retail Leases, Retail Real Estate Law Tagged With: , , , , , , , , , ,

Oh No, Not Another Change To What It Means To Be An Additional Insured!

March 24, 2013 By 1 Comment
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Hard as we try to “mix it up” and meter out our ramblings about insurance concepts affecting, landlords, tenants, and lenders, the insurance industry makes it pretty hard to do so. We were planning to Ruminate over purchase and expansion options this week and then Builders Risk insurance the week after that, but the ISO’s (Insurance Services Office’s) promulgation of some revised forms effective April 1 forced our hand.

Ruminations sees two changes of interest to the leasing industry and they affect: (a) additional insureds; and (b) those who serve liquor or allow its on-premises consumption. We also see some ways to change our documents to counteract the effect of some of these changes. [Read more…]

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Filed Under: Financing Properties, Retail Leases, Retail Real Estate Law Tagged With: , , , , , , , ,

Wait Until After The Fire To See If There Was Insurance Coverage

March 17, 2013 By 1 Comment
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Like it or lump it – the insurance industry doesn’t care about your problems as a landlord or a tenant or a lender. A lot has been written about the only useful element of a certificate of insurance, the ability to use the reverse side as scratch paper (assuming it is blank). In addition, we all write lease and loan documents as if the parties can get their insurance carriers to give notices of non-renewal or cancellation, but those provisions aren’t self-enforcing. There is no willingness on the part of the insurance industry to provide a mechanism for such notices.

A number of work-arounds have been used. My favorite useless provision in an agreement is [Read more…]

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Filed Under: Financing Properties, Retail Leases, Retail Real Estate Law Tagged With: , , , , , , , , ,

Temporary Takings; Permanent Damage – What’s The Scoop?

March 10, 2013 By 2 Comments
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Has any reader ever actually seen a “temporary taking” by way of eminent domain? Though rare, such a “taking” can take place, usually to accommodate construction of an adjacent road improvement. Theoretically, the government might need to “occupy” actual leased space for a temporary activity (such as in war time), but that may be less common than alien invasions. [That might not be a good example given that the National Geographic Channel did a survey and found 80 million Americans are certain that UFOs exist (that’s 36%). Only 17% are sure they don’t exist. 10% have actually seen a UFO.] [Read more…]

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Filed Under: Buying and Selling Properties, Financing Properties, Retail Leases, Retail Real Estate Law Tagged With: , , , , , , , ,

Can I Have Your Space Back? – Revisited: Pay me

March 3, 2013 By 3 Comments
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Last week’s posting about a landlord’s negotiated right to “recapture” space generated comments reflecting somewhat divergent views, both here and on some social networking sites. That’s good. That was the idea. So, with last week’s posting freshly in mind, we’ll plunge in.

Other than for the rent coming in, empty space, especially at a retail project is an anathema to a landlord. If nothing else, it says: “failure.” Of course, there is nothing to stop either the landlord or the tenant from going to the other and working out a deal: “I’d like your space back; would you like our space back?” A discussion-enabling lease clause is not a prerequisite to either party picking up the phone. We think a lot of us have forgotten this approach. [Read more…]

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Filed Under: Buying and Selling Properties, Financing Properties, Retail Leases, Retail Real Estate Law Tagged With: , , , , , , , ,

Can I Have Your Space Back If You’re Not Using It? Please?

February 24, 2013 By 2 Comments
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Retail landlords have a legitimate concern when it comes to whether a tenant space is actively in use; industrial and office landlords, less so. If it isn’t obvious why to readers, here is a short list of some key concerns:

• Vacant space makes a project less desirable to potential tenants.

• Vacant space scares potential lenders.

• Vacant space invites crime.

• Vacant space incurs higher insurance rates.

• Vacant space depresses sales for other tenants at a retail project.

• When a Tenant vacates space, it can be an early indication of pending financial problems.

[Read more…]

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Filed Under: Buying and Selling Properties, Financing Properties, Retail Leases, Retail Real Estate Law Tagged With: , , , , , , , , , ,

If The Lease Is Going To Wind Up This Way Anyway, Why Not Start Out This Way?

February 17, 2013 By 4 Comments
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Last week, though it might not have been clear (which would be entirely our fault), we were suggesting that the lease negotiating process would be quicker and more effective if the parties started with a form a lot closer to the finish line than has become the custom. We were surprised by how much support we received for our suggestion that the “default” approach in a lease should not call for a landlord’s approval of every detail of a tenant’s fit-up or other alteration work. Certainly, there were detractors, but we thought there would only be detractors. That turned out to be far from the case.

This got us to thinking about some other common clauses that seem to be more suited for inclusion in The Dance of the Seven Sisters (An Iroquois tale adapted by Amy Friedman). Today, our thoughts turn to the default clauses in the typical lease. [Read more…]

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Filed Under: Retail Leases, Retail Real Estate Law Tagged With: , , , , , ,
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