Exercising An Option – Can You Change Your Mind?

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We agree with most judicial decisions, though there are a very few we think are misguided (read that as “wrong”). But, it isn’t very often at all when we’re not sure what we think. Today, we’ll present one of those, a “slip opinion” about whether a landlord could “withdraw” a notice when the lease didn’t say so – either way.

The lease included a reasonably comprehensive set of provisions designed to allow a landlord to redevelop a multi-tenanted building, one with high-end retailers (and possibly others). The redevelopment, if implemented, would take up to three years before the building could be re-tenanted. The building had to be empty during the redevelopment.

Basically, the lease gave the landlord the right to “suspend” it for up to three years. During the “suspension,” it would be as if there was no lease. When the redevelopment was completed, the lease would spring back into effect, essentially as if time had stopped while the redevelopment was taking place. [Read more…]

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Bargaining Power – Will The Tables Be Turned?

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We could have made today’s posting our shortest ever by posting only its title. But, that wouldn’t be Ruminations.

Traditionally, though bargaining power has been very site/situation-specific, larger enterprises always had a head start. And, though that meant large, mostly national, tenants with “brand” names, more often it meant the “landlord.” Owners of multi-tenant projects usually had the upper hand over most tenants and prospective tenants – the small ones who populate and support our shopping centers. While large tenants could easily negotiate for exclusive use rights, even if their market power made those rights mere surplusage, small tenants desiring protection for their core businesses found themselves whistling in the wind. Large tenants got to use their own, tenant-focused leases forms, while small tenants were offered a Hobson’s choice – take it or leave it. [Read more…]

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A Sneaky Attempt At Amending A Lease Fails – Lessons To Be Learned

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A little more than eight years ago, we wrote: “[I]t seems like a fair number of lenders think the “A” in “SNDA” stands for “Amendment,” i.e., an amendment of the lease.” [Click HERE for more about that.] Today, we look at an Estoppel Letter and see whether the initial “E” stands for “Emendation.” [We found a website explaining the following: “Amend is to change something, usually a document or personal behavior, to make it better. Emend is to correct something, usually in a text, to fix an error.”] Either way, SNDA or Estoppel Letter, let’s stop trying to use those documents to amend or emend a lease.

In an April 15, 2020 published decision, a United States Court of Appeals court looked at the history of a lease and other lease-related documents for a single-tenant office complex. The validity of the lease and five subsequent amendments was not at issue even if there was some dispute over their meaning. All were signed by both the landlord and tenant. On the other hand, the court was presented with two other documents – one was a letter from the landlord to its tenant (signed only by the landlord), and the other an estoppel letter (seemingly) signed only by the tenant and given to the property’s buyer. The estoppel letter, in its recitals, referred to the landlord’s letter as one of the lease’s amending documents. [Read more…]

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No One Is At Fault: It’s Time To Rethink Our Leases And Loan Documents

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A few weeks ago when COVID-19 kidnapped our blog postings, we wrote about recognizing the differences between individual catastrophes and community catastrophes. As further evidence that Ruminations has little if any influence on our industry, it seems to us that we stand almost alone in the way we are analyzing the current situation. While newspapers, other media, law firms, industry gurus, and general analysis sources are predicting the future from a global perspective – i.e., what will the “new normal” look like; will this coronavirus rear its head again, over and over; will it morph and be with us for a long time to come – the industry blog postings and law firm memorandums we are reading (by the hundreds) seem to focus on weaponization. Yes, how can one of the three: landlords, lenders, and tenants, defend or protect themselves against the others?

Articles about “force majeure” are an example. Those that look backward analyze how clauses written without any thought of a pandemic can be retroactively reinterpreted to provide rent relief. Those that look forward seem to be encouraging that tenants (in their leases) and landlords (in their loans) insist on a provision giving relief either for a pandemic or, in essence, for any situation not anticipated at the time the binding documents are executed. We’ve seen “advice” from respected sources suggesting that, in situations such as what we are all facing today, payment modifications or workouts be treated just like “we always did,” beginning with a review of the payor’s financial statements, business plans, financeability, etc. [Read more…]

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COVID-20 And Beyond – What Will It Take For Brick And Mortar Retail To Thrive?

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The news is full of information about the current “novel coronavirus”: (2019-nCoV), as the Centers for Disease Control and Prevention identifies it. A “novel coronavirus” is a new coronavirus that has not been previously identified. So, there will be further coronaviruses. They will be just as novel. Hopefully, they will be no more disruptive than the common cold, also caused by a coronavirus. The keyword in that last sentence is: “disruptive.”

COVID-19 has swept swiftly over society and our industry. So has the disruption it has brought. We’ve seen many disruptions before. In fact, they overlap one another. The difference this time is its swiftness. In the 1920s, as the developed world was transitioning from an agrarian society to an industrial one, although the future was imponderable, there was time to adjust. Today, although on-line merchandising and sales are shifting the retail paradigm, the disruption has been slow and progressive. “Slow and progressive” allows time to adapt. [Read more…]

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Rights Without Remedies: Moratoriums And Real Estate

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If blog postings, law firm memorandums, newspaper articles, televised pundits, and the like were effective medications for COVID-19 infections, this crisis would be over. Without even asking readers, we know that all of you are inundated with reliable [and less than reliable] information and guidance about this virus and how to deal with it. Unfortunately, more and more, it seems like we’re hearing Arthur “Guitar Boogie” Smith and Don Reno performing “Feudin’ Banjos” on their seminal 1955 recording. We don’t play the banjo. Therefore, we won’t be joining the COVID-19 legal advice band today.

 

One thing, however, bothers us more than the many others. We’ve seen a lot of words speculating on what “laws” were needed. Some opinions have been sage. Many have been uninformed. What bothers us is that much of what we are reading ignores or blurs the difference between “rights” and “remedies.” Almost all lawyers know the following; many of our other readers may not. One way to explain what is going on is to use an example that comes right out of our current news. An increasing number of jurisdictions are legislating (or administratively imposing) rent relief for (usually only residential) tenants. [Read more…]

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The COVID-19 Crisis Is Now Over – What Is Next For Retail Real Estate?

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If you are like we are, you’ve been receiving dozens of COVID-19 emails or other messages each DAY. On the “law” side, they discuss and dissect the legal rights and remedies implicated by the current crisis – force majeure, impossibility, impracticality, material adverse changes (effects), foreclosure moratoriums, and on and on. On the “business” side, they opine on holding off the payment under mortgages or leases, or the applicability of insurance coverage, and on and on. The now 94-year old Newton Minow, when last to speak on a panel, is reported to have said something like: “By this time, everything to be said has already been said, but not everyone has had a chance to say it. Now is my turn.” That’s the feeling we are getting about the nearly 200 messages we are receiving weekly.

Some “advice” is well thought out; some is authoritative; some is important; some is trivial; some are well-meaning but dangerous. To us, the common factor is that all (that we have seen) are backward-looking. What about tomorrow? In the words of Bishop T. D. Jakes, “Never make a permanent decision based on a temporary storm. No matter how raging the billows are today, remind yourself: ‘This too shall pass!’” [Read more…]

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Today, Hubris And Existentialism, Not “The Missing Comma”

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Hubris (hu·​bris), n. [Gr. Hybris].wanton insolence or arrogance resulting from excessive pride or from passion. That’s what it would be if we were to present today’s blog posting as if our subject matter was important in the current situation. It is also what all of us, unknowingly for sure, have demonstrated in thinking that our agreements could cover every possibility. If any reader had a COVAD-19 provision in their documents before January, we invite you to share it with the rest of us.

Countries have shut down walk-in commerce. In the states and Canada, stores, large and small, are closing “temporarily.” Restaurants, the “saviors” in today’s shop-on-line world, are closing “temporarily.” Hours are being cut back. Rents won’t be paid. Some, mainly marginal, tenants won’t be coming back. Some (pretextually) will use their co-tenancy right to “skinny down” their portfolios. We’ll all fight about the meaning of “force majeure.” We’ll be picking through our leases, open purchase agreements, and loan documents (including loan commitments) in an effort to “get out.” [Read more…]

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