What Is A Landlord’s Duty To Deliver Possession Of The Leased Space?

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Interestingly, and probably not known by many, there are two very different possible legal obligations of a landlord to deliver the leased premises to its tenant. Some jurisdictions require delivery free of occupants and free of other persons entitled to possession of the same leased premises. Other jurisdictions only require that the landlord deliver the “right of possession” to a tenant, leaving it up to the tenant to get rid of any trespassers.

This doesn’t come up very often in commercial leases because almost all of those leases define what constitutes delivery of the leased premises. The smart leases require that the leased premises be delivered free and clear of all occupants and tenancies. Those leases that don’t say that or something like that should be corrected.

Consequently, the real “play” in lease negotiations over delivery issues is “by when,” and what happens, “if not.” [Read more…]

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Why Do We Ask For Insurance In The First Place?

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To be able to intelligently negotiate the insurance provisions found in leases, mortgages, and other contracts requires some sense as to why one party would ask the other to carry insurance in the first place. This, of course, presumes Ruminations readers aren’t life members of the “my way or the highway” negotiation society. If, when trying to work out a deal, you don’t need a reasonable basis to impose an obligation on someone else, save your time by clicking the “back” arrow on your browser. [Read more…]

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Allocating Environmental Liability – Landlord v. Tenant

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In a lease, parties can allocate risk as they choose – and often do. Risk need not follow fault, though it often does. So, the question is: how should allocating the risk of environmental liability work as between a landlord and its tenant?

For simplicity, we’ll assume that the landlord we’re talking about owns the property in question. We’ll also assume that we’re not speaking of a ground lease or similar arrangement, though many of our thoughts are equally applicable to such arrangements.

When it comes to allocating the risk of environmental liability between a landlord and its tenant, Ruminations thinks risk (call that: responsibility) should follow fault. We’ve said “between a landlord and its tenant” a couple of times because our thoughts certainly won’t change the way the law allocates such responsibility. [Read more…]

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Why Are Environmental REP(resentation)S Different?

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The purpose of asking for a representation in a purchase contract, lease or other agreement is two-fold. The representation serves as a risk-shifting device and it serves as an element of the due diligence process. This is never clearer than when it comes to the ever contentious “environmental rep.”

The transferor (seller, landlord or borrower) and the transferee (buyer, tenant or lender) are not on even footing when it comes to representations. The property owner holds all of the environmental knowledge and all of the environmental risk before any transaction with the transferee takes place. So, the questions are: (a) how much risk should the buyer, tenant or lender take over; and (b) what should the seller, landlord or borrower be required to reveal before the “closing” takes place? We all know that, in practice, the answer differs depending on the type of transaction. Lenders rarely will lend their money without broad, all-encompassing representations from their borrowers, coupled with the fullest of indemnities. And, their borrowers honor that demand. [Read more…]

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What’s The Story Behind Indemnification Clauses?

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In our last posting, we described the tort (or common law) exposure that a landlord might have. We did that because most readers understand that when a party breaches an agreement, it may be liable to the other parties. On the other hand, many readers only have a sketchy idea about the kinds of liability a party can have “just by being out there.”

This time, Ruminations will muse about indemnification, waiver, and release provisions in our leases, sales contracts, and other agreements. [Read more…]

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For What Would A Landlord Want To Be Indemnified?

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Our last posting brought out dozens of comments, representing a wide spectrum of views. Almost all responders noted the connection between letters of intent and the time it takes to get a deal done. Beyond that there was little consensus. So, we’ve had over 100 comments on that topic – getting the deal done faster – but no one yet has suggested a major reason. Ruminations has a suggestion – the people responsible for negotiating leases (especially) don’t seem to have a sense of urgency. [Read more…]

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Indemnifying Invitees

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I’ve only recently drilled down into my thinking about the question as to whether or why a tenant should indemnify its landlord with respect to the activities of the tenant’s invitees. I’m not talking about the insurance or cost aspects of such an indemnification, but about the underlying theories. I can’t say that I’m fully settled on the issue. So, this is a work in progress and help from anyone reading this entry would be very much appreciated.

This got started when I was asked about a proposed set of indemnification provisions in an industrial lease. Essentially, the indemnifications from landlord to tenant and from tenant to landlord mirrored each other. No problem there. The relevant (to this posting) text said: “wholly or in part, any act or omission of [Landlord/Tenant], its agents, contractors, employees, servants, invitees, licensees or concessionaires … .” The landlord was insistent that these kinds of people be listed. What did I think? [Read more…]

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