How Big A Default Was It?

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It is pretty common for a lease or other agreement to grant a party (usually the tenant) a particular right or option and then make it conditional on the “entitled” party not being in default or never having been in default. We are “talking” about such provisions that look like the following sample, but we aren’t endorsing its particular formulation. That would be a whole ‘nutter discussion.

Provided that on both the day that Tenant gives its Renewal Notice and on what would have been the Expiration Date had the Lease Term not been extended by the giving of the Renewal Notice: (a) this Lease had not been previously terminated; and (b) Tenant shall not be in default beyond applicable notice and grace periods, Tenant shall have the option to …

In Merry Ole England, the King had a court system that heard and resolved all disputes. Well, not really all disputes, only those that fit into a limited number of “off-the-shelf” cognizable claims (lawyers, think: causes of action). These “pre-packaged” claims, called “writs,” were “designed to enable the English law courts to rapidly process lawsuits.” The writs were highly technical, and even though new ones were regularly issued to create new rights, the system just couldn’t keep up. If a claim couldn’t be fit into an existing “writ,” the aggrieved person was out of luck – “no writ, no remedy.” The law was the law and too bad! [Read more…]

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Options: Two Wrong Ways To Write It Right

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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…]

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Notices + Ambiguity: You Can’t Have It Both Ways

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We’ve never seen it said this way, but it can’t be an original thought. [After all, there really are very, very few of them.] When it comes to an enforceable agreement (a “contract”), you can’t have it both ways. If you aren’t bound, they aren’t bound. It isn’t an enforceable contract. When it comes to “election” notices, the principle is the same. You can’t have it both ways.

Why did that thought come to us this week? Answer: because two weeks ago we promised to talk about equivocal notices. That led us to ambiguities. To refresh reader’s memories, here’s what we learned constitutes an ambiguity: “Open to more than one interpretation.” That’s not the same as vagueness: “Not clearly or explicitly stated or expressed.” To say this in a different way, when words are vague, they are unclear; when they are ambiguous, each of the two or more meanings will be clear, but it won’t be clear which one was intended. [Read more…]

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Oh No, What Have I Done? Not A Right Of First Refusal! Here Are Some Common Headaches, But Only A Handful Of Solutions.

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While problems associated with giving or getting Right of First Refusal (ROFR) may vary depending on the subject matter of the right (adjacent space, post-lease expiration renewal, purchase of the underlying property, right to provide financing, etc.), the one problem all have in common is that there is always a mismatch between what the grantee (usually a tenant) would design for itself and what a third party concocts in the form of its own offer.

Let’s give an example based upon a ROFR to lease adjacent space. Assume that a 9,000 square foot tenant has three years to go in its lease term followed by a five year extension option. Conveniently, two adjoining spaces, each measuring 3,000 square feet, become available, one of which is incontestably adjacent to that tenant’s space. [Read more…]

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OK, The Deal Will Contain A Right Of First Refusal. How Do You Write That Up?

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Why should anyone grant someone else a Right of First Refusal? Here’s an uncharacteristically succinct answer: “because they have no choice.” Yes, make the deal or not.

Granting any option rights always seems like a one-way deal. The optionee (i.e., the one who gets the “right”) isn’t bound to do anything, but the optionor (i.e., the one who gives the right to the other) is “stuck” if the option is exercised. The only reason it isn’t a “one-way deal,” is because the party granting the option right gets the deal by reason of having granted the option right – small comfort, but true. [Read more…]

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What Were You Thinking? Was It a ROFO, ROFN, ROFR or ROLO?

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What do you do when the deal sheet, agreed-upon by the parties, says: “Tenant will have a right of first refusal to lease adjacent space at a rent to be agreed-upon by Landlord and Tenant”? And, if you’ve been in this business more than three weeks, you’ve seen that.

Is it possible that those who make such a deal have a very different understanding of what constitutes a right of first refusal than does the “market”? Is it possible that they also think if parties decide that they will agree on something later, they are obligated to agree? Unless you have a better explanation, it sure looks that way. Where do we start? [Read more…]

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

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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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Losing And Not Losing Option Rights – What’s The Scoop?

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This week, we’re steering away from a “survey” approach to the topic of options. Rather than present an entire meal, we’re dishing out a few items from our tasting menu. The theme of this meal is “options.” First, we’ll look a court opinion about the “words” used in a notice of exercise. Then, we’ll look at a late exercise notice case. [Read more…]

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