The Chickens Come Home To Roost – Pretext And Tenant Control Over Development

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According to Lawrence Peter “Yogi” Berra (May 12, 1925 – September 22, 2015), late of Montclair, New Jersey, “You can observe a lot by just watching.” That’s how we get our “experience” – by watching what we ourselves have done and by what others have done. We can learn from those experiences, “ours” and “theirs.” That’s one reason we read court decisions. Doing so allows us to safely observe what others have done without getting burned, even when the situations covered by these decisions invoke another Yogiism: “It’s deja vu all over again.”

We came across a late August court decision out of the U.S. District Court for the Northern District of Alabama. It involved a lease dispute at an enclosed mall, one emblematic of the history of such malls. At 300,000 square feet, it opened in 1970 with 32 inline tenants and two department stores as anchors. By 1982, one had disappeared and its parent company soon followed. The following year, a national retailer relocated its own department store from downtown to the now-vacant space. In the mid-1990s, plans were made to expand the mall, based in part on the addition of a third department store building. Some physical impediments delayed those plans and then the contemplated additional department store chain was acquired by yet another. This resulted in a further delay. But, the mall’s expansion opened in 2000, and the mall grew to 700,000 square feet of space. [Read more…]

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How Long Do I Have To Wait?

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There’s a song, Hesitation Blues, first recorded in 1916, that begins with this line: “How long do I have to wait?” It is also a question often asked when a lease or other agreement is silent as to a deadline or permissible period. And, almost always, that question is asked when something has gone wrong. That’s evidence it should be asked at the outset when people memorialize their agreement or expectations.

We just looked at an August 12 decision by a New York lower court. In it, the judge wrote what is generally the law: [Read more…]

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Rights, Powers, And Forgiveness – Let’s Loosen Up

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Today, we’re going to engage in some pure Ruminating. Most of the time, we (and others who are deeply engaged in this side of the “business”) focus on the “documents.” We think about how they are drafted and often mis-drafted. We read articles and (in “olden” times”) participate in programs focused on how better to do our “job.” But, there are some “rules” that get short shrift. These are rules that regularly have more force than do laws.

One is that there is a difference between having the “right” to do something that is required (or to abstain from doing something) and the “power” to do that thing (or not). Another comes in two versions: It’s easier to ask forgiveness than to get permission; and it’s easier to apologize than to get permission.

The success of either approach might be related to another aphorism: Might makes right. Each reveals two deficiencies found even in the best-crafted agreements. There aren’t enough trees in the world (proverbially speaking) to create enough paper to contain all of the words needed to regulate every possible permutation of conducts or situations. And, much of what we write (and agree-upon) just plain isn’t important; the provisions aren’t really needed. [Read more…]

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How Can One Enforce A Continuous Operation Lease Provision? Not Easily.

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Rarely will a court enforce a continuous operation obligation by ordering a tenant to stay in business at its leased space. Yet, from time to time a landlord will seek an injunction to force a tenant to keep its store open. A simplistic explanation as to why courts don’t issue such orders is because landlords need to show an irreparable injury, and if a landlord can be compensated by the payment of money, its injury isn’t irreparable.

Landlords confronted with a tenant bound by a covenant to be “open and operating,” but on the verge of breaching that obligation by closing its store, usually plead the “domino effect,” expressed by Benjamin Franklin thusly: [Read more…]

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Apocalypse Now For Shopping Malls?

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We had a posting teed up for this week, ready to click the “publish button” today. Then we read an on-line article last night, one about the most visible retail real estate we have – shopping malls. So, for the first time in nearly 500 Ruminations blog postings, we are scrapping (actually delaying) our planned posting, one focused on the danger of just plopping in new text at the last minute without reading all of the “notwithstanding” provisions already in that document. Basically, we interrupt your regularly scheduled blog posting to bring you this important message, one written today.

The article appears in today’s New York Times under the headline: “With Department Stores Disappearing, Malls Could Be Next.” In another first for Ruminations, click HERE for a link to the article. We’ve never before linked to another publication. Though this is a newspaper article written from the transitory point of view of one author, she spoke with the largest operators in the United States. We don’t want to substitute our summary for the actual article. Two of the printed quotations should be enough to give our readers the “flavor.” [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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What Permanent Changes Do YOU See For Retail Leases?

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Today Ruminations’ blog posting, our 480th, will be different from all that have come before. We’re making it our readers’ blog posting.

Since March 11, we’ve seen only the supermarket (with our laundry-dry cleaning, and mail drop concessionaire), the same hardware store (twice), an outdoor herb nursery (once), and a warehouse store (once). We picked up an order from a fishmonger, giving us a glimpse (from outdoors) of its back office. That’s two months – five retailers at most. No take-out, though we admit to a lot of on-line shopping from a behemoth seller-selling platform.

So, we have no idea as to what is really happening on the “retail” ground. Reading about the retail marketplace is unhelpful. Some would say that press coverage is filtered through political pathways. That must be true, but we think the bigger filter is that for media outlets to survive, “news” has to be interesting. Certainly, adding a dose of “politics” can make it so, but far, far more often it is a lot simpler than that. “Dog bites man” isn’t very interesting. “Man bites dog,” now, that’s a story. Translated to today’s subject, media reports focus on the unusual, not the humdrum, ordinary. [Read more…]

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How Gross Are “Gross” Sales? And More.

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A few weeks ago, we wrote about the distinction between “rights” and “remedies,” but in somewhat theoretical or even esoteric terms. Today, we’ll present a situation that demonstrates a practical intersection of the two. Our story comes from an April 24, 2020 decision from the Appellate Division of the Supreme Court of New York. [That’s New York’s name for its intermediate appellate court.]

Imagine a mall with approximately 150 tenants. One of those tenants (and possibly others) was listed as a “Named Retail Tenant” or as a “Suitable or Successor Replacement Anchor Store,” a “Required Tenant” or “Upscale Tenant” in the “co-tenancy” provisions within the leases of many other tenants at the mall. Basically, if this “Named Retail Tenant” left the mall, dominos could fall. [Read more…]

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