Exculpation Lost On Assignment?

Print

We’ve written about “exculpatory” clauses before. The on-line version of Black’s Law Dictionary explains such clauses as follows: “An agreed-to condition (1) preventing blame or liability on one party due to the improper behavior of the other party; (2) preventing liability on one party due to not meeting all of the contractual performance expectations.”

In past blog postings, we’ve pronounced such clauses as overwhelmingly common in leases and almost always included to protect landlord-parties. We’ve suggested tenant-oriented versions. And, we’ve suggested tenant-protective modifications to this ubiquitous landlord-tilted lease provision. If interested, click HERE to read our thoughts.

We thought we had shot our load (an expression more acceptable than its more unsavory version, one that originated with early rifles) – until about a month ago when we saw a decision out of a California Court of Appeals, one that can be seen by clicking: HERE. The facts may be unusual, but the lesson is unsettling. Ruminations may not agree with the outcome, but denial, in this case, seems to be a big river in Egypt and not an effective legal strategy. [Read more…]

Print

Are Waivers Enforceable?

Print

Are waivers enforceable? It depends. How unsatisfying is that answer? Generally speaking, absent duress or coercion, parties can waive what would otherwise be their right. How does one know if there is (was) coercion? Well, some situations, such as an actual gun to the head, are easy to identify. Others are not so simple. When it comes to agreements between commercial parties, there is a presumption that they are grown-ups, able to protect their own interests. The “bigger” they are, the less likely a cry of “coercion” will rule the day. Representation by an attorney will dull a party’s claim that it was improperly forced to agree to a waiver (or other contract terms). When courts reject a party’s plea that it was coerced, you’ll often see the “deal” as having been between “sophisticated parties that negotiated at arm’s length with apparent care and specificity, and represented by competent counsel.” All of those factors concern themselves with the character of the parties and how they arrived at their agreement. [Read more…]

Print

It Might Be Negligence To Leave Out The Word Negligence (Unless It Isn’t)

Print

Are there “magic words” or are there not? Once again, we feel compelled to warn readers that “we need to know what we are doing.” A lot of people in this “business” of ours cross over jurisdictional lines whether rightly or not. There is a lot of material out there about the ethics of doing so. That’s a reasonable concern to have, but there is a far less discussed, but more serious, problem. It is called malpractice. That term is not limited to attorneys. It isn’t even limited to professionals. It is hard enough to know the law in a single jurisdiction. Know the “law” in every jurisdiction (e.g., state) is, frankly speaking, impossible.

If we are going to “practice” in the real estate world, we need to practice well, not malpractice. “Mal” is a “combing form,” one that is added to words. It comes from the French “mal,” and that came from the Latin “male” which meant “badly.” [We sure hope the word is pronounced differently than is the gender.] The bottom line, however, is that “malpractice” is practicing in a faulty or improper or inadequate manner. No reader of this blog wants to come within a million miles of anything “mal” in her or his practice. So, we need to know that we don’t know the law everyplace. One example is how various jurisdictions view liability waivers. Today, we write only about one aspect of that question – whether to effectively be released from one’s own negligence, a waiver must expressly say that “negligence” is being waived or whether waiving “all” claims for damage really means “all,” including those claims arising out of negligence. [Read more…]

Print

Why Do I Want/Need A Waiver Of Subrogation?

Print

Two weeks ago, we cautioned against thinking that because we know the “general” law, we know the law in a particular jurisdiction. Yes, there is a lot of commonality on a broad level – if a tenant doesn’t pay the rent, it can lose its right to stay – but just what a landlord has to do (the needle it needs to thread) varies greatly from place to place. Today, we’ll give a more focused example in the context of explaining why the (misnamed) waiver of subrogation is important.

At the end of the day, who really pays the insurance premiums for the property – landlord or tenant? When a lease requires the tenant to pay or reimburse its landlord for insurance premiums, isn’t the tenant really paying the premiums? When the stated rent includes the then-existing amount of insurance premiums and the tenant pays only for increases beyond that “base” amount, isn’t the tenant really paying the premiums? Even when the stated rent is “all-in,” might it not be that the tenant is really paying the insurance premiums? [Read more…]

Print

I Surrender! Here’s Your Property Back: As-Is. Sue Me

Print

We are no fan of a particular type of “surrender” clause commonly found in leases, the “style” that calls for a tenant to “leave the property in as good condition as when it moved in, save normal wear and tear.” These clauses come in a variety of flavors, none of which Ruminations will offer today. In 2014, we shared some thoughts on this same topic in a posting that can be seen by clicking: HERE. We’ve also said (too) much about “wear and tear.” For those Ruminations of ours, search the blog site for (what else?) “wear and tear.” For the most part, our earlier writings have focused on the downside to tenants of this type of lease clause. Today, we’ll introduce a court decision that illustrates a giant shortcoming of the “same or better” condition requirement, one that should make landlords leery. Even readers who take a different approach to the condition of the leased property when its tenant departs will be interested in what the same court had to say about a property’s “move-in” condition and the implication for provisions dealing with the “move-out” condition. [Read more…]

Print

Primary And Noncontributory – What’s The Scoop?

Print

Last week we wrote about a lease seemingly written by an inexperienced draftsperson. Though our point was to highlight the danger of inexperience, the court-reported situation we described also dealt with a missing insurance concept, that of calling (or not calling) for “primary” coverage. As a result, we got a few inquiries about the meaning or implication of that insurance term” and also about its sibling term, “non-contributory,” such as in: “The required coverage must be “primary and non-contributory.” So, here’s the scoop.

“Primary(ness)” (as does “noncontributory”) has to do with the priority of payment and only involves a situation where one party, named as an additional insured on the other’s liability insurance policy, also has its own insurance. When one of those two insurance policies is “primary,” and the other is not, the one that is primary will pay out until its policy limit is exhausted. At that point, if more needs to be paid, the other policy will cover the “excess.” [As to “noncontributory, we’ll get to it.] [Read more…]

Print

Who Should Write Settlement Agreements? The Courts?

Print

Today’s Ruminations is triggered by a court decision that may not have reached the “correct” result. If that suspicion is correct, then why do we promulgate its holding? There’s a simple answer. Had more talent been employed in negotiating the agreement dissected by the court, there would have been no court involvement. There would also be a different blog posting today.

The facts appear to be somewhat simple. They might be simpler had the court shown more of the actual agreement in its written decision. Instead, it gave us its characterization. Normally, when courts do so, they do it in a way that tilts the “story” to support its decision. So, we’ll assume that the characterization is the strongest the court could write to support the outcome. Enough with the mystery – here’s the story.

A fitness center leased space. The lease was subsequently amended, at which time the tenant’s owner signed a personal guaranty. The document was denominated as a limited guaranty, but the only “limitation” was its dollar amount cap. Otherwise, it appears to have been what we call a “come heck or high water” obligation. [Some would give it a different, but similar nickname.] The guaranty expressly said that the guarantor’s liability was “co-extensive with that of” the tenant. [Read more…]

Print

Chickens, Eggs, And Waivers of Claims

Print

When a tenant’s property is ruined by rain coming through the roof of its leased space, what caused the damage? Was it the water or was it the landlord’s failure to repair the roof? That’s today’s issue to Ruminate about.

Right after a tenant moved into its space, it noticed the presence of water after what was called, “inclement weather.” We might have called it “rain.” So, it notified its landlord. Without delay, the landlord dispatched someone to investigate. His conclusion was the water was coming from an air conditioning unit. The tenant immediately called an independent HVAC repair company. Its conclusion was that the roof was leaking and the air conditioning unit was fine. The landlord did not make any roof repairs.

After that, each time it rained, water came into the space. After one rainstorm, only four months after the tenant moved in, so much water came in that there was damage to equipment, furniture, interior walls, and to over one million dollars (at retail) of inventory. At that time, the tenant again put its landlord on notice of the leaking roof, the damage caused, and the failure of the landlord to make repairs. The landlord had the roof inspected again. This time, its foreman determined that the water intrusion was the result of the building’s improperly constructed exterior and by something wrong with its downspout. Apparently, the landlord still did nothing, not even in response to repeated notices subsequently sent by its tenant every time water came into the space. A lawsuit followed. [Read more…]

Print