The Art Of Not Responding

not responding 5Most of us learn when and how to respond in order to  get along with others at an early age.   In the elementary school years we learned that there are boundaries to when and where you can say things that you think.  As we get older and mature, we also learn to listen – hopefully.  Although it is sometimes amazing that some very experienced professionals have lost their filter on when to listen to someone, keep their thoughts to themselves and then respond when it is productive and useful in business disputes and transactions.  

In my practice, I have found that some of the most bright and knowledgeable people simply cannot restrain themselves from exploding into commentary, criticism or downright insulting language when they feel that their clients’ interests are not being fully represented in a discussion. As most business folks can attest, lawyers (especially) who can’t seem to work with a group of people to get a deal done, resolve a contract dispute or simply project a personality that encourages others to move forward towards a mutual goal can be obstructive or even destructive to the process. 

not responding 3On the other hand, some of the most successful people  in the business world have learned the simple art of not responding. This is not a sign of weakness or lack of skill and knowledge.  Instead, it is a way to pause, think and also consider what other parties in the discussion are saying and meaning by what they say.  

Litigators probably see this more often than any other group of attorneys. And they will tell you that time after time, letting an opponent drone on and on gives them an advantage, as they find out something they didn’t know and possibly would never have been disclosed. I have seen attorneys literally hang themselves and their clients by not resisting the urge to sit down and stop talking in an attempt to emphasize their position. 

On the other hand, those who don’t respond after hearing a diatribe, often end up with an advantage simply by not talking.

The same is true in the business world, especially in multiparty negotiations. Sure, whether you practice law or finance or real estate, there’s always a fear that if you don’t project yourself aggressively and often that you may be perceived as being ineffective.  However, experience often shows that there are few successful people that look for this as a positive trait in their opponent or person they’re negotiating with.  More often than not, the lack of a response or delayed response is both appreciated and helps to move the discussion forward.  There are folks that will insist they want the bulldog who as an attorney or a broker will  get in people’s faces, jam fingers at them and say essentially it is “my way or the highway.”  The press has often not done a good job of showing that these people get marginalized in their business and by their own colleagues. 

not responding 2Many more times, the pensive and thoughtful professional is the one who will get repeat business and form strong relationships in his or her industry.

Notwithstanding all of the above, there is certainly a time to speak up and make sure that you or your client’s position is clearly heard and understood. However picking those times is crucial. The curse of many teens is that too often they know what they want to say and what the goal is, but they simply cannot stop themselves from speaking out loudly and abrasively. How well do that work out?  As you grow older though you learn to pick your battles and appreciate the power of silence and the ability to truly listen to other people in business and law. 

Honing the skill and truly knowing when not to respond and then speak up when appropriate is a task that most of us will struggle with through our professional lives, but ought to be at the forefront of our minds every time we step in to meeting or have a conference call.  It will pay dividends.

Stuck in the Middle. What if the Tenant’s Use of the Premises Becomes illegal?

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So your out parcel Tenant is doing great with their check  cash and coin change business, But next thing you know the municipality limits or outlaws these businesses in the area where your Center is located. The tenant  has no way to implement an alternative use and the existing uses in the Center prohibit them from mailing packages or providing other “same day” financial services, the only easy alternatives to their specific use. Even worse, the lease states the Tenant is prohibited from “any other use other than specifically described herein.”

Yes it happens. All the time.

What to do? What rights does the Landlord or Tenant have to terminate the Lease? Can Landlord hold them to their Lease obligations while they cannot operate?

Many jurisdictions have struggled with this issue and come up with various interpretations of law with varying results. In North Carolina, the Court of Appeals recently ruled on this issue in the case Town of Beech Mountain v. Genesis Wildlife Sanctuary, Inc., 2016 WL 2646664 (N.C. Ct. App. 2016).  In that civil action,  the Court was called upon to decide the rights and obligations of  the Landlord and the Tenant where the Tenant’s use was limited to construction and operation of an education center relating to how people and animals can peacefully co-exist. As part of the use description, Tenant was allowed to bring wildlife onto the premises “from time to time.”

The Town later passed an ordinance that outlawed the caging or storing of animals within 200 feet of a recreational lake adjacent to the premises. Thus the Tenant’s use of animal habitats and storage was in direct violation of the ordinance. The Town demanded that the Tenant remove all animals in the specified vicinity , which the Tenant promptly complied with.  Not content, the Town then defaulted the Tenant again for violation of 4 other ordinances dealing with fuel tank storage, setbacks, buffers and accumulation of waste on the premises. The basis for the Town’s position was a catch all phrase in the use clause stating that Tenant was permitting the premises from being used for any purpose (italics mine) that “violates  any law”.

The tenant moved for summary judgment on this claim, which was granted by the trial court and upheld by the NC Court of Appeals. In affirming the lower court ruling, the Court stated that the Town could not show that the specific use of the of the premises was a purposeful violation of the law and thus not a basis for a breach of the lease.

Although a somewhat strange case on its facts, the Beech Mountain decision points out the problems that can arise when an operating use is later found to violate the law.  Perhaps in retrospect the lease should have been more specific as to what “violates any law” meant. It seems the Court may also have been troubled by the Town’s use of its own law-making abilities to target this tenant.

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Turning back to the example at the top of this post, how could the landlord and tenant have avoided the result of the use allowed by the lease from being problematic if the law changed and made it illegal for the tenant to so operate. Here are a few ideas:

  1.  Add language that outlines any ancillary uses that may be close substitutes to the stated use description (i.e. “provision of financial advice or counseling” or “online services for financial payments”);
  2. Specify the rights of the parties if the use is rendered illegal – such as Tenant’s right to terminate or negotiate alternative uses, as well as Landlord’s ability to seek removal of the tenant and/or sue for damages if the tenant continues to operate illegally;
  3. Explore opportunities for insurance coverage if this situation arises; or
  4. Allow Tenant limited rights of assignment or sub-letting.

In the end, the parties cannot always control what governmental bodies may choose to outlaw or restrict after a lease is signed. However, there certainly ways to provide for this risk and it is well worth exploring, especially for all landlords who are negotiating with tenants whose use is inherently dangerous, politically controversial or that may create a public nuisance.





Don’t Ask, Don’t Add?


Should you add or suggest a modification to a contract or lease when it is not to your client’s best interest? No? Never? The answer is Yes and here’s why.

Competing Motivations and Goals

In the process of negotiating a business transaction, many attorneys are left to ponder why their opposing counsel or his or her client did not suggest (or even demand) a contract term that is clearly to that side’s advantage, or even failed to discuss an important concept that affects all parties to the agreement. As an advocate for the client, one might stay silent in order to preserve the benefit of the absence of such matters. Certainly it is a “win” for  your client?  And it won’t hurt your relationship with them to happily announce that the opposing party and his lawyer “left one out that will hurt them and help us!”

However, as an adviser…

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Don’t Ask, Don’t Add?

Should you add or suggest a modification to a contract or lease when it is not to your client’s best interest? No? Never? The answer is Yes and here’s why.

Competing Motivations and Goals

In the process of negotiating a business transaction, many attorneys are left to ponder why their opposing counsel or his or her client did not suggest (or even demand) a contract term that is clearly to that side’s advantage, or even failed to discuss an important concept that affects all parties to the agreement. As an advocate for the client, one might stay silent in order to preserve the benefit of the absence of such matters. Certainly it is a “win” for  your client?  And it won’t hurt your relationship with them to happily announce that the opposing party and his lawyer “left one out that will hurt them and help us!”

However, as an adviser to your client, and for their long term benefit, there are many instances where leaving out a key substantive or procedural term will end up causing more problems than raising the subject and negotiating terms that both sides can agree to.

For the purposes of this post, I am not talking about core terms such as consideration, proper identification of the property location, the term of the agreement, notice addresses etc. No one benefits if those are left out or are hopelessly ambiguous as the enforceability of the agreement is put in direct peril.

When Does This Make Sense?

Suppose you are negotiating a 10-year triple net retail lease which includes boilerplate language for common area maintenance charges to be paid on a monthly basis by the tenant. However, what if the form lease is silent AND the tenant does not request language that provides procedural and substantive guidance for reconciliations and/or review rights?  That is no skin off the Landlord’s back, right?  As landlord’s counsel, remain quiet on that term and move on to the next negotiation point. Big win for the owner, right?  Arguably not.

When the tenant wakes up after year 1 of the lease and determines that it has not received an accounting of CAM charges and the net owed by or due back to them,they will likely demand that landlord provide this information. Landlord then points to the lease and shows there is no obligation to provide any reconciliation. Tenant disagrees and their counsel says landlord has a common law (or in some States statutory) duty to provide an accounting and return any over paid CAM fees per the tenant’s pro rata share of the total square footage of the shopping center.

At that point, there is at best a dispute, if not a threatened lawsuit against landlord for unjust enrichment and potentially other claims. Sure, landlord may prevail in litigation.  But what if they don’t? And what if the Court deems the entire CAM obligation unenforceable? What about the relationship status of the parties for the next 9 years?

What happened to your big win?

Other Examples Where Lack of Terminology or Silence Can be Harmful

  1. Relocation Rights and Obligations – what happens when the landlord has no mechanism (outside of eviction) to move a struggling or holdover tenant to a vacant space to make way for a replacement tenant who is paying 200% higher rent and taking more term?
  2. Rules Regarding Recording of the Lease – if nothing is stated what happens when the tenant records landlord’s full lease in the public record?
  3. Parking Rules – how many spaces is tenant allowed? what if they fill up the parking lot with a special event?
  4. Holdover Status and Increased Rent – landlord may be at the mercy of the common law as to what type of tenant they are dealing with and how much rent tenant owes per month is anyone’s best guess? How long will it take to evict them when the replacement tenant comes along?
  5. Right To Accelerate Rent – as landlord, do you want to be left with the right to seek only past due rent as a remedy? where does landlord’s leverage go if the amount owed is accruing one month at a time?
  6. Landlord Breach and Tenant Remedies – if not spelled out, both parties may be at the mercy of that State’s law on the issue instead of what the parties intended.


Think carefully before you advise your client to ignore these issues even where there might be a short term gain. The long term effects of such an action may be painful and costly!

“I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.” – Abraham H. Maslow


Due diligence in commercial real estate contracts – how much is enough or too much?

goldilocks 5Identities and Motivations

In purchase and sale contracts as well as some long-term leases, the scope and timing of due diligence is often a hotly negotiated topic.

From the seller/landlord’s perspective, the time for due diligence should be short and tie in neatly to closing. In addition, the scope of due diligence should be as narrow as possible.  Likewise, any representations and warranties related to items defined by the parties should be limited to the effective date of closing or as close to as possible to that time.

From the buyer/tenant’s standpoint, the timing should align with their financing goals for the property, coordination of operations, up fit as well as satisfaction as to what they are buying – i.e. clean title, no hazardous waste problems, proper zoning approval, building inspections, lease evaluation AND and that the seller/landlord stands behind its representations.

What to Look For

Let’s step back a bit and look at what items customarily fall within due diligence for commercial real estate contracts. Although there are differences depending on the type of property, the existing and intended use, age of buildings etc., generally most parties to these transactions should expect the following to be discussed and investigated:

  1. Title  (including  easements, encumbrances, restrictions and covenants, current title policy);
  2. Survey;
  3. Zoning and governmental restrictions, licenses and rules;
  4. Existing and Intended Use of the Property;
  5. Buyer Financing (if not a cash deal);
  6. Inspection of Improvements;
  7. Environmental Inspections and tests;
  8. Existing Leases or other Third Party Property Rights;
  9. Legal Status and Authority of the Parties; and
  10. Representations and Warranties.

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Key Factors

One could post 1500 words on any of these topics (maybe later), but let’s focus on the issues that could develop when the contract is in play.  As an Owner or Buyer what should you watch out for, prepare for, and deal with in these transactions?

  1. Is this  a 1031 Exchange? – if so, expect the  buyer to want to move quickly and thoroughly to avoid the tax consequences that come from not hitting the closing deadline.
  2. Is this a cash deal? – if so, expect the buyer to want to accelerate the due diligence period to get the $$ into the asset as soon as practicable.
  3. If not, is the sale/purchase subject to conventional or non-conventional financing? – As a seller, you will want to have a back-up plan if the contract is terminated either way, but especially if buyer is pulling funds from sources that may have challenges on closing day.
  4. Is this transaction a stand alone deal or tied to bundling properties for a portfolio? – if the latter, be sure as a seller you are aware of the buyer’s plan and contingencies relating to the other properties.
  5. Is this a long term investment for the buyer or a flip? – this could significantly increase or decrease the scope of due diligence and the importance of those terms in the contract.



When the parties negotiate due diligence terms and go through the investigation process, all should be aware of the particulars of the asset, the factors lying within and outside the transaction, the motivations of the buyer/tenant AND seller/landlord, and any other relevant factors relating to the property, process and parties. Perhaps “a little dab will do ya”, but sometimes the situation may require multiple rounds of review and analysis.

Confidentiality and Non-Disclosure Clauses in Commercial Contracts – Is it worth the Effort?

Let’s set the scene….

The parties to an active litigation case or in the case of a pre-filing settlement discussion or mediation have worked hard, given up more than they wanted to or not received as much as they desired, and are concerned collectively about how their attorneys fees are continuing to pile up. Throw in some bruised egos and negative past events that have been ruminated over and rehashed and you have folks who want to get something down in writing as to basic terms and be done. Details be damned! That’s what the lawyers are there for. Right?

This situation creates fertile ground for the parties, and perhaps even their attorneys, to not spend the time and effort that they should in crafting a solid, workable and individualized confidentiality agreement that captures the present and future concerns the litigants may have about anyone else discovering the details of their settlement. Many clients suggest lawyers use “boilerplate” clauses or the “usual verbiage” in order to avoid having to be involved with situations that they have gritted their teeth over and reached an agreement. A weary or inexperienced attorney might reflexively reach for form language that he or she used in previous settlements. Even worse, they may ask for the same type of generalized language from another attorney who has not been involved with the parties and the issues in dispute.

Here’s why that is a recipe for disaster in many situations.

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Is this battle you should choose ? – Negotiating Commercial Lease Maintenance and Repair Terms

While negotiating a commercial lease, the inevitable issue of maintenance of the building, premises and building systems may prove to be one of the tougher issues facing landlords and tenants.  Although the LOI negotiations on basic terms such as rent, term , options, square footage and other rights and responsibilities of the parties are often sorted out early, maintenance and repair are often not specifically defined (carve out here for dynamite manufacturers and buildings that have significant deferred maintenance issues).  However, many well intentioned business people leave the issues of who maintains and repairs what in general terms even in the drafting of the lease agreement. In addition, tying in generic terms relating to casualties and indemnity can lead to uncertain results if not examined carefully for each transaction.

Concerns of Landlords and Tenants

For owners, the basic concern is protecting the asset while minimizing  cost. For tenants (except for their specific improvements) the chief concern is minimizing the scope and costs, specifically related to the structure, building systems common areas and even certain improvements which may be deemed fixtures that have to be surrendered at the expiration of the lease.  Costs are the common denominator, but there is often more at stake. Take the tenant who has injected thousands of dollars into upfits and permanent improvements or the landlord who has retrofitted the premises to fit tenant tenant needs. Then the issues get sticky….

 Less Sticky Situations

In  some lease scenarios, these issues may be more easily resolved and defined, such as:

  1. Ground Leases
  2. Build to Suit Transactions
  3. Single Tenant Occupancy
  4. Outparcel Leases
  5. Franchised Tenants
  6. Substantial or Complete Retrofit by Tenant
  7. Tenant with Extensive Renewal Options
  8. Tenant with an Option to Purchase

In these situations either landlord or or tenant will likely want to substantially control the protection of their asset or improvements. Landlords desire to protect the structure, building systems, fixtures and alteration approval. Tenants generally want landlords to pay for the maintenance and repair of as much as possible, except for tenant-specific or custom alterations and personal property.  Many LOIs in these situations come tailor made for the final lease and are  essentially non-negotiable on these issue. But what about the rest?

What’s in the the toolbox  to help?

Great question. But over time, real estate professionals have gathered and honed many methods to deal with the issues of maintenance and repairs. By no means a complete list, the items below can help guide the parties to a final agreement knowing that protections and securities have been built in to deal with the lease, such as:

1. Insurance – ideally both landlord and tenant should maintain separate policies that name the other other as additional insureds where appropriate.

2.  Maintenance Contracts – especially for building systems, a solid and reliable maintenance agreement obtained by one or both of the parties can prevent problems from arising. As for the structure (except in ground leases and other situations where the tenant is constructing and fully controlling the building), most tenants look to landlords to cover.

3. Indemnities – these animals can create a good umbrella to cover negligence,  third party damage and other unforeseen circumstances. Again, the party with more to protect will want want a stronger, tighter and broad scope clause included in the lease. Key to this discussion will be the financial status of the parties.

4. Casualty Responsibilities – Likewise, by dividing the risk, responsibilities and rights if there is unpredictable damage to the building and its contents, the parties should know what the consequences will be for themselves.

5.  Approval for Improvements – This is often a tug of war between landlords and tenants. Many times setting a requirement for approval of improvements costing above a certain dollar amount can allow the landlord to be assured the building is not substantially modified without their blessing, while allowing tenants the right to make routine changes and replacements without having to wait for the landlord to respond to their requests.

6. Guarantors – Often a tool to insure that landlords have additional security for unpaid rent, TICAM etc., personal or corporate guaranties can assuage concerns of how risk may be otherwise allocated in the lease agreement.



The touchstone for negotiation of maintenance and repair responsibilities should be what does each party want to protect or control and what are the costs and benefits of the physical items, fixtures or structure to be maintained.









Landlords Lose Remedies Or Do They? – The Lockbox


Most commercial landlords are familiar with the concept (or actually use) a bank “lockbox” for deposits of rent and other lease charges from tenants. The process is simple. Take for example a shopping center development. Instead of the landlord receiving checks by mail or other carrier, tenants deliver their payments directly (usually via via ACH) to a bank that holds all of the payments in a single account.

The advantages of this system are numerous:

  1. Landlords don’t have to spend the time or the $$ to collect and account for all of the monthly or periodic payments owed by the tenants;
  2. Although there is generally a fee charged by the bank for this service, it is usually far outweighed by the cost of employees or third party collectors doing the same job; and
  3. The bank provides a clear timely report of which tenants are making payments, short paying, or not paying at all.

So, assuming you are a landlord with multiple properties and/or numerous tenants, why would you not choose this method of gathering and accounting for rents, TICAM  and other payments?  Unfortunately in many states if a rent payment is deposited, it is considered to be accepted by the owner and constitutes a waiver of all defaults. In addition, most banks will not block individual tenant’s payments, short of closing the account entirely. Not a good solution for the landlord, especially when the anchor tenants are paying through the lockbox as well.

So what do you do if you don’t want to block your lockbox?

In many situations landlords and their attorneys have attempted to come up with creative solutions to this problem, including:

1. Attempting to reverse the payment through the bank;

2. Sending the tenant a replacement check in the same amount with a letter reiterating the default is not waived and landlord maintains its position that it can act on its remedies;

3. Changing the notice address for payments to a P.O. Box or even better, someone’s office; or

4. Reporting to the bank that any payments received by the defaulting tenant are potentially fraudulent.

Which of these have been successful?  Under the first scenario, most tenants have successfully argued that once the check is negotiated by virtue of deposit into the lockbox account, the receipt of the same and waiver cannot be undone.

In the second situation, tenants have either refused to accept the payment back from the landlord either by ignoring certified mail or hiding from the FedEx person!  Thus, the tenant can frustrate the attempt to avoid a waiver.

In the last scenario, even when there has been a history of bad checks issued by a tenant, most banks will not investigate checks sent by the offending tenant before they go directly into the lockbox deposit. This is also dangerous, as a savvy tenant could argue that the landlord is setting them up to default by creating a mechanism by which they can evict or collect additional monies per the remedies section of the lease.

For tenants who are concerned about getting their rent in on time and in full, the third situation may work. However, a canny tenant would continue to send the rent to the lockbox. Although that may be technically a default of the notice paragraph in the lease, courts have held that it does not undo the waiver of the default by the owner.

Is this the end of the story?

Maybe not.

Some courts have ruled that waiver must be a conscious choice regarding legal rights as to the tenant. In other words, the landlord must have actual knowledge that the payment is being made and intentionally not take action to allow the check to be accepted.  In the case of Manufacturing Co. v. Building Co., 97 S.E. 718, the North Carolina Supreme Court stated that “[w]aiver must be manifested in some unequivocal way, and to operate as such, it must in all cases be designed, must have so acted as to induce the other to believe that he intended to waive…”.  The case also cited Justice Holmes’ classic definition of the doctrine of “election” from Bierce v. Hutchins, 205 U.S.340, that “[e]lection is simply what its name imports; a choice shown by an overt act , between two inconsistent rights, either which may be asserted at the will of the chooser alone.”

In the lockbox situation, an affirmative election to not waive the tenant’s default (by returning the payment and stating in writing such election and intent not to waive the default), the landlord would arguably be able to maintain an action for eviction, collection and other damages despite the tenant’s position to the contrary.

Business Decision or Rely on the Courts?

One final point.  Aside from the legal outcome of accepting lockbox payments, landlords may want to consider shutting a lockbox account down temporarily in order to have rock solid grounds to oust a tenant. Consider the situation of a large tenant in a industrial park who has defaulted repeatedly and the presence of a more solid and attractive replacement tenant for the same space. Foregoing the rent payments for a month or two may make more long term business sense than accepting the rent from the defaulting tenant and potentially losing the replacement business in the process. Obviously this is not an easy decision to make in most cases and lender restrictions and other factors could easily complicate the decision.

QUIET ENJOYMENT – Rarely Quiet or Enjoyable! – TAKE 2


Certainly this term is familiar to almost anyone involved in real estate. However it is one of the toughest to fully define and often leads to many disagreements in drafting and certainly in interpretation.  Just like the Holy Roman Empire in Europe (which was neither Holy, Roman, nor an Empire), the  covenant of quiet enjoyment is likewise often neither about “quiet” or “enjoyment!”  Most attorneys and real estate professionals are familiar with the term, but what does it really mean?

Most states define quiet enjoyment either by statute or common law as “unreasonable interference with the tenant’s use of the premises.”   As with most legal definitions this gives little clarity and leaves a lot to the imagination. Yet,  how to get your arms around the concept when you’re negotiating a lease or trying to resolve a dispute between landlord and tenant, tenant and tenant, or all three?

Perhaps the best way to evaluate quiet enjoyment in a particular transaction/agreement is to look at a number of factors:

1. What is the specific use of the tenant? 

2. What are the results to other tenants related to this particular use?
3. Where is the tenant located on the property and in regards to other tenants or activities thereon?

4.  Is there an REA or OEA that clarifies the allowable use and enjoyment of the premises (i.e. is there an overriding document that defines the specific and systemic activities that will occur at the center, office park or building?)

5. What exactly have the parties negotiated as far as the covenant of quiet enjoyment in the LOI or the lease?  Is there simply a legal recitation of the term or have landlord and tenant built in particular expectations, uses and limitations?

6.  How do we all get along? In other words, what are the global expectations of the landlord and all of the tenants regarding the property and the activities and services and ancillary events that may occur during the tenancy?

7.  In specific disputes between tenants, who was there first?

8.  Last, and certainly not least, are there any exclusives or other restrictions that would limit or prohibit a tenant’s use intended of the premises.

Obviously, there are challenges in all types of commercial real estate. In industrial/flex properties, access, and security may be paramount. In office properties, amenities, parking, utilities and common use of services may be important. Certainly in retail properties all of the classic indicia of quiet enjoyment would likely apply: noises, vibrations, odors, signage, access, and common area uses would be highly important to consider. Perhaps the most challenging properties are mixed use projects that may involve residential, retail, office and other related uses that may conflict with each other in many ways.

Further, landlords and tenants need to look at additional factors in evaluating the length and breadth of the duty of quiet enjoyment, such as:

1.  What rights and responsibilities should be assigned or restricted as between multiple tenants?

2.  Is there a potential for adjoining landowners or landlord contractors/vendors to interfere with the quiet enjoyment of the tenants?

3.  What duty does the landlord have to control the activities of other tenants which may be interfering with the intended use and quiet enjoyment of a particular tenant?

4.  Finally, there are modern trends and challenges that should be considered in drafting and interpreting the language in a quiet enjoyment obligation? For instance, what about the expectations of millennials as opposed to baby boomers, technology, green buildings etc.

As with all negotiations and dispute resolutions, the keys are investigation, communication and monitoring.  The landlord should share its knowledge and goals for the Property. The tenant also needs to be transparent about its intended use now and in the future.  Certainly there will be some weighing of the factors involving each party (size of tenant, location on the property, integration with existing and future or potential uses for the project); however, the ultimate goal is co-existence and mutual fulfillment of business goals.





Unwinding Intertwining Deadlines And Responsibilities – Avoiding The Gordian Knot Syndrome

knot 3

How many times have you pulled a form contract or lease together to make sure that the deal gets done, and in the process not looked at the particulars of how all of the deadlines and responsibilities fit together? Probably more than once!

Although it’s always important to focus on the substance of the transaction, deadlines and interconnected duties and responsibilities truly matter in the long run. Yes, it may be tedious and it may cause deviations from the form document you’re using, but it can be incredibly important to get these items clear and right.  With the economy coming back, the premium is set on getting all documents finalized and in order as quick as possible. However, if negotiations result in conflicting deadlines for different obligations under the terms of a contract or lease, danger lurks ahead.

Here are a few examples:

  1. Lease commencement and rent commencement beginning with the delivery of the premises by the landlord.   Most lease commencement dates begin either at the date of signing of the document or another set by the parties.  However, rent commencement can be another issue altogether. Most tenants will not agree to pay rent until they have a premises delivered to them with all of landlord’s upfits complete and approved and permitted. If the rent commencement keys off of some other date, this can be an issue.
  1. What about TICAM reporting deadlines and the corresponding deadlines for the tenant’s response and request for any auditing of landlords records?   If the reconciliation date is set to early, landlords may end up in breach by not reporting this information within the time provided in the document. Correspondingly, even if it is reported within the time allowed by the agreement, if the tenant’s response, objection and/or request for audit does not come within a timely fashion as envisioned by the form, does their remedy disappear?
  1. Most purchase and sale contracts set a firm date for due diligence for the purchaser. However, there are often corresponding dates that the purchaser has to provide evidence or proof of loan approval, as well as government approvals and permits. Do these lineup?
  1. What if the contracting parties agree on a deadline or limit on a guarantors responsibility for a contract or lease? Is it clear that the responsibility will end on a date certain or will it continue to accrue for a certain amount of time during the term of the contract or lease?

Solid negotiating and good drafting can solve all of the above, but it takes time and effort. One may question the necessity of spending time on such details. However, imagine that amount of time compared to resulting disputes and litigation over interpretations of conflicting or contradictory terms. Most of the time, the difference is minimal on the front end compared to the time spent on sorting, unraveling, unknotting and otherwise working out these conundrums.

Why spend the time on all of this? After all reasonable people in reasonable business transactions can certainly agree to results in a expeditious time.


Unfortunately, failure to coordinate time deadlines or responsibilities under the terms of a contract or lease often result in hours and hours of time spent negotiating and/or disputing the rights and meaning of certain clauses.  If it is unclear to the contracting parties at the time they signed the agreement, it will certainly be confusing to any third parties that may have to examine the agreement at a later, not to mention the time and money needed to resolves the issues.

A key point: if a clause or deadline description doesn’t make sense to you, it’s highly likely it will never make sense to anyone later. Better to spend the time early on working out the language that will allow the parties to read and interpret the agreement in a clear fashion rather than to find later that they are in an expensive and time-consuming dispute over something that could’ve been hammered out months or years before!