Sherin and Lodgen is a Boston based law firm specializing in real estate, litigation and business law.
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Joshua M. Alper
Bethany A. Bartlett
Edward M. Bloom
Joshua M. Bowman
Gary D. Buchman
Robert M. Carney
Paula G. Curry
Douglas M. Henry
Deborah Howitt Easton
Richard J. Kaitz
Gary M. Markoff
Ronald W. Ruth
John J. Slater
Geoffrey H. Smith
Written by: Geoffrey H. Smith
“Percentage Rent” is a familiar concept to retailers and landlords and has long formed a significant aspect of the business arrangement between commercial landlords and their retail tenants. In a lease arrangement that includes percentage rent, a landlord may negotiate a relatively reduced base rent for the chance to have some “skin in the game” by agreeing to participate in a percentage of tenant’s revenue, through gross sales, when that revenue exceeds a certain threshold amount. Tenants appreciate this arrangement because they pay percentage rent if they are doing well and their sales exceed that negotiated threshold level. Landlords appreciate this model because it compensates them for the costs they incur in creating and maintaining successful shopping centers with amenities, such as food courts and open spaces. If a successful shopping center drives foot traffic to individual tenants that increases their sales, tenants are often willing to compensate landlords for their part in driving that foot traffic. The concept really is a “rising tide lifts all boats” model, in which landlords and tenants work as partners.
Written by: Edward M. Bloom
A sublease is a transfer of less than a tenant’s full interest in its lease because either it is a transfer of less than all of the tenant’s premises or a transfer of the entire premises for less than the entire term of the tenant’s lease. Generally, there is no relationship or enforceable rights between the prime landlord and the subtenant because the sublease is basically a lease between the prime tenant and the subtenant whose terms are defined by the provisions of the sublease. As a result of the legal principles governing (i) the existing lease between prime landlord and prime tenant and (ii) the sublease arrangement between the prime tenant and its subtenant, each party must focus on certain key issues for its protection.
Written by: Gary D. Buchman
A topic that arises in virtually every retail lease, and yet is barely addressed in the letter of intent (LOI), is the heating and cooling of the demised premises. The LOI is typically cursory: “Landlord shall deliver the demised premises to tenant with a 15 TON HVAC system in good working order.” Who is responsible to maintain and repair the system? Whose obligation is it to replace the system if it can no longer be repaired? While these are all business issues, they are most often left for the lawyers to determine during the lease negotiation. A standard landlord clause would provide:
Written by: Anthony L. DeProspo
The Massachusetts Appeals Court in Host v. Gray recently affirmed a Land Court decision dismissing a buyer’s claim seeking specific performance of his offer to purchase real property. In March 2010, the seller subdivided her property into three parcels, two of which became known as “Lot 18” and “Lot 19.” Thereafter, the seller, through a broker, listed Lot 19 for sale. The buyer viewed Lot 19 in October 2010. At that time, the seller’s broker advised the buyer that any sale of Lot 19 would require the purchase of some or all of Lot 18 in order to provide access to Lot 19.
Written by: Peter Friedenberg
I just finished reading an article about a recent Superior Court case, Board of Trustees of the Gates of Greenwood Home Owners’ Trust v. Gates of Greenwood LLC, 2014 Mass. Super. LEXIS 12, in which the court invalidated an indemnification clause contained in the condominium Declaration of Trust that entitled the condominium trustees to indemnification from both the condominium trust and the individual unit owners against liability incurred in connection with their actions as condominium trustees. Since the trustee seeking indemnification in that case was the original developer of the project, and the claims for which indemnification was sought were based on the trustee’s failure to require the developer and its contractors to correct defective work in the condominium’s common areas, the result did not seem all that surprising. When the court wrote, “By inserting the clause, Greenwood attempted to insulate itself from all liability and make the Trust and unit owners financially liable for its malfeasance”, there was no question that the decision was correct. But that couldn’t happen in a multi-hundred million dollar downtown Boston mixed-use condominium development (say a hotel and residential tower with commercial space)….or could it?
Written by: Andrew Royce
The recent Massachusetts Land Court decision in Ry-Co International, Ltd. v. VonIderstein, et al. is a salutary reminder to lenders making mortgage loans in Massachusetts and their counsel that the Massachusetts Obsolete Mortgages Statute (Mass. Gen. Laws chapter 260, section 33) will cause an otherwise perfectly valid Massachusetts mortgage to be discharged without the lender’s knowledge after the passage of 5 years from the maturity date stated in the mortgage or, if no maturity date is stated, after the passage of 35 years from the recording of the mortgage. The mortgagee can avoid such discharge by recording, before the expiration of such period, an extension of the mortgage or an acknowledgment or affidavit that the mortgage is not satisfied. Better yet is to not include the maturity date in the mortgage in the first place!
A judge of the Superior Court has recently awarded brokerage fees to a realtor despite that the landlord did not enter into a commercial lease with the tenant for which the realtor was compensated. Finding that landlord had acted in bad faith, the Court distinguished the Supreme Judicial Court’s 1975 landmark decision in Tristram’s Landing, Inc. v. Wait, which established the general rule that in order to earn a commission, a broker must not only obtain a ready, willing, and able tenant, but that a transaction must actually be signed. The Court found that the defendant landlord had encouraged the agent to market vacant space to medical groups, knowing that for business reasons an existing supermarket tenant of adjacent space objected to medical tenants. When the plaintiff real estate agent brought a dental practice to rent the space, the defendant landlord used the threat of a dental practice as a stalking horse to persuade its existing supermarket tenant to expand into the premises at twice the rent which the dental practice would pay.
Written by: Jane Errico
In the 1998 movie, “You’ve Got Mail,” the charming children’s bookshop owned by Meg Ryan’s character is threatened by the mega-box book store owned by Tom Hank’s character. Despite the small shop’s long history as a part of the Main Street USA-style neighborhood, the store eventually folds underneath the pressure exerted by the discount powerhouse next door. Flash forward to 2014, and Borders book stores have closed their doors due in large part to Amazon.com’s supremacy in the sale of on-line books. According to Bloomberg News, in December 2013, “Cyber Monday web sales surged, sending online shoppers to a single-day record as Amazon.com and EBay, Inc. siphoned customers from brick and mortar stores.” At first glance, it seems like there’s only bad news for traditional retail shops.
Written by: Deborah Howitt Easton
Generally when thinking of a lease arrangement between a landlord and tenant we have in mind a long term relationship. We think in terms of years. The parties enter negotiations optimistically with the hope that the tenant’s business will be a success. While startups have that same optimism, the future may often be undefined and less certain. Their time horizon is often not thought of in years but rather in months or weeks. (When is the next influx of funding coming in? When will the next round of lab results be completed?) The nature of the startup is such that the companies should carefully consider certain issues when leasing space. Startups need to think ahead, while at the negotiating stage, and try to anticipate as best as they can how their business may change (for better or worse) in the future.
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