Category: Real Estate

We like “Landlords.” Here’s why.

A tip on drafting leases:  Embrace the “Landlord” — no, not that kind of embrace.  Embrace the word.  

William Nickerson, in his classic work on investing in real estate, recommended using the terms “Lessor” and “Lessee” in leases.  He thought that “Landlord” sounded like a relic of the feudal era, and that it offended tenants.  

He may have been right about the effect on tenants, but he was wrong about the effect on contracts.  If you use “Lessor” and “Lessee” to identify the parties to a lease, you’re much more likely to mistake one term for the other when you’re proofreading the agreement.  No one mistakes “Landlord” for “Tenant,” but casual readers can easily mistake “Lessor” for “Lessee.”  It’s a whimsical mistake to make — unless you’re the “Lessor” to whom the lease assigned maintenance and repair responsibilities that you wanted to be the tenant’s responsibility, and that your tenant now wants you to fulfill.   

Don’t be afraid to be the “Landlord” in the lease: it’s a lessor evil (sorry) than being mistaken for the tenant.

A bad contingency clause can produce a dissatisfied buyer

Almost every real estate sale agreement includes some contingencies: conditions that, if not met, will allow the seller or buyer to cancel the sale. The two most common are a financing contingency and a property inspection contingency.

Be sure when you’re writing a contingency that you identify what the contingency actually is. Don’t write “Buyer’s obligation is subject to Buyer obtaining a property inspection,” or (even worse) “This transaction is subject to Buyer obtaining a property inspection.” The actual contingency isn’t the inspection, but the buyer approving the inspection. What if the buyer obtains an inspection, but doesn’t like what the inspector has to say?  The buyer has satisfied the contingency, but is dissatisfied with the property, and likely to be dissatisfied (or worse) with the attorney or agent who drafted the contingency clause.

Instead, write “Buyer’s obligation is subject to Buyer obtaining and approving a professional inspection of the property on or before _______, 2018.”   When the actual contingency is the buyer being happy, say so.

On what day does your lease start? It’s a multiple-choice question

The Chinese New Year, which in 2018 is on February 16, is one of several days that people around the world mark as New Year’s Day. We think of January 1 as New Year’s, but in colonial America until 1752, New Year’s Day was March 25. The Hebrew new year, lunar like the Chinese calendar, is on September 9 this year, and the Cambodian new year will start in mid-April.
Leases should be simpler than the calendar, but they aren’t. On what day does a commercial lease start? The landlord and tenant take on some obligations the day they sign the lease. The tenant’s right to possession may start on a second day, the tenant’s obligation to pay property taxes and insurance may start on a third day, and the tenant’s obligation to pay rent may start on a fourth day. Before you sign your next lease, be sure you understand what starts when. If you don’t understand the various start dates when you write and sign the lease, the jury won’t understand them when its members read it.

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