Real Estate Advisor Law Blog

Real Estate Advisor Law Blog

A Plea And/Or Request: Stop Using And/Or

Posted in Leasing Issues

University of Cincinnati Law Professor Sean Mangan does not hate many things, but ‘and/or’ has to be first on the list – along with whomever might be playing his Irish that weekend. I had the pleasure of taking multiple drafting classes with him several years ago, but I honestly never quite understood the depth of his anger towards the use of ‘and/or’ (along with “thereof”, “henceforth”, “hereto”, and the like). However, as it turns out, he is in very good company, as many judges and legal drafters seem to have some unresolved anger issues with this phrase as well.

The generally agreed upon meaning of “X and/or Y” is “X or Y or both”. That is a fine definition, but the problem is that the lack of clarity on the surface of the expression can allow opposing counsel to deliberately misinterpret whatever provision is in question in their client’s favor. If “X or Y or both” is what you mean, then just write what you mean! Take a look at how judges and style guides view the use of ‘and/or’:

Cochrane v. Florida E. Coast Ry (Florida) – It is one of those inexcusable barbarisms which were sired by indolence and damned by indifference, and has no more place in legal terminology than the vernacular of Uncle Remus has in Holy Writ. I am unable to divine how such senseless jargon becomes current.

Employers Mut. Liab. Ins. Co. v. Tollefsen (Wisconsin) – [T]hat befuddling, nameless thing, that Janus-faced verbal monstrosity, neither word nor phrase, the child of a brain of someone too lazy or too dull to express his precise meaning, or too dull to know what he did mean.

Chicago Manual of Style – Avoid this Janus-faced term. It can often be replaced by ‘and’ or ‘or’ with no loss in meaning.

Raine v Drasin (Kentucky) – [The] much-condemned conjunctive-disjunctive crutch of sloppy thinkers.

Higgins v Orion Insurance Co (California) – This is … a … consequence of the use of the expression “and/or”. That term has often created confusion and ambiguity and for many years has been the subject of frequent criticism. It has been condemned as “a confusing hybrid”, “a grammatical monstrosity”, “a bastard sired by indolence (he by ignorance) out of dubiety”, and “an unfortunate expression which I have not met before and which, I hope, I may never meet again”.

Carley Foundry, Inc. v. CBIZ BVKT, LLC (Minnesota) – The phrase “and/or” is semantically and logically contradictory … It is an indolent way to express a series of items that might exist in the conjunctive, but might also exist in the disjunctive … the expression “and/or” creates an instant ambiguity … a bad-faith reader of a document can pick whichever one suits him—the “and” or the “or.”

Klecan v Schmal (Nebraska) – [T]he use of the phrase is not to be recommended as it leads to uncertainty, ambiguity, and multiplicity.

Putnam v Industrial Commission (Utah) – [W]e believe the symbol to be a device for the encouragement of mental laziness.

Strunk & White, Elements of Style – A device, or shortcut, that damages a sentence and often leads to confusion or ambiguity.

The Redbook: A Manual on Legal Style – It is especially unfit for legal writing because it is inherently ambiguous.

Legal Drafting in Plain Language – Never use “and/or.” This linguistic aberration is dealt with harshly by the courts … The eye tends to trip and stumble over this symbol. It has been promulgated largely by those who either have not taken the trouble to decide, or cannot make up their minds, which of the two words they mean.

Whew. One of the least fun things I can think of is having a judge rip into one of my leases just because I used “and/or”. I’m not quite sure if the level of vehemence is justified in every case, but consider this: Does it really take much more effort to say what you are truly trying to say instead of “and/or”? It seems like a no-brainer to simply use the preferred language of “X or Y or both”. Professor Sean Mangan and legal drafting professors around the nation are doing their part in shaping the drafting skills of new attorneys to not use bad expression like ‘and/or’. Now it is up to the practicing attorneys to change their ways as well to ensure that no one will have to bear the weight of an angry judge’s ruling on their use of “and/or” ever again.

Also, if you had to google what the heck Janus-faced meant (“having two sharply contrasting aspects or characteristics”), don’t worry. I promise you that you’re not alone.

Life is Like a Restaurant

Posted in Construction Related Issues, Leasing Issues

I just attended the BDO Restaurant CFO Roundtable where I presented the Top 10 Most Important Legal Provisions of a Restaurant Lease. Arranged by Dustin Minton and Floyd Roades of BDO, the Roundtable brings together restaurant industry executives to learn about industry trends. BDO is the industry leader when it comes to accounting services for restaurants. I was very impressed with every BDO person I met and I loved their new office. Wide open spaces designed to encourage collaboration. The best space was the employee dining room which had a ping pong table in it and an attached balcony overlooking Great American Ballpark.

I won’t recreate the whole presentation here, but I will say that the top most important lease provision (according to me) is the construction exhibit/clause. Between chargebacks, bonding requirements, security deposits, impact fees, requirements to work before permits are received, equipment requirements and design requirements, a tenant’s construction budget and opening schedule could be significantly affected. And these things are never covered in the LOI and typically are not even presented until the end of the lease process.

Moffat Machingura said that “Life is like a restaurant; you can have anything you want as long as you are willing to pay the price.” This applies to the build out of a restaurant. But a tenant needs to focus on the construction exhibit/clause to ensure the true price is known up-front.

After the Roundtable, we were treated to dinner at Sotto. (I’d like to think my presentation was why everyone attended, but let’s be real.) If you haven’t been to Sotto – you need to. Try the Goat Cheese and Hazelnut Honey Bruschetta and the Short Rib Cappellacci, and save room for dessert. They have homemade donuts served warm with three different sauces. Not even kidding!

Relationships Matter

Posted in Leasing Issues, Retail Industry Issues

Relationships matter.

Seems obvious, but not always understood. However, this past week Scott Kadish, Alex Conn and I experienced firsthand the importance of this simple principle.

Last week we attended the ICSC U.S. Shopping Center Law Conference in San Antonio, Texas. For 4 days we attended educational sessions (we actually led the discussion in 2 of those), visited with clients and colleagues, renewed friendships and made new ones. There were about 1,350 attendees at this conference, the programming was terrific, and opportunities were abundant.

Clients and lawyers with whom we may only have an electronic connection for most of the year were suddenly and delightfully in the same physical place as us for 4 or 5 days. It was during this face-to-face time that I realized how important it is to actually know our clients and the folks who sit across the table from me the rest of the year.

During this conference relationships were made, strengthened and valued. We had great encounters with both new and long-time clients (PetSmart, JoAnne’s, Ulta and PF Chang’s) and planted seeds with others for future growth. The San Antonio Riverwalk was the site of several good meals, and the Alamo was remembered.

The conference featured a number of food and entertainment themes. The presentation on the leasing and operation of food halls (Jeremy Cohen and Brian Smith, both from Atlanta, handled this one) was creative and informative. And the changing world of co-tenancy, prohibited uses and exclusives was another popular topic. Vertical development, marijuana dispensaries, airport leasing and alternative uses were also explored.

But, at the end of the conference, the main takeaway, from my perspective, was that the world of legal professionals focused on retail development and leasing is a small one indeed. While there were lots of new faces at the conference, there were more that were familiar. We are fortunate to do repeat business with many of the same folks.

Relationships matter. We at Ulmer work hard on making good ones, and making them last.

Street Food Gone Upscale

Posted in Leasing Issues, Retail Industry Issues

“Street Food” has generally referred to prepared food items ready for immediate consumption sold on the street or in a public space from a food cart, food truck or similar moveable station. The connotation was cheaper fast food.

Today, “street food” is a unique, trendy selling point. There is Piada Italian Street Food that brands its entire restaurant chain this way. It’s the same with Tortilla Mexican Street Food in Columbus, Ohio. At Blue Agave in Springdale, Ohio, a local Mexican Restaurant that I frequent, they have Street Tacos on the menu. Quan Hapa in Over-the-Rhine in Cincinnati advertises itself as Asian Street Food. The whole notion of street food has changed to a more favorable connotation. It is nostalgic, bringing together the idea of unique, freshly-cooked food served in a social setting.

Fast food too has evolved with the idea of “fast casual”. This is a whole new category between fast food and casual dining. It seems “fast food” still has a poor connotation for quality, making it appear that the move toward “street food” or “fast casual” may just be a way to avoid being labelled “fast food”. Whatever the ‘label’, I have to say I love Piada, Tortillas, Blue Agave, Quan Hapa, and eating at food trucks. But I also love The Waffle House, so maybe you have to consider the source.

‘Lease’ Vegas

Posted in Leasing Issues, Retail Industry Issues

World Famous Las Vegas Nevada. Vegas Strip Entrance Sign in 80s Vintage Color Grading. United States of America.

I just returned from the National Restaurant Association Financial Officers and Tax Executives Conference in Las Vegas. I participated on a Real Estate Leasing Trends panel with Adam Schwegman, head of the eat/drink department of General Growth Properties and George Galloway of Next Realty Mid-Atlantic, with Ryan Cupersmith of Ernst & Young as our moderator. While there, I was able to soak in some knowledge myself. Here are some of the highlights of what I learned:

  1. Restaurants may be the new anchor in retail developments. A center has to provide an “experience” to motivate consumers to shop at the center as opposed to sitting home and buying over the internet. Restaurants have become a great way to create an experience and draw customers in.
  1. Restaurants are immune to internet competition. Last time I checked, you can’t buy a prepared meal over the internet that comes with a server and clean-up crew, so restaurants appear to be safe from internet competition, at least for now.
  1. GGP has a separate eat/drink department dedicated to restaurants. As head of that department, you would have to spend a lot of time trying new restaurants, right? Now that sounds like an ideal job.
  1. The mobile food app is the new critical feature for the fast casual sector.
  1. While most people agree that there is simply too much retail space, it may be more accurate to say there is too much antiquated retail space.
  1. The new accounting guidelines regarding capitalized vs. operating leases will not have any impact on most retail tenants.
  1. There’s a lot of great restaurants in Las Vegas. To confirm this, I ate at the Hot & Juicy Crawfish The hot & juicy sauce on my shrimp dish was unbelievably good and addictive. Additionally I had tremendous sushi at the Aria.
  1. Many tenants are paying too much for their legal representation on leases. Several people in the audience seemed to like the fixed-fee arrangements we provide, and the other tips I shared on how tenants can reduce their legal spend on leases were well-received.

If you would like to know more, give me a call and we can grab lunch. I know this great shopping center that has a wonderful restaurant right in the center of the action.

Ulmer Client, Taco Bell, Opens Cantina in Downtown Cleveland

Posted in Development

It has an urban, industrial feel. It has a live DJ. It has a festive atmosphere. It has a patio. And, in addition, to the tacos, gorditas, crunch wraps and chulapas that you’ve come to love and expect, it has beer!Taco Bell Cantina

It’s the new Taco Bell Cantina which opened today at 200 Euclid Avenue on Public Square in downtown Cleveland. Lines stretched out the door at opening time today but service was provided smoothly and quickly by the friendly and outgoing employees.

Situated in the long vacant Cadillac Ranch space in the old May Company building, Cleveland’s Taco Bell Cantina joins other Cantina restaurants operated by Taco Bell in San Francisco, Austin, Chicago and on the Las Vegas strip.

The first Taco Bell Cantina opened in Chicago’s Wicker Park Neighborhood in September 2015. Less than a dozen currently exist and only five other Taco Bell Cantinas serve alcohol.

Draft beers offered at the Cleveland location include Dos Equis, Miller Lite and a local microbrew of Strongsville, Ohio based Beer Kettle. In addition to the beer choices, Taco Bell Cantina offers “Twisted Freezes” – an alcoholic “slushy” beverage in a variety of flavors and mixes.

The new Taco Bell Cantina is a welcome addition to the quick service restaurant scene downtown. Congrats to our clients, Taco Bell and Yum! Brands, Inc., on a successful Cleveland opening.

A Restaurant Lease is a Unique Dish

Posted in Leasing Issues

I have previously commented about the similarity in service between a restaurant and law firm (see prior blog). One area where restaurants differ from other businesses is the issues presented in a retail lease.

For Lease Sign in window

A restaurant lease involves unique issues which must/should be dealt with, some more monetarily significant than others. But don’t underestimate the annoyance factor. If any of these issues are not dealt with appropriately, you can bet someone will be more than a little annoyed.

  1. Impact Fees – Because restaurants are typically big water consumers, new build locations may charge a significant tap-in fee. In some cases, there may be various impact fees. Depending on leverage, a restaurant may be able to get the landlord to pay this as part of its development costs. But even if the landlord will not pay the fee, the restaurant needs to know the exact amount of the fee so that it can correctly prepare its budget.
  1. Trash Removal – There are many different ways a landlord can charge for trash removal. Does the restaurant have its own dedicated dumpster? Does the landlord mark up the bill? Is there a choice on who to use as the hauler? I have heard of landlords going to a weight-based system where a tenant gets billed for actual disposal, but have not actually seen one in place. In any event, these details need to be determined before the lease is signed.
  1. Grease Removal – Similar to trash removal, the tenant needs to understand whether it will have a shared system or its own dedicated system, and who is responsible to install it.
  1. Liquor License – The availability of liquor licenses can vary greatly by municipality. A restaurant serving alcohol may need a contingency, but needs to fully understand the availability, time to obtain, cost and other terms prior to lease execution.
  1. Operating Covenant – Many shopping center leases require the tenant to be open during “normal shopping center hours”. However, a restaurant may have its own unique opening hours. For instance, a shopping center may open at 10:00 AM but the restaurant does not open until 11:30 AM. Also, a restaurant tenant should not be penalized if the GM decides to close early one night, or if he or she oversleeps and opens late one day. Additionally, a restaurant may not want to be open during special extended holiday hours. These things happen – the lease should address them.
  1. Opening – Most leases provide that the tenant will begin paying rent when the restaurant opens. Many restaurants have a “pre-opening” where they do test runs and invite family and friends. The lease should be clear that such a pre-opening does not trigger rent commencement.
  1. Patios – The lease should specifically address maintenance of any patio, allow for background music, and specify that the tenant does not pay extra rent for the patio. I have seen instances where a landlord tries to terminate a tenant’s use of a patio without terminating the lease if the tenant fails to maintain the patio. The tenant should never agree to this. A landlord should not be able to take away certain rights while requiring the tenant to continue to be liable for all obligations.
  1. Use Clause – A successful restaurant changes its menu over time to keep it fresh. The lease must allow the tenant to evolve over time so long as it’s not breaching another tenant’s exclusive.
  1. Odor – A restaurant is going to give off some odor (hopefully a pleasant one!). The lease can not prohibit any odor whatsoever. The tenant should be clear from the beginning on whether a scrubber will be required. This can be a large expense which, if unbudgeted, could be a very unpleasant surprise.
  1. Pest Control – A landlord will typically be responsible in a shopping center environment. But the particularities of the site and other tenants may require a tenant to participate or even be responsible. This needs to be clearly spelled out in the lease.
  1. Exclusives – A restaurant is one area where an exclusive is particularly necessary and appropriate. The tenant should get liquidated damages and, if it agrees to a rogue tenant exception, should eliminate any fish or cut bait clause.
  1. Standard Clauses – Many leases contain standard clauses that simply do not apply and should be deleted. For instance, the clause that says a tenant should do nothing “immoral” in the space – is the sale of alcohol immoral? Or what about the clause that says the tenant is responsible for any increased insurance cost due its use? Insurance for a restaurant will undoubtedly cost more than for a greeting card store, but does that mean a restaurant tenant pays more even though it is only conducting its permitted use?

I used to say that before anyone should be allowed to eat at a restaurant, they should be required to work at one. The same thing may be true for leases: before anyone should be allowed to negotiate a restaurant lease, they should be required to work in a restaurant. If you buy me lunch, I will be happy to elaborate on any of these issues, as long as I get to pick the restaurant.

All I Really Need to Know About Client Service I Learned in a Restaurant

Posted in Leasing Issues

Scott KadishI am a commercial leasing attorney at a large firm. I have developed a decent stable of loyal clients, but not because I am the smartest attorney in the world. I like to think I’m smart, but I would be less than honest if I said that my success is due to being the smartest guy in the room. No, I believe my success is attributable to my client service. I know I have done my job when a client asks if they are my only client. So what is good service? It is not merely returning phone calls or emails. It is going above and beyond expectations. And who is the client? It should not just be the ultimate consumer, but everyone you work with and for. So it is not just the CEO of the company for whom you are providing services, it is the secretary or administrative assistant at the company, it is every other employee at that company with whom you may interact, and it is your superiors at your own company.

I waited tables to help pay for college. As a waiter, my income was 100% dependent on providing good service. And that meant not just bringing the meal, but like an attorney going above and beyond expectations. In many ways, everything I really need to know about client service I learned from being a waiter.

  1. Be present and alert. If a customer needs something, do it before they have to ask.
  2. Be timely. Never make a customer wait. Get them what they want quicker than they expect. Every customer should feel as though they are the only table you have.
  3. Be pleasant. Your attitude creates the customer’s experience. Nobody wants to deal with a grouch. And the biggest tips come from the customer who is demanding and unpleasant. If you can maintain a pleasant disposition and positive attitude, that customer may end up being your most satisfied loyal customer.
  4. Be deferential. Never talk down to a customer; make the customer feel good about themselves. Do not assume the customer can’t afford or appreciate your service. You never really know the opportunity presented. Being snobby though is one sure way to ensure you will never find out.
  5. Be neat. Nobody wants to be served by or interact with someone with bad hygiene.
  6. Be accountable. If a customer complains, say you’re sorry and fix it. Even when the complaint is unjustified. The customer is always right.

CALL TO ACTION!

Posted in Legislative Update, Tax Credit Issues

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I just thought everyone should know that the federal historic tax credits are in clear jeopardy of being repealed as part of the Trump administration’s approach to tax reform policy. Speaker of the House Paul Ryan’s “Better Way Blueprint,” which specifically repeals the historic tax credits is currently in the House Ways and Means committee for consideration.

If you are reading this blog, you are probably a supporter of the historic tax credit. As a refresher, here are just a few reminders of the positive aspects of historic tax credits many developers and neighborhoods stand to lose out on if the credits are eliminated under new tax policy:

  1. Historic preservation is key to urban revitalization and Cleveland is a prime example of that.
  2. It is a huge job creator; nationally it has created 2.3 million jobs.
  3. It improves the housing stock in much needed neighborhoods.
  4. It pays for itself. Of the 23.1 billion dollars in credits there have been 28.1 billion dollars in tax revenue created.

If you want to take up this call to action to protect the historic tax credit, the House Ways and Means committee is currently the author of the tax reform bill. There are 2 Ohioans on this committee, Pat Tiberi and Jim Renacci. Now is the time to reach out to them and tell them about specific projects that have been completed or are in the pipeline of which you are aware. Let them know the importance of saving historic buildings. Specifically ask them to support the Historic Tax Credit Improvement Bill (HTCIA). Their contact information is as follows:

Pat Tiberi – OH-2 – Whitney Daffner – whitney.daffner@mail.house.gov – (202) 225-5355
Jim Renacci – OH-16 – Randy Herndon – randy.herndon@mail.house.gov – (202) 225-3876

If the historic tax credit is repealed in the Houses’ version of the tax reform bill, then the bill goes to the Senate finance committee for review and approval and there are two Ohioans on that committee as well, Rob Portman and Sherrod Brown. If you have a relationship, reach out to them.

Rob Portman
(202) 224-3353

Jim Renacci
(202) 224-2315

A Lesson in Ground Leasing

Posted in Leasing Issues

Lovett_43_background_RGBSo I don’t know about you, but every time I turn on NPR lately there is some discussion about President Trump’s conflict of interest because of his Washington D.C. Hotel built in the former U.S. Post Office with a ground lease from the GSA. For those of you who do not spend your days analyzing ground leases, I thought it might be helpful to know what they are and why anyone would want one.

In short, ground leases are a method of transferring most of a property owner’s interest in a piece of real estate to a tenant while allowing the property owner to retain a residual interest, and therefore some control, in the real estate. Ground leases typically have lengthy terms (75-99 years) and often include renewal options.

With a ground lease, the real estate owner gets a steady stream of income from the lease payments, which are usually based upon the value of the real estate plus interest amortized over the term of the lease. If the tenant defaults, the landlord gets the property back (usually after very generous cure periods). At the end of the term of the lease, the real estate and the improvements go back to the property owner. There are often covenants in the lease that require the developer/tenant to complete the intended project.

The advantage of a ground lease to the developer/tenant is that they “pay for” the land over the term of the lease rather than up front. The tenant ends up with all other ownership rights and obligations for the term of the lease. Sometimes, as I imagine is the case in President Trump’s deal with the GSA, it may be the only way that the developer can have access to the real estate. The GSA may have to go through a process to determine that it will never need this real estate in the future.  Once the GSA determines that it does not need the real estate, the GSA would then need to take competitive bids on the sale. This process would make it difficult to strike a deal with any one particular developer.

I hope you have enjoyed your ground lease lesson for the day….

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