Leases v. Licenses v. Easements

Last Updated on Thursday, 14 July 2011 04:03 Written by Chris Griswold Thursday, 1 April 2010 09:01

Knowing the basics pays dividends.  At some point, it will make a big difference in the outcome of one of your deals.  Accordingly, we’re going to review some of the basic differences between leases, licenses and easements.  Why? Each vehicle has its own different strengths/weaknesses and I’ve seen each used within the wrong context.  Read more below….

Leases v. Licenses v. Easements

Revocable? Perpetual? Assignable?
Lease No No Yes
Easement No Yes n/a
License Yes No No

Absent certain language within the document and/or certain special circumstances, the foregoing table quickly summarizes the basic, legal discrepancies between each type of vehicle.  What practical effect do these differences have on you?

Parking Situations:  I’ve seen property owners grant easements to other adjoining property owners for parking space.  While this may sometimes be in the best interests of the granting property owner, it’s usually not.  Why? Easements are not usually revocable and are usually perpetual (which makes the issue of whether they’re assignable moot).  This all makes granting a parking easement a little risky since you might not like the future owners of the adjoining property.  Instead, you’d probably want to use either a lease or a license – depending upon the situation.

Vacating Right of Ways:  I’ve seen back-to-back property owners discuss the possibility of jointly vacating an alley (which would result in each property owner getting back their half of the alley) just to overlook the possibility that, unless they enter into a “reciprocal easement agreement” at the time of vacation, the other property owner could ostensibly fence off their half of the alley thereby constructively blocking off the other’s access to the back of their building (depending on the width of the alley).  In other words, granting each other mutual leases or licenses upon the other’s land won’t long-term protect either them or their respective successors (since neither a lease nor a license is perpetual in duration).

Snowcone Stands, Parking Lot Nurseries, Christmas Tree and Pumpkin Lots:  The big things here are: 1) seasonal/temporary use, and 2) your familiarity with the operators.  It’s okay for a property owner to grant a lease to an operator they’ve done business with for years for a 6 month term (i.e., Spring through Summer) to sell plants or to serve snow cones.  However, it’s likely unwise to grant a lease to a new and unknown operator who wants to sell pumpkins for just a few weeks.  Why? As a property owner, you won’t mind granting the lease with a hard, irrevocable, 6 month term to the repeat operator, but, with the new operator who only needs the space for a month or so, you’d probably want to use a license in order to retain the right to quickly revoke an unworkable/undesirable situation – especially since the term is so short….

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“I take special care when selecting business partners to represent my company and look for those who exhibit the same levels of professionalism and integrity that I try to achieve.  Chris Griswold definitely meets these requirements and is considered a very valuable member of the JOBO Properties team.  I have no hesitation in recommending Mr. Griswold to handle your business and commercial real estate transactions.”

Darren Ford / Owner & Developer of JOBO Properties, L.L.C. / Oklahoma City, Oklahoma

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Nuts & Bolts of Notice Letters

Last Updated on Thursday, 14 July 2011 04:05 Written by Chris Griswold Friday, 1 May 2009 09:01

Notice Letters.  We all have written and gotten them.  We might even be waiting on one in the mail right now (I know I am).  From time to time, we all have something come up in one of our deals that requires that we either write one or cause one to be written.  In fact, during these turbulent economic times, you may find yourself writing or receiving these types of letters a little more often than you’d like!  Accordingly, I’d like to shed some light, in general terms, on what constitutes a good notice letter….

Nuts & Bolts of Notice Letters

If done correctly, they save the day.  If done wrong, someone is potentially in real trouble.  It’s funny that something so important is usually located at the end of the contract (or the lease), written in such small print and is typically treated (in its entirety) over the course of a mere two to three sentences, or less.  No wonder the old adage that “big things come in small packages” comes to mind when I think about the concept of notice letters.  Accordingly, I want you to walk away knowing three, basic things about the proper drafting and management of notice letters:

First, check the actual notice addresses for the other party (or parties) who are required to receive such notice.  These notice addresses are usually set forth in the first few pages of the contract; if not there, look at the end of the document.  Keep in mind that these addresses may have already changed.  Accordingly, look in your files for any letters, e-mails, contractual amendments and/or other correspondence received from this other party (or parties) which has changed their formal notice address.  Remember, it doesn’t do any good to write a fancy letter if the address is wrong….

Second, check the language usually located in the back of the contract which is most often entitled “Notices.”  The purpose of this language is to set forth exactly how notice shall be delivered and will commonly talk about how notice letters should be mailed “via certified mail return receipt requested” or by a “nationally recognized overnight courier.”  If it says that, be sure and do it.  You’d be surprised to know how many people deliver notice letters via first class or registered mail just to find out that they didn’t give the other party good and proper notice (tip: registered is not the same as certified; “registered” means “insured” and is used for insuring the value of parcels such as diamonds, precious metals, etc… while “certified” means “signed-for” which is the purpose of notice letters).

Third, remember that after you send out your notice letter and receive back the “green card” in the mail, you’re still not “out of the woods” as it were.  Why?  You have to actually keep up with the “green card” or other packaging receipt in order to prove, often months or even years later, that you delivered and the other party actually received the notice letter.  Oftentimes, I get calls from people to the effect that they know the other party received their notice letter but the green card (proving such receipt) can’t be found in the files.  This can be bad….  What should you do?  I recommend that when you get back the green cards, be sure to staple them to the copy of the notice letter that you put into your file.  This will keep those small, mint green and oddly shaped pieces of paper from walking away….

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“I take special care when selecting business partners to represent my company and look for those who exhibit the same levels of professionalism and integrity that I try to achieve.  Chris Griswold definitely meets these requirements and is considered a very valuable member of the JOBO Properties team.  I have no hesitation in recommending Mr. Griswold to handle your business and commercial real estate transactions.”

Darren Ford / Owner & Developer of JOBO Properties, L.L.C. / Oklahoma City, Oklahoma

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SNDA’s – A Safety net for the Smart Tenant

Last Updated on Thursday, 14 July 2011 04:05 Written by Chris Griswold Sunday, 1 March 2009 08:41

It’s no secret that things are financially in a state of flux – AIG, GM, Chrysler, Wachovia, etc.  The result?  Money is tight and some landlords are against the ropes or may be in the near future.  The concern?  If you’re a tenant or even a landlord who is holding under a ground lease, you have a lot to lose if your landlord goes under.  Is there something you can do to protect yourself?  The following article on SNDA’s (i.e., Subordination, Non-Disturbance and Attornment Agreements) should ease your mind….

SNDA’s – A Safety Net for the Smart Tenant

So you’re sitting at your desk opening the mail one morning and you open a notice letter from your landlord’s lender.  It says that your landlord hasn’t paid rent in 6 months and the building in which your space is located is being foreclosed upon.  You finish reading the letter and look up at your space which you’ve occupied for over twenty years…, the same space which you’ve put thousands of dollars (of your own money) into for flooring, carpentry, lighting fixtures and other niceties which your customers expect from a high-end retailer.  It occurs to you that you stand to lose everything you’ve worked so hard to achieve.  You would feel a lot better had you entered into an SNDA with your landlord’s lender.  Accordingly, I want you to walk away knowing three, basic things about SNDA’s:

First, what is an SNDA?  It’s an agreement entered into by and between the tenant and the lender that allows the tenant to remain operating in their leased premises should their landlord become insolvent.  In return for the lender’s agreement not to disturb the tenant’s operations, the tenant agrees to “attorn” to the lender as its new landlord.  Moreover, the tenant agrees to subordinate (i.e., subject) their leasehold interest to the lender’s security interest in the leased premises thus making the lender’s claim to the leased premises superior to that of tenant, even if the lease pre-dates the mortgage….  So, from the tenant’s viewpoint, an SNDA ensures that the tenant’s business operations won’t be negatively impacted by a landlord’s financial distress.

Second, will the SNDA change the nature of the landlord/tenant relationship?  Probably.  Lenders usually try to negotiate SNDA’s in such a way so that lender’s responsibilities (e.g., maintenance and repairs) are diminished and their rights (e.g., time of showing the building to prospective purchasers) are enlarged as compared to those originally set forth in the lease.  Why?  The big picture is that lenders don’t want to be the landlord for long since they’re in the banking business – not the real estate business.  But while the lender (as landlord) is trying to sell the building, they want to be on the hook for as little as possible.  Accordingly, watch out for the fine print that the bank’s attorney sends over for signature….

Third, when should a tenant enter into an SNDA?  An SNDA is only useful if it is entered into prior to your landlord’s insolvency.  In other words, a bank will not usually agree to enter into an SNDA with a tenant after the landlord has already gone bankrupt.  Accordingly, the SNDA issue is one to address, if at all possible, up front during the negotiations which precede the execution of the lease.  Otherwise, the sooner the better.

What My Clients Are Saying….

“We have worked with Chris Griswold in negotiating all aspects of our lease agreements and highly recommend his work.  He has always been diligent, thorough, quick and effective.  Additionally, he has a keen understanding of the truly critical aspects of leases and how best to address them.”

Scott Osuna / Which Wich Franchisee / Dallas, Texas

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