Service-members Civil Relief Act

Last Updated on Thursday, 14 July 2011 04:03 Written by Chris Griswold Monday, 1 March 2010 09:08

The women and men who proudly serve in our armed forces today are a special breed.  We owe them, both past and present, a great debt for our many freedoms.  However, if you’re a property owner, property manager, banker or anyone else transacting business out there, there are a few things you probably want/need to know about the “Servicemembers Civil Relief Act of 2003” before inking your next deal with one of our soldiers.  Read more below to save yourself needless trouble….

Servicemembers Civil Relief Act

As you’d expect, there are a few deserved perks that go along with one of the world’s toughest jobs – serving in our military.  However, from a real estate and general business vantage point, it’s good to be aware of a few things contained within the Servicemembers Civil Relief Act, a Federal Law enacted in 2003 (just so your bases are covered).  Remember, the “Act” applies both to active duty and active duty reserves….

Default Judgments. You only get these against a Servicemember (“SM”) if you go through a special process.

Fines and Penalties Under Contracts. If an action is “stayed” under the Act, you cannot receive penalties against the SM during the stay.  Furthermore, if the SM was in military service at the time of the breach of contract, the court may reduce or even eliminate the fines and penalties associated with breach.

Residential Evictions. Subject to special circumstances, you can’t evict a SM (including their family) during that SM’s military service if the premises is used (or intended to be used) as the SM’s primary residence.

Purchases/Leases of Real/Personal Property. If a deposit or installment has been paid by the SM before entering military service upon any real/person property, the contract or lease may not be terminated for any breach occurring either before or during the SM’s military service; nor can the property be repossessed absent a court order.

Waiver of Rights Under the Act. In general, with some exceptions, a SM may waive any of the rights and protections provided by the Act.

Keep in mind, the Act is much longer than what’s listed above.

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“My wife Heather and I could not be more satisfied with the comprehensive estate planning solutions that attorney Chris Griswold developed for our family.  As the parents of young children, we had several questions about how to structure our estate – including the guardianship of our children in the event of our sudden deaths.  We now have peace of mind thanks to the expertise and careful approach of attorney Chris Griswold.  Thanks Chris!”

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How to get Paid

Last Updated on Thursday, 14 July 2011 04:04 Written by Chris Griswold Wednesday, 1 July 2009 09:07

Brokers, realtors and everyone else:  getting paid isn’t always easy.  Whether it’s a purchase/sale or a lease that you’ve helped to close, sometimes, for whatever reason, the check just doesn’t come.  When this difficulty has arisen in the past, you’ve probably tried getting paid by either “working it out” with the other party, or, in the alternative, pursuing the normal, legal channels just to still come up empty-handed.  There is a better, non-legal and arguably more effective way to go about collecting your unpaid commissions and other fees.  Read more below….

How To Get Paid

As a commercial real estate attorney, I field calls from a lot of good people as regarding the difficulties they encounter in getting paid at the conclusion of a deal.  So, if you’re in such a position (or if you should ever find yourself in that position), just remember that you’re not alone.  In fact, we’ve all been there at some point (some more than others)!  After you get the news that you’re not getting paid, the normal drill ensues….  You write a letter, then you write a certified, demand letter, then you contact an attorney who tells you that everything “depends” and then goes onto tell you that collecting your money “…will be difficult at best…,” and then, ultimately, you wind up filing a lien upon the subject property.  This process takes a lot of time away from the other paying deals on your desk and it also takes away a lot of your positive, life energy.  Accordingly, I want you to walk away knowing about a better, non-legal and more effective way to go about collecting the money you’ve earned.

So, how does it work?  It’s actually pretty simple.  When your check doesn’t show and you call over to discuss it with the other party and they say “…blah, blah, blah…, we’re not paying…,” just hang up the phone and ask yourself this one question: “is financing involved in this project?”  If the answer is “no,” you need to probably do the normal drill.  However, if the answer is “yes” (and it usually is), you should just contact the lender(s) on the project and tell them about your potential lien on the property as becoming a cloud on title.  You’ve never seen such a shuffling of paper….  This method is really effective if construction or mezzanine financing is involved because the re-financing of the project (to a permanent loan) is inevitable.  This method is tantamount to settling a fight with your sibling by involving your parents.  Try it next time. ______________________________________________________________________________

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Mark Ruffin / PrecorRuffin / Oklahoma City, Oklahoma

Understanding the Legal Concept of Material Breach in a Tightening Economy

Last Updated on Monday, 11 July 2011 10:37 Written by Chris Griswold Wednesday, 1 April 2009 09:06

If you’ve seen it once in a deal, you’ve seen it hundreds of times.  Landlords, tenants, buyers, sellers, brokers and bankers either demand or reject its presence within the fine print of a deal.  However, the question remains, what exactly does the term “material breach” mean?  As a practicing commercial real estate attorney, I’ve been asked this question many times by my clients and opposing attorneys alike.  However, it’s hard to just open up the dictionary and give the term a flat definition.  Why?  Well, the term is more than just a word in need of a definition.  It’s a legal concept which, like any legal concept, requires the application of a set of legal tests and factors to a set of facts which enable one to arrive at a meaningful analysis.  However, the purpose of this article is not to give a full, legal dissertation on the legal concept of material breach.  It’s to give the layperson a better working relationship with the concept of material breach within the context of a likely hypothetical scenario – especially in light of a weaker economy where cash flows for both parties might be constrained.

Hypothetical:  Assume you are the landlord of a retail development which contains common areas, the maintenance costs of which are to be spread proportionately amongst your tenants.  Your oldest lease contains simple language to the effect that “…tenant shall reimburse landlord for its proportionate share of the common area maintenance expenses by April 1^st of each year…,” nothing more.  The last page of the lease contains a provision which sets forth that “…time is of the essence with regards to the terms and provisions contained herein….”  You are eight years into an initial lease term of ten years and, up until this recent credit crunch, your tenant has made all lease-related payments on time.  However, on this particular April 1^st, you do not receive tenant’s reimbursement.  On April 9^th, you receive a letter (and a phone call) from your tenant to the effect that their cash flows are tight (due to the effects of the recent credit crunch) but tenant promises to get you a check for the full amount in three weeks.  You further explain that if you don’t get the reimbursement within three weeks, you’ll have to terminate the lease and find another tenant.  Your tenant promises to get the money to you within three weeks and follows up with a letter to that effect which you receive two days later.  Sixteen days later, but still within the three week period as promised by your tenant, you send a letter to your tenant that you are cancelling the lease and are entering into a new lease for the premises with a new tenant.  You feel justified in doing this since, at this point, the reimbursement payment is almost a month overdue.  Besides, for whatever reason, you just don’t feel that tenant will uphold their promise to pay.

Question: Can you declare tenant to be in material breach of the lease, terminate the lease and enter into a new lease with another retail tenant?

Discussion:  Maybe.  The law on material breach (in a non-goods contract) sets forth that if a party fails to perform a promise which amounts to both a material and total (i.e., no cure by the breaching party is forthcoming within a reasonable period of time) breach, then the aggrieved party may, among other alternatives, cancel the contract, enter into another contract and sue the breaching party for all damages.  Whether a breach is material is ultimately a question of fact for the judge or jury to decide and there are legal tests and factors to consider in making that decision.  However, instead of focusing on those tests and factors, let’s just assume that the judge or jury decides that the breach by tenant is not material, thus, landlord cannot terminate the lease and enter into a new lease.  What about our fact pattern would support such a finding and, more importantly, what could you learn from it?

First, although the lease sets forth that the reimbursements shall be made by April 1^st, there is no language which makes such reimbursements by April 1^st a condition of the agreement.  In other words, the agreement does not set forth how important it is that such reimbursements be made by April 1^st of each year.  Without such language, landlord will be unsuccessful in claiming that tenant’s failure to pay by April 1^st put landlord in so dire a financial situation that it would justify landlord’s termination of the lease agreement.  Accordingly, when drafting such a provision, it would be advisable to include language to the effect that “…tenant’s failure to tender such reimbursements to landlord by April 1^st of each calendar year shall constitute a material breach of the agreement…” or, in the alternative, “…tenant’s reimbursement to landlord by April 1^st of each year shall constitute a condition of the agreement….”  When that type of language is found within the lease, it will be easier for the court to find that tenant was in material breach when it failed to remit the reimbursement payment to landlord by April 1^st.

Second, even though the phrase “…time is of the essence with regards to the terms and provisions contained herein…” appears at the end of the lease, courts have held that the use of a singular, detached “stock phrase” such as this will not, by itself, make tenant’s breach of a certain lease obligation tantamount to a material breach of contract.  Rather, if the parties intended for time to be “of the essence” with regard to tenant’s obligation to make such reimbursements by April 1^st of each year, then language to the effect that “…time is of the essence…” should have been inserted directly into the operative reimbursement provision of the lease.  This would make it easier for the court to find that tenant was in material breach when it failed to pay landlord by April 1st.

Third, whether or not tenant’s failure to pay by April 1st constituted a “material breach” of the lease, landlord still “jumped the gun” in attempting to terminate the lease and enter into a new lease.  Why?  A tenant with a history of making all lease-related payments on time was not given the chance to cure the breach by making the reimbursement payment within the three week period as promised.  Put another way, after making all lease-related payments on time for eight years, landlord should have reasonably believed that tenant’s cure of the breach was forthcoming.  Accordingly, there was not a “total” breach of the lease by tenant which would justify landlord’s attempt to terminate the lease and enter into a new lease.  This does not mean landlord could not claim a partial breach of the lease by tenant and sue tenant for damages which landlord incurred by reason of tenant’s failure to make the reimbursement payment by April 1^st.  However, it does mean landlord was not justified in attempting to terminate the lease and enter into a new lease.  At the end of the day, if landlord had waited the three weeks before writing the letter to tenant, the court would be more likely to hold that tenant’s cure of the breach was not forthcoming which, in turn, would increase the odds that tenant would be found to have been in material breach of the lease.

The legal concept of material breach is complicated and the analysis and application of it to any set of facts should only be attempted by qualified legal counsel.