Texas Real Estate Blog
Leases,Workletters and Tuesday Morning Quarterbacking
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Well, it’s Tuesday morning after Super Bowl Sunday and the news is filled with wonderful highlights from the big game. However, who would have guessed that real estate issues would dominate the discussions. Yes, as fans and Cowboy haters all over the country blame and threaten Jerry for the ticket disaster, little does everyone know that the devil (no-not Jerry) is in the details (contracts and legal status) as opposed to the obvious fact that the stadium is owned by Jerry’s partnership. When you boil this down, I believe we will be focused on two sections of a lease which are commonly overlooked– the “alterations” paragraph and the “workletter” addendum. It is my understanding from talking to lawyers close to the Cowboys that the parties in the Superbowl set up this way: Landlord: Cowboys (Jerry’s ownership partnership), Tenant: NFL, and Licensees of Tenant: Fans. Based on what I can surmise from the serious crawfishing by the NFL, I am assuming that the NFL had control over the construction of those stands and simply realized way too late that, due to the enormity of the job and some unexpected weather problems, the record attendance was not going to happen. This high-profile screw up is going to put a magnifying glass on the interplay (or lack thereof) of the basic construction and alteration paragraphs of a lease. Normally, the Landlord will have complete discretion and consent over all alterations or construction done to its premises. However, even though it may have such consent, it may, nevertheless give to the Tenant control over the actual construction subject to the protection and indemnification of the Landlord. The infamous “workletter” which is buried as an addendum to the Lease is of major importance here because it addresses the scope, authority and liability of the various parties (including the contractor) in connection with the construction. I have always maintained that the most complex area of real estate law is in the construction area as, in this area, we have to delve into, and understand, other disciplines (engineers and architects) that are integral to the process. I am guessing from the way this is shaking out is that the NFL got Jerry’s consent (leave them there for next year!)to build the stands with the proper consent and indemnification back to Jerry. That’s just one simplistic reason the, the NFL, is taking the lead on resolving the issue.
Now, what about the poor fans?As you can tell they are not happy http://newsfeed.time.com/2011/02/08/super-bowl-ticket-scandal-are-fans-planning-a-suit/?hpt=T1 and the NFL seems to be cratering like a cheap Super Bowl tent http://www.cnn.com/2011/SPORT/football/02/08/super.bowl.seating/index.html?hpt=T1# My opinion here is that the NFL (a) is trying to do the right thing for the fans and (b)is bracing itself for a huge image problem with the lockout on the horizon. Because, I believe the NFL has little exposure and, potentially, several defenses (force majeur??!)to the claims of these fans. The next time you attend a sporting event, read the back of your ticket and see what legal status you hold under that agreement. Generally by purchase of the ticket, you are purchasing a revocable license to enter upon the premises of the owner of the property. Sounds kind of screwy doesn’t it? All along we thought we were buying the ticket to support our team when, in reality and legally, we are buying a ticket for the privilege of watching their team. Ugh–the truth hurts. As a “licensee” (quote-Black’s Law Dictionary)-we have the privilege to enter upon land arising from the permission or consent, express or implied, of the possessor of the land but we go on the land for our own purpose rather than any purpose or interest of the possessor”. Make sense? Yeah, I didn’t think so. The only duty the possessor (Jerry and the NFL) owe us is the duty of reasonable or due care. Ergo, the reason the NFL pulled the plug (with the help of the City of Arlington) on the stands is that their liability for an injury to someone (because they knew of the dangerous condition of the stands from the fire marshal and the contractor) was much higher than denying access. Of course, everything I have just expressed is purely my opinion based on a ton of assumed facts and without seeing any of the documentation on this event; however, if I am a fan who got hosed on this deal I take my triple refund and tickets to next year’s bowl and run!!
Nevertheless, a big thanks to all Steelers and Packer Fans for making this a great event. I have been to several Cowboy/Steelers/Packer games (Remember SB XXX!) and can attest to the class and quality of the Green Bay and Steelers faithful. (sorry about the weather-we were just trying to make you feel at home). Also, much thanks to the Bowl Committee for their tireless work and the citizens of the Metroplex for their Texas hospitality. It was a great time and super experience.
Final thought—-see this situation where Jerry might have some exposure http://superbowlblog.dallasnews.com/archives/2011/02/jerry-jones-facing-lawsuit-fro.html Yeah right-get in line!
Tags: alterations, construction, landlord, leases, liability, licensee, tenant
Short Sales Explained and Exposed
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A “Short Sale” , as commonly referred to in the press is simply a transaction by which a buyer purchases a property from a seller for less than what is actually owed on the property. Essentially the property is “under water” being worth less than the debt on the property. The seller turns over the proceeds of the sale to the lender and is often released from the debt. The benefit to the lender and the seller is the obvious avoidance of foreclosure, bankruptcy and all the cost, expense and other fun attendant thereto. However, the buyer in a transaction like this needs to be aware that this is a true “tri-party” transaction where the lender and the seller must have an agreement in place before the transaction will close as a true “short sale”. Frankly, in reality,this type of transaction is a “one-party” transaction as the lender holds all the cards on whether or not to allow a short sale and upon what terms and conditions it will actually happen. See our firm’s newsletter on the topic for other issues involved:SP-#3280927-v1-Success_of_Short_Sales_May_Fall_Short In short, while there has been a lot of news on short sales of late, the devil is in the details and the phrase “buyer beware” is right on the money for a transaction of this type.
Now, another example of a “short sale”, so to speak where “seller beware” was more appropriate. On (or about) this date in 1848, Nicholas Trist shook hands with a delegation from Mexico to effectively end the US-Mexican War (The Alamo, Santa Anna etc…) This was one of the most important treaties in US history as it gave the US more land than the Louisiana Purchase( Nevada,Arizona,New Mexico,Utah, parts of Colorado and Wyoming and, ugh, California). However, this was actually one of the first cases of “Apparent Authority” gone awry. The Mexicans were unaware that Trist had actually been canned by President Polk two months earlier and President Polk was unaware that Trist was cutting this deal. Nevertheless, despite the minor hiccup, the US accepted the treaty. But the most interesting part of this deal of which neither the Mexicans, Trist or Polk were aware was that 23 hours before the treaty was signed and over 1000 miles away, a logger by the name of James Marshall, at a place called Sutter’s Mill (California) stuck his hand in a pool of sluice water and pulled out a nugget of gold thus raising the value of the treaty by a multiple of 10,000. The US would not fall into a deal like that until it took Alaska off Russia’s hands. Remember, “Buyer Beware”! (or was that Seller???)
FDIC Playing Hardball
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Keeping with the baseball theme, on this day (give or take a week or two) in 1865 an extremely important part of America was about to change. Newspapers picked up on a “big” story that had actually occurred the year before. Apparently a guy named Al Reach had left Brooklyn to earn money in Philadelphia. Reach’s problem had nothing to do with interstate commerce; rather, his problem was that he was a second baseman. In the summer of 1864, Reach had left the Brooklyn Atlantics to go to the Philadelphia Athletics for a paycheck of $25 a week! This was blasphemy to baseball purists as baseball was still a gentlemen’s game and money would do nothing but soil its reputation. Well, all the fuss did nothing but bring to light that other players were already being paid in some form or fashion and now other players were now demanding to be paid. So, baseball went professional, and in a matter of years, baseball players were making more than doctors. Then something familiar happened. The government came in and “offered their help”. As a result, in an effort to keep the game pure, Congress gave baseball anti-trust protection. Management used the tool to keep some exceptionally gifted people at a compensation level that equaled indentured servitude. That lasted for decades until the advent of free agency, which naturally swung the pendulum all the way back. After that there was no further trouble about salaries in baseball that we know of. (Thanks to art Cashin for this gem from history)
“I Surrender”-Foreclosure Quandary
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I can’t tell you the number of times I have been asked by friends, relatives and clients about what to do when the value of their home or commercial property drops below the balance of their outstanding loan. Frankly, from a commercial standpoint, bankruptcy is the best way to go as long as there are no personal guarantees to muddy up the process. Further, if it is a non-recourse loan, the property is in an SPE (Special Purpose Entity) and the borrower does not intend to use the SPE for another transaction any time soon, the client can simply pack up and walk away from the property. However, when dealing with single family residences or situations where personal liability is exposed, the answer is not nearly as clear. In these situations the borrowers choices are very limited because their credit is at significant risk. The sad part of this situation is that normally the borrower has done nothing to create the situation as the economic “perfect storm” has caused job loss along with real estate devaluation–both uncontrollable factors. I believe this article http://massrealestatenews.com/tag/strategic-foreclosure/ gives a very fair representation of the situation as well as viable alternatives. Speaking of limited choices, on this date in 1949, Americans got the chance to drive four cylinders of pure fascism, as Adolph Hitler’s beloved “People”s Car” or “Volkswagen” went on sale in the US. Yes, Hitler was actually the instigator of the round design for the “Bug” when, in 1933, he met with Porsche to see about creating a car for the common German. Clearly, Dirk Nowitski was not part of the target market.
Hospitality Not so Hospitable
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The hospitality market will continue to struggle along with the rest of the real estate market according to Steve Vann of Prism Hotels & Resorts.
“Happy Birthday”
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I know this is long over do but I think it’s appropriate to acknowledge those famous folks whose yuletide celebrations (the receipt of numerous presents) was either ruined or magnified by being born on Christmas day. 1821-Clara Barton-founder of the Red Cross-give a pint instead of hoisting one. 1887-Conrad Hilton-staying at one of his establishments on my way to Breckenridge! 1907-Cab Calloway-known for his tune, “Minnie the Moocher” with it’s chorus “Hi De Ho” made famous by the “Blues Brothers” and the current calling card for Conrad’s great-granddaughter. 1924-Rod Sterling-since born on Christmas day, now entering the no-presents zone. 1946-Jimmy Buffet-Parrotheads replace turtle doves. Finally, 1950-Karl Rove-blames lack of duplicate presents on vast left-wing conspiracy. What does any of this have to do with marketing and sales? Nothing really, except the fact that you can make tremendous hay by remembering and acknowledging important days in lives and careers of your clients and prospects. Birthdays, anniversaries and significant business accomplishments that have been long forgotten or overlooked that are remembered and recognized by you, show that you really care about the person and not just what that person does or can do for you. It’s that one piece of “added value” that we should be constantly looking for in our relationships. Happy New Year!! Let’s make it a great one!!
“On This Date”
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On this date (-3) in 1732 a 26 year old by the name of Benjamin Franklin published “Poor Richard’s Almanac” (oh-credit for this post goes to Art Cashin at UBS). The publication, containing pithy wisdoms like “Early to bed, early to rise makes a man healthy, wealthy and wise” or ( a DC favorite) ” A penny saved is a penny earned” was a huge success in the colonies allowing Ben to retire at 42. Since golf was not popular at that time, he filled his days and nights by discovering electricity, inventing the lightening rod, the iron stove, bifocals and the glass harmonica while developing long-standing theories on meteorology, heat absorption, ocean currents and, of course, electricity. In his spare time he founded the first insurance company, fire department, public hospital, public library, night patrol and militia. Seeking a break he became colonial postmaster and civil defense chief for the French and Indian War. Tiring, he was chief delegate at the Albany conference which organized the colonies and then was appointed chief negotiator with the British crown in London. When negotiations failed, he returned home to help draft, and then pass the Declaration of Independence. He was then sent to Paris where he won support of the French which event won the revolution for the colonies. He returned home and help draft and again pass the Constitution of our new nation. After that he did little that was important aside from a few inventions and a couple of immortal publications. To directly quote Art,” To celebrate, take a high school graduate out for a beer and explain the team concept, consensus thinking and why little can be accomplished by one man alone”. This story about one of the most important founders of our nation brings to a close two marketing and sales dilemmas. First, there is no single right way to market or sell. Like Ben, who dabbled in a number of ventures, we must be involved in a number of activities. I do a lot of different things because I like doing a lot of different things. We have to continually step up to the plate and keep trying and refining our processes and techniques because, like Ben, we are going to strike out a lot. However, for some reason we will never get a hit unless we step up to the plate. Second, we cannot wait around until the “marketing” team is established. Based on the popular premise that most professionals (especially in the law business) hate business development, if we wait until we get consensus we will never get traction. So, pull out the old shotgun and go hunting—-alone (if necessary). Happy hunting.
“On This Date” (SBA)
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Now I really feel old. On this date in 1978 (one year after I graduated from High School) the “Susan B. Anthony” dollar coin went into circulation. I actually remember the great fanfare that went into its debut and the promise of how this new “dollar” would revolutionize financial markets and save the US Mint tons of coin. Well, as you and I now know, it was a total failure. The coins were initially circulated to the Post Office (first bad marketing idea) and then circulated to us who then tried to pawn them off on unsuspecting vendors who obviously did not get the message and refused to accept them. (I remember getting one as change and promptly throwing in my closet as a memento where it remains less than worthless today). It was smaller than the Eisenhower dollar so it was often mistaken as a quarter despite the Post Office’s slogan “Carry Three for Susan B.” The slogan was later replaced with “B a pal and take these damn things off our hands”. (kudos to Chris Regan for that one). Any way, what the heck does any of this have to do with marketing? Well, I’ll tell you how! As lawyers, one of the ways we exhibit our higher intelligence and vast expertise is through speeches and other live events. We schedule conferences and lunches and put on exquisite legal presentations that typically impress no one except ourselves. Why? Because the “content” we choose is the “content” we choose, rather than (can you believe it?) the content the audience wants. What a frigging revelation? We wonder why we get 10 rsvp’s from 100 invites. The most basic consideration in any presentation is to find out what the audience/customer wants and needs to hear. While our clients and contacts love to hear us speak on topics that interest them and that give legal solutions to their business problems (essentially free legal advice), this advice is not really free if it is basically worthless. This BASIC principle applies to all businesses and professions. So, before going to the time and expense of organizing your next event, take about 5 minutes to shoot out an email to a few of your expected invitees and ask them what they want to hear. This simple act will virtually guarantee a successful event ( free food, booze and CLE/CPE doesn’t hurt either)!
“On this Date” (Santa Preview)
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The posts this month are going to be full of Pre-Christmas cheer. So, today I came across a gem embedded in Art Cashin’s (UBS Financial) weekly financial column. Apparently, on this day in 705 AD, the Nordic tribes of Europe, recently converted to Christianity, began to adopt a theological affection to a wise and devout Archbishop who had lived 3 centuries earlier in an area east of Greece. He was the designated patron saint of scholars, merchants, sailors and children. He gained the last role through the legend that he had saved three dowry-less young girls by dropping jewels into their home by an open window. So over the next thousand years, or so, these Nordic tribes would celebrate his generosity by giving gifts to their children and the poor on St. Nicholas’s feast day-December 6th. When the Dutch came to America, they brought their gift giving “Sinte Klaus” with them. We, holiday loving Americans, adopted the tradition (presumably as an excuse to boost the economy), moved the gift giving day to Christmas and mispronounced his name to “Santa Claus” (Dutch must have landed in Brooklyn). Since open windows in the American winter were just a tad inconvenient, we replaced the entry point with a nice warm chimney. We put the jewels (gifts)in our stockings (which we wore over cold floors to get to the darn chimney). So, you might ask, what could this story possibly have to do with marketing and sales? Are you kidding? I am a big believer in sending gifts to clients, especially those who have blessed your year with their business. It does not have to be expensive or ornate. It, as the saying goes, is the thought that counts. While I love receiving Holiday cards, they are no different than everyone else and, your client knows it does not take much thought or effort since they do the very same thing to their clients and vendors. A gift says you care and that you took the time to focus on them during the busy Holiday season. Oh, I mention this gift giving theme now because if you don’t hurry and get them out, you may have to couch your gift as a pre-Valentines greeting!
“On This Date”
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Image via Wikipedia
On this date in 1835, Samuel Clemens a/k/a Mark Twain was born. Despite penning the famous “Adventures of Huckleberry Finn” Mr. Twain’s name was often bellowed on the Mississippi River as a warning to other ships of the water’s depth. “Mark Twain” meant that the mark on the sounding line measured a safe depth of 2 fathoms (“Twain” being an antiquated word for “two'”). [“Mass Historia”-Chris Regan]. Now that’s deep! So much for the history lesson. Now for a quick marketing/sales reminder. Whenever you are hosting an event (as I did at Cowboys Stadium on Thanksgiving-tough loss-ugh), remember to act like a real “host”. That means you should also entertain other guests of other colleagues in addition to your own not to mention introducing them to one another. Nothing (to me) is more annoying than watching my colleagues ignore (which did NOT happen at this event) everyone at an event outside of their personal invitees. It is rude and, more importantly, you lose the opportunity to promote your company, your practice and yourself to other clients of the organization and the chance to connect these people to one another and add value to the relationship. How exciting and satisfying to receive emails from other folks at our event thanking me for a wonderful time in our venue AND the opportunity to meet other guests. Two of our guests are actually connecting to explore business opportunities. So, remember, when hosting an event—host!
Steve Watten
Real Estate News& Views
Steve Watten
Texas Real Estate Blog 