Texas Real Estate Blog

Exhibit “C” Says What?

May 17, 2011
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Yes, I have heard this lament many times by unsuspecting contractors who agree to perform tenant improvements but fail to coordinate the terms of their construction agreement with the work letter. Oh, and yes, I have heard the same lament from landlords and tenants who failed to consult with the contractor before they signed the lease. As you can imagine, it raises some real interesting issues and conflicts; hence, my children are fed for yet another day. This is just one example of why I continually preach  about the complexity of all real estate transactions let alone those involving construction. In this scenario, either the landlord or the tenant has simply agreed,under the terms of the “work letter” (attached as a long forgotten addendum to the lease)  to take on the construction of the tenant’s leasehold improvements. Simple, right? Well, the problem is that neither the landlord or the tenant is going to perform the actual work. The party agreeing to perform the task is going to hire someone (the contractor) who actually knows how to construct something. Ergo, it makes perfect sense to let the contractor in on just what work , and under what terms and conditions, it is going to perform. Simple things like time of performance, price, scope, change orders and the like, are things the contractor may want to know about. You would be surprised how often we have to try and revise the work letter post execution of the lease. Depending on who has the leverage in the transaction makes for a lively discussion! So, this articleSP-#3396770-v1-COORDINATING_WORK_LETTERS_WITH_CONTRACTOR–… deals with the key provisions that landlords, tenants and contractors must address in the context of  tenant improvements. It gives a retail scenario as an example but it applies to every lease that has a work letter. Oh, did I mention that these mistakes are expensive?

Speaking of expensive–on this date in 1918, the US Postal Service issued it’s first “airmail stamps”. They came in 6,16 and 24 cent denominations. On the second day of the sale, a man by the name of Bill Robey bought a 100 sheet of the 24 cent variety and noticed, as he headed for the door, that the Biplane-Curtiss Jenny that was on each stamp was printed upside down. Robey knew he had a hot item and assumed hundreds of similar sheets would be shortly running off the presses. (In fact, the USPS caught the mistake and destroyed the faulty ones leaving Robey with the only sheet). He quickly sold his sheet to a stamp collector for $15,000 who had already pre-sold it to another stamp collector for $20,000. About 60 years later, one single stamp sold for $198,000 which would make Robey’s sheet worth $19.8 million. Even more interesting, when airmail service actually started, the inaugural flight featured a Curtiss Jenny Biplane with the same markings as the stamp. Shortly after take-off it crashed—-upside down.  Coincidence–I think not!

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    Steve Watten


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