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FEATURES Use Report Form for Smooth Eviction . . . . . . . . . . . . . . . . . . . . . . . . . 1 Otherwise, a judge could delay or dismiss your eviction proceeding, which will likely cost you money in lost rent and legal fees. þ Model Form: Eviction Report Form (pp. 4-5) AND Take Six Steps When Using Self-Help Eviction Right . . . . . . . . . . . . . . . . . . . . 1 Take advantage of an underused eviction right that can save you time and money. þ Model Notice: Notify Tenant that You Have Taken Back Space (p. 6)

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Use Report Form for Smooth Eviction When a tenant defaults under its lease, you will want to evict it as quickly as possible. But too often property managers and owners don’t give their attorneys all the documents and information they need for a speedy eviction. If your attorney doesn’t have all the necessary details, a judge could delay or dismiss your eviction lawsuit. And you could lose money because of your inability to re-let the tenant’s space—and rack up costly legal fees because of the delay, says Sacramento, Calif., attorney Nancy Hotchkiss. To avoid that problem, Hotchkiss suggests that you use an Eviction Report Form that requires you to attach key documents and answer key questions relating to the tenant’s default, and then give the completed form to your attorney. Hotchkiss has found this form to be very helpful. We will tell you more about what can happen if you don’t give your attorney detailed information about the circumstances leading to an eviction. And

*** Set Staffing Requirements for Architect, Contractor to Follow . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Make sure you know exactly who’s working on your center’s construction project. þ Model Clause: List All Key Project Members in Construction-Related Contracts (p. 9) Dos & Don’ts . . . . . . . . . . . . . . . . . . . . 10 Recent Court Rulings . . . . . . . . . . . . . 11

IN FUTURE ISSUES ■

Get Vital Protections When Negotiating Management Agreement with Owner

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Don't Let Your Center's Web Site Become a Target of ADA Lawsuits

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Seven Key Issues in Managing Mixed-Use Developments

(continued on p. 2)

Take Six Steps When Using Self-Help Eviction Right Like many owners, you probably believe that the only way to kick out a holdover tenant or a defaulting tenant is to sue to evict it, says New York City attorney Adam Leitman Bailey. However, depending on what state law and tenants’ leases say, you may have another option, he says. You may be able to take back a tenant’s space using “self-help eviction”—that is, terminating the tenant’s lease and then locking it out of its space. While all states ban self-help evictions of residential tenants, some states permit self-help evictions of commercial tenants if that right is included in the tenant’s lease, says Bailey. Having a self-help eviction right can benefit you in several ways. For instance, you will not have to go through a long and costly lawsuit to evict the tenant, thereby saving you lots of time and money, says Bailey. And you will be able to re-let the tenant’s space faster, he adds. First, you have to make sure you have a self-help eviction right, and if you do, make sure you properly exercise it. Otherwise, a court could hold you liable for damages for wrongfully evicting the tenant, says Bailey, who just negotiated a self-help eviction right in a restaurant lease.

(continued on p. 6)

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BOARD OF ADVISORS Norman D. Bates, Esq. Liability Consultants, Inc. Sudbury, MA Stuart A. Frank, Esq. Hinman, Howard & Kattell, LLP Syracuse, NY John N. Gallagher, CPM Polinger Shannon & Luchs Company Chevy Chase, MD Gary A. Goodman, Esq. Sonnenschein Nath & Rosenthal, LLP New York, NY Howard Gordon, Esq. Goodrich Mgmt. Corp. Englewood Cliffs, NJ Harvey M. Haber, QC Goldman, Sloan, Nash & Haber Toronto, ON, Canada Gerard Harris George Comfort & Sons, Inc. New York, NY Nancy Hotchkiss, Esq. Trainor Fairbrook Sacramento, CA Julie Jones, SCSM, SCMD General Growth Properties, Inc. Chicago IL Kenneth S. Lamy The Lamy Group, Ltd. Mandeville, LA James B. McLean Daniel J. Flynn & Co., Inc. Quincy, MA

Frederick J. Meno, CPM, RPA, CSM Woodmont Co. Ft. Worth, TX Stephen J. Messinger, Esq. Minden Gross, LLP Toronto, ON, Canada Michael W. Minns Dayton Mall Dayton, OH Jeffrey A. Moerdler, Esq. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC New York, NY Peter D. Morris, SCSM, SCMD Colliers Macaulay Nicolls Inc. Victoria, BC, Canada Richard F. Muhlebach, CPM, CSM, CRE Kennedy Wilson Properties Bellevue, WA Neil T. Neumark, Esq. Schwartz Cooper Chartered Chicago, IL Kevin Purcell Miglin-Beitler Management Corp. Chicago, IL Marc L. Ripp, Esq. Mack-Cali Realty Corp. Edison, NJ Thomas F. Stewart, Esq. Downey Brand LLP Sacramento, CA

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Dear Subscriber, As we mentioned in last month’s issue, we have decided to change the name and look of our Shopping Center Management Insider publication to better reflect its broader commercial real estate content. The new title, featured in this May 2007 issue, is Commercial Property Management Insider. We believe this title more accurately conveys what we will give you each month: the current, informative, and how-to information that owners and property managers need to effectively manage commercial properties—including shopping centers, office buildings, mixed-use developments, and industrial properties. We hope you enjoy the new look of the publication, and we encourage you to submit your opinions or advice. Please feel free to contact me any time at [email protected] or (212) 8128434. Best regards,

Wendy B. Starr, Esq., Editor

Senior Editor: Wendy B. Starr, Esq.

Smooth Eviction (continued from p. 1)

Executive Editor: Heather Ogilvie Copy Chief: Lorna Drake

we will give you an Eviction Report Form (see pp. 4-5) that you can use to gather the documents and information your attorney will need.

Production Manager: Kathryn Homenick Corporate Marketing Director: Andrew O’Donnell Director of Operations: Michael Koplin Publisher: Mark Fried Editorial Director: Julie DiMauro, Esq.

Commercial Property Management Insider (ISSN 1089-7364) is published monthly by Vendome Group, LLC, 149 Fifth Avenue, New York, NY 10010-6823. Subscriptions/Customer Service: To subscribe or for assistance with your subscription, call 1-800-519-3692 or go to our Web site, www.vendomegrp.com. Subscription rate: $327 for 12 monthly issues (plus $15 shipping/handling). • To Request Reprints: Email: [email protected]. • To Contact the Editor: Email: wstarr@ vendomegrp.com. Call: Wendy B. Starr, Esq. at (212) 812-8434. Fax: (212) 228-1308. Disclaimer: This publication provides general coverage of its subject area. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The publisher shall not be responsible for any damages resulting from any error, inaccuracy, or omission contained in this publication.

Lack of Information Can Derail Eviction Without the necessary documents and information, your attorney may have problems getting a court to evict a tenant. For example, suppose you send a tenant a default notice giving it eight days to cure a lease default. The tenant doesn’t cure the violation or move out of its space by the eighth day, so your attorney starts an eviction proceeding. If the tenant asks the court to dismiss the proceeding because its lease required 10—not eight—days’ notice, the court will likely do so. Then you will have to send the tenant a new default notice and wait to see whether the tenant cures the default. If not, your attorney will then have to start the eviction proceeding from scratch. However, if you had given your attorney all the information she needed, such as a copy of the lease and the notice you sent to the tenant, the attorney could have spotted and dealt with the notice problem before starting the eviction proceeding.

© 2007 by Vendome Group, LLC. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage and retrieval system, without written permission from the publisher.

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Documents Attorney Will Need The Eviction Report Form requires you to gather all necessary documents and information to make the eviction process run smoothly. Section A of the Eviction Report Form includes a checklist of documents you should gather and give to your attorney to help her prepare for a successful eviction proceeding. That checklist includes the following documents: Lease and all amendments. Give your attorney the tenant’s original lease and all its amendments or agreements of any kind, whether formal or informal, says Hotchkiss. These documents provide the names of the building’s or center’s owner and the tenant as they are written on the lease at the time it was signed. Also, be sure to give your attorney the exact names and capacities of the existing owner and tenant, including all unnamed occupants of the space, whether lawful assignees or not, she advises. Then the attorney can be sure that the parties’ proper names appear on the eviction papers, she explains. Your attorney will also refer to the lease’s notice clause to make sure that any notices sent to the tenant comply with the lease, adds Hotchkiss. As the example above demonstrates, even the smallest error in a default or termination notice can delay or even derail the eviction, she warns.

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vant lease default and whether the tenant had a legitimate reason for not complying with the lease, she explains. Also, your attorney will need to see all notices to ensure that they comply with your lease and state law, she adds. Chain of title documents. If someone else owned the building or center when the tenant signed the lease, tell your attorney the exact name and capacity of the current owner, advises Hotchkiss. The deed will have that information, but if it is not readily available, give the attorney any other documentation proving who currently owns the building or center, she suggests. If your attorney goes to court without the proper chain of title documents, the tenant may be able to delay the process by claiming that it signed the lease with someone else and demanding proof of the building’s or center’s current ownership, she explains. PRACTICAL POINTER: It’s also important to know how the current owner acquired the center. For example, if documents show that the owner acquired it through a foreclosure, the tenant may claim that the original lease was terminated at the time of the foreclosure, says Hotchkiss.

Correspondence with tenant. Give your attorney copies of any correspondence between you and the tenant, including any letters about the relevant lease default, legal notices you sent the tenant, and any email messages between you and the tenant, suggests Hotchkiss.

Information Attorney Will Need Section B of our Eviction Report Form contains questions you should fully answer to give your attorney some basic information that will help her prepare for a successful eviction proceeding. These questions cover the following areas:

Correspondence with the tenant will tell the attorney what discussions you and the tenant had about the rele-

Nature of lease violation. Your attorney must be sure that you have valid grounds for eviction, notes

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Hotchkiss. Therefore, tell your attorney the general nature of the lease default, the efforts you made to get the tenant to comply with the lease, and how the tenant responded [Form, Sect. B-1]. For certain kinds of lease defaults, your attorney will need additional information: ➤ Nonpayment of base rent or additional rent. If the tenant failed to pay its base rent or additional rent, be mindful of the following two rules: ■ Be accurate. Give your attorney accurate information of what the tenant owes and for which months, says Hotchkiss. Tell your attorney whether the tenant must make separate payments for base rent, percentage rent, CAM costs/operating expenses, real estate taxes, late fees, and other charges. Be aware that if you tell your attorney that the tenant owes an incorrect amount, the error can cause you problems in court.

If the amount is too low, the tenant may offer to pay up and leave you unable to collect the rest. If the amount is too high, the tenant may legitimately claim that it doesn’t owe that much money. At least some states, however, will permit an eviction if the notice overstates the amount due, so long as the amount actually found to be due is within 80 percent of the total demanded, notes Hotchkiss. Also, clearly specify which types of payments are unpaid and for which months, says Hotchkiss [Form, Sect. B-1(a)]. If you tell your attorney that the tenant owes base rent when, in actuality, the tenant owes only additional rent, and your attorney asks a court to evict a tenant for the nonpayment of base rent, the court may not let you evict the tenant. (continued on p. 5)

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EVICTION REPORT FORM If your [building/center] wants to evict a tenant for defaulting under its lease, gather the documents listed in Section A and enter a check mark next to each item you have provided. Then, fully answer the questions in Section B, using extra sheets of paper, if necessary. Send the documents and this completed, signed report form to the attorney who represents the [building/center] in eviction proceedings. Name of [Building/Center]: ___________________________________________________________________________________________________________ Exact name of landlord: _____________________________________________________ (“Landlord”) Exact name of tenant: _______________________________________________________ (“Tenant”) Section A – Documentation Please provide the following documents:

❑ A copy of the lease, along with all amendments. ❑ A copy of all correspondence to the tenant, including e-mail messages. ❑ A copy of all correspondence from the tenant, including e-mail messages. ❑ If current Landlord did not sign Tenant’s lease, a copy of documents proving chain of title. Section B – Questions Answer the following questions. Attach additional pages where necessary. 1. How has Tenant defaulted under the lease? What efforts were made to get Tenant to comply with the lease, and how did Tenant respond? –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– a. If Tenant defaulted by not paying rent, what kinds of payments (e.g., base rent, percentage rent, CAM costs/operating expenses, etc.) are unpaid, for which months are they unpaid, and how much is due? –––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– b. If Tenant defaulted by not assigning or subletting its space without Landlord’s permission, to whom did Tenant sublet its space or assign its lease, and when did this occur? (Provide any check or letter from the subtenant or assignee showing that it took possession.) –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– c. If Tenant defaulted by [insert use clause violation, e.g., conducting an unauthorized business/selling items outside the scope of its use clause], when was the default first noticed, and what [business was it conducting/products was it selling] in violation of its use clause? –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– d. If Tenant defaulted under the maintenance/repair clause, which required repairs or maintenance work did Tenant fail to do? (Attach pictures of the area that was not repaired or is not being properly maintained.) –––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– e. If Tenant defaulted by not staying open, how long has Tenant’s store been closed? –––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 2. If a formal notice was sent to Tenant, how was it sent (e.g., via regular mail, fax, certified mail), and where was it sent? –––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 3. Was a lease payment accepted from Tenant after the lease default? If so, was a letter sent to Tenant in response? (Include a copy of this letter if one was sent.) –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

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EVICTION REPORT FORM CONTINUED 4. Are there any subtenants, assignees, or other parties occupying Tenant’s space or with a legal right to the space? If so, what are their names? –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 5. Did any of [Building’s/Center’s] employees or agents ever excuse Tenant’s performance of any of the terms of its lease? If so, please describe what was said to Tenant. –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 6. Did Tenant ever orally complain that Landlord had violated its lease? If so, in what way? –––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Completed by: Print Name/Title –––––––––––––––––––––––––––––––––––––––––– Signature –––––––––––––––––––––––––––––––––––––––– Date ––––––––––––

Smooth Eviction (continued from p. 3) ■ Act fast. When the tenant stops paying its rent, act fast against the tenant. If you drag your feet and a court discovers that the tenant has owed rent for a long time, the court may rule that you have waived your right to collect that rent, and may dismiss your eviction proceeding. ➤ Sublet/assignment default. Suppose the tenant caused a lease default by assigning or subletting without your consent. In that case, tell your attorney when the default occurred and the parties involved, and give her any evidence you have (such as rent checks or letters from the subtenant or assignee) to show that the space was sublet or the lease was assigned without your consent, says Hotchkiss [Form, Sect. B-1(b)].

➤ Use clause violation. Suppose the tenant violates its use clause by conducting a prohibited business at its space or selling a prohibited product. Tell your attorney when such violation first occurred and identify the prohibited business or prohibited

product, says Hotchkiss [Form, Sect. B-1(c)]. ➤ Failure to repair/maintain. If the tenant did not make necessary repairs or generally maintain its space, tell your attorney specifically what the tenant didn’t repair or maintain and, if possible, give your attorney pictures of the affected areas [Form, Sect. B-1(d)]. ➤ Not staying open. If a retail tenant violated its lease by not keeping its store open, tell your attorney how long the tenant’s store has been closed [Form, Sect. B-1(e)]. Notices sent to tenant. If you’ve sent the tenant a default or termination notice, tell your attorney how and where you sent it, so that she can make sure you complied with the lease’s notice requirements. If the notice wasn’t sent to the address specified in the lease or didn’t contain the necessary information, a court may find that the tenant was not properly notified and refuse to evict the tenant [Form, Sect. B-2]. Acceptance of rent after dispute. Tell your attorney whether you have accepted rent payments from the

tenant after the tenant’s lease default. In some states, acceptance of postdefault rent may excuse the tenant’s lease default and make it more difficult to evict the tenant, explains Hotchkiss. If you accepted the rent but sent a letter telling the tenant that by doing so you didn’t excuse its lease default, give your attorney a copy of that letter, she advises. The letter could defeat a tenant’s argument that your acceptance of rent excused the default, she says [Form, Sect. B-3]. Occupants of tenant’s space. Your attorney will need to know whether there are any subtenants, assignees, “squatters,” or other parties—including corporate entities— who are using the tenant’s space or have a legal claim to that space, says Hotchkiss. The court papers the attorney prepares should mention those parties and, in fact, may have to be sent to them, she explains. Not doing so could delay or jeopardize the eviction proceeding, she warns [Form, Sect. B-4].

(continued on p. 6)

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Smooth Eviction (continued from p. 5)

Inadvertent excusing of default. Your attorney needs to know whether any member of your staff said or did anything that could be interpreted as excusing the tenant’s lease default, says Hotchkiss. For example, if the tenant started conducting a business that was outside the scope of its use clause, but the building’s or center’s

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assistant manager gave the tenant the impression that it was okay to do so for the short term, the tenant could argue in court that you gave it the green light to violate its use clause [Form, Sect. B-5].

which the tenant may do in defense of its own lease default. Your attorney should know in advance about any possible owner defaults so she can be prepared to deal with them, says Hotchkiss [Form, Sect. B-6]. ■

Tenant complaints. Tell your attorney whether the tenant has complained that the building’s or center’s owner defaulted under the lease,

Insider Source

Self-Help Eviction Right

Nancy Hotchkiss, Esq.: Shareholder, Trainor Fairbrook, 980 Fulton Ave., Sacramento, CA 95825; (916) 929-7000; [email protected].

MODEL NOTICE

(continued from p. 1)

With Bailey’s help, we will give you six steps to take before and during a self-help eviction to protect yourself. And we will give you a Model Notice that you can adapt and send to a tenant to inform it that you have exercised your self-help eviction right (see box, at right). While the notice is not mandatory, it is a good idea to use it to document your actions and to notify the tenant of why you changed its locks.

Notify Tenant that You Have Taken Back Space Here is a Model Notice, written with help from New York City attorney Adam Leitman Bailey, that you can adapt and send to a tenant to inform it

that you have exercised your self-help eviction right. Show this notice to an attorney in your area before sending it to a tenant.

EVICTION NOTICE

[Insert Date] VIA CERTIFIED MAIL (RETURN RECEIPT REQUESTED) John Tenant XYZ Corp., ABC [Office Building/Shopping Center]

Will Tenants Agree to SelfHelp Eviction Right? Small tenants are likely to agree to your self-help eviction right. Bailey regularly includes the self-help eviction right in leases with smaller office, retail, and restaurant tenants. However, expect larger tenants with more clout to resist self-help clauses, says Bailey. Those tenants will usually win the battle in any market because they don’t want you taking back their spaces so easily if they default under their leases, he explains. In any event, owners of larger spaces don’t usually conduct self-help evictions, since the eviction would be costly and unduly burdensome because of the size of the space, the amount of inventory involved, and the inability to secure all of the space properly, he adds.

Anytown, USA 66666 Re: Notice of eviction from [insert description of the tenant’s space] (“Premises”), pursuant to clause [insert # of section covering self-help eviction right] of the lease, dated [insert date] (“Lease”). 1. Lease default. Tenant is hereby notified that it is in default of Clause [insert # of clause relating to tenant’s lease default] of the Lease because Tenant [insert description of default, e.g., did not pay base rent for March and April 2007]. 2. Exercise of self-help eviction right. Because of said default, Landlord has exercised its self-help eviction right under Clause [insert # of selfhelp eviction right clause] of the Lease and has taken possession of Premises. In addition, Landlord reserves the right to pursue all legal remedies available to it under the Lease, at law, and in equity. Landlord shall also hold Tenant strictly liable for all consequential damages as well as all legal expenses, attorney’s fees, litigation disbursements, and court costs incurred by Landlord in the enforcement of its rights and remedies against Tenant. 3. Status of property. In accordance with Clause [insert # of surrender of premises clause] of the Lease, Tenant’s personal property at the Premises is [insert status of tenant’s property as required by its lease, e.g., being stored at XYZ Storage Facility]. Tenant’s immediate attention to this critical situation is appreciated and expected. If you have any questions or comments with regard to the above, please contact Landlord at [insert telephone #]. Landlord _______________________________________ Date ____________

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Nonetheless, such a clause should be included in the lease and, if contested, used as a bargaining chip for a stronger default clause involving the court system, Bailey says. Step #1: Check State Law on Self-Help Evictions First, have your attorney check your state law on self-help evictions, advises Bailey. As mentioned above, all states ban self-help evictions of residential tenants, but some states—such as Alabama, Alaska, Arizona, Georgia, Hawaii, Maryland, Mississippi, New Jersey, New York, Ohio, Texas, North Carolina, and Wisconsin—permit peaceable self-help evictions of commercial tenants, he explains. Note that several other states— such as Idaho, Massachusetts, Missouri, North Dakota, Virginia, and West Virginia—let owners use selfhelp eviction only if the tenant has abandoned its space, Bailey adds. Step #2: Check Lease for Self-Help Eviction Right Next, check the tenant’s lease to see whether it gives you a self-help eviction right, suggests Bailey. Most states that permit self-help evictions of commercial tenants require owners to include the right to do so in the tenant’s lease, he says. If your state law and your lease give you a self-help eviction right and you exercise that right, a court is likely to rule that you were justified in doing so. Example: After a tenant didn’t pay its rent, the owner took possession of the tenant’s space. The tenant sued the owner for damages, arguing that it had been wrongfully evicted. A New York appeals court ruled that the owner had the right to re-enter a commercial space and take back possession peaceably, in accordance with a self-help eviction right in the lease, if

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the tenant didn’t pay its rent [Bozewicz v. Nash Metalware Co.]. Note that you can’t sue to evict a tenant and exercise your self-help eviction right, warns Bailey. Therefore, you will have to choose which course of action is best for your situation, he advises. PRACTICAL POINTER: Make sure the lease language spelling out your self-help eviction right is clear and unambiguous, advises Bailey. Because self-help eviction is such a drastic remedy, courts usually will not approve its use if there is any ambiguity in the lease’s language, he explains. You should not use self-help eviction when it is unclear whether the lease term expired or the tenant defaulted, he says. If you have any uncertainty about whether you have a self-help eviction right, you should try summary proceedings or another legal procedure to oust the tenant, he advises.

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tion right, Bailey says. And make sure that any cure period given in the lease has run out before you either exercise your self-help eviction right or sue to evict the tenant, he adds. PRACTICAL POINTER: Exercise your self-help eviction right only if the tenant has committed a "material"—that is, major—lease violation, advises Bailey. Therefore, don’t exercise your self-help eviction right for a minor violation— such as when the tenant violates its lease by ignoring your building’s or center’s recycling rules. However, you can exercise the self-help eviction right if the tenant makes structural alterations without permission, for example.

Step #4: Take Possession of Tenant’s Space Peaceably If, after taking the above steps, you decide to exercise your self-help eviction right, make sure you do so peaceably and not in a hostile or forceful manner, advises Bailey. That is, avoid any interaction, conflict, or confrontation with the tenant when you take back its space and change the locks, he says.

Step #3: Make Sure Tenant Is in Default or Lease Has Expired Even if state law and the tenant’s lease If possible, change the locks at give you a self-help eviction right, night or on the weekend, when the don’t exercise that right unless it is tenant or its employees are not prescrystal clear that the ent, he suggests. If tenant is in default they are present, of its lease or that Videotape the self-help don’t use any physiits lease has ended, eviction to document that cal violence, threatwarns Bailey. For it was done peaceably. ening conduct, or example, if the tenintimidation, he ant doesn’t repair a adds. If the self-help eviction is not roof leak and it is not clear whether peaceable, a court may hold you you or the tenant is responsible for liable for damages and give the tenant such repairs, don’t exercise your selfback the space. help eviction right, he advises. Instead, sue to evict the tenant, and It is a good idea to videotape the resolve the issue in court, he says. self-help eviction to document that it was done peaceably. Also, take photoHowever, if a tenant doesn’t pay graphs to show that you didn’t damits rent for two months, it is probably age the space or any of the tenant’s safe to exercise your self-help evic-

(continued on p. 8)

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Self-Help Eviction Right (continued from p. 7)

property, and that you didn’t steal anything, says Bailey. Technology can also help you make sure that the eviction is peaceable, notes Bailey. Suppose the tenant uses an electronic key card system to lock its doors, instead of a standard door key. In that case, it would be easy to cancel the key cards’ access code from your building’s or center’s computer system without having to go to the tenant’s space, he says. And you don’t have to worry about getting locksmiths or ripping out the locks. Just make sure that the space is vacant, so that you don’t inadvertently lock a tenant’s employee into the building. Step #5: Arrange for Removal or Storage of Tenant’s Property Once you have taken back the tenant’s space and changed its locks or key card access code, you will need to arrange for either the removal or storage of the tenant’s property, says Bailey. Check whether the tenant’s lease says what you must do with property a tenant leaves behind after it is evicted, abandons the space, or its lease ends, and then comply with those requirements, he says. Also, find out from your attorney whether your local or state laws place any restrictions on your ability to remove or store the tenant’s property, he adds. Step #6: Notify Tenant of Self-Help Eviction Consider notifying the tenant, in writing, that you have exercised your selfhelp eviction right, even if the tenant already informally knows because its employees were present when you

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took back the space, says Bailey. The notice provides proof of why you exercised your self-help eviction right and what happens next. This proof may be helpful in court if the tenant sues you.

ration, Bailey notes. And owners that wrongfully and forcibly evict tenants may be subject to lawsuits that allow tenants to collect treble damages and get back their spaces, he warns.

Your notice, like our Model Notice, should do the following:

However, owners should not be scared to get and exercise a self-help eviction right if a tenant defaults, says Bailey. This self-help eviction right benefits owners by providing tenants with an incentive to comply with their leases, and allowing the owner to re-let the tenant’s space quickly, without having to spend time and money on a lengthy lawsuit before doing so, he explains.

■ State that the tenant has violated its lease and which section it has violated, and give a brief description of the violation; ■ Explain that, because of the tenant’s lease violation, you have exercised your self-help eviction right and taken back the tenant’s space. Also, state that you reserve the right to pursue all other legal rights and remedies available to you; and ■ Give the status of the tenant’s property—that is, whether it is in the space or in storage. You should adapt the notice to reflect the lease’s requirements regarding disposal of the tenant’s property after it surrenders its space.

Realities of Self-Help Eviction Right Even though many states permit selfhelp evictions, it is typically a “neglected remedy,” says Bailey. Many attorneys don’t advise their ownerclients to use self-help evictions to get back spaces when a tenant defaults. Why? Those attorneys fear that courts will be hostile to self-help evictions because the space is forfeited to the owner before the tenant can litigate its right to remain in the space, he explains. Also, many owners aren’t familiar with self-help eviction rights, so their attorneys are reluctant to recommend such an aggressive remedy. It is true that courts don’t allow self-help eviction if the lease is ambiguous or there are outstanding questions concerning the lease’s expi-

Be aware that if you exercise a self-help eviction right, you will not always avoid lawsuits. The evicted tenant could sue you, and you would have to prove that the tenant was in default at the time of your re-entry and that the self-help eviction complied with the law, says Bailey. However, if you document a tenant's default before re-entering its space and ensure that re-entry is done peaceably, you should not worry that a court will rule that your re-entry was illegal or forceful, he says. Bailey has noticed that owners that have exercised self-help eviction rights typically have done so when a tenant didn’t pay its rent and its space was small. Also, if the tenant uses an electronic key card system to lock its doors, instead of using a standard door key, an owner is more likely to exercise a self-help eviction right because it is easy to deactivate the tenant’s access code by computer without having physically to remove and change the locks, he explains. ■ ■ Bozewicz v. Nash Metalware Co.: 725 N.Y.S.2d 671 (N.Y. Sup. Ct. App. Div. 2001).

Insider Source Adam Leitman Bailey, Esq.: Shareholder, Adam Leitman Bailey, P.C., 26 Broadway, 21st Fl., New York, NY 10004; (212) 825-0365; [email protected].

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Set Staffing Requirements for Architect, Contractor to Follow “The success or failure of a construction project is largely dependent on the skills of the people actually doing the work,” says Chicago attorney David R. Schenk. So when you hire an architecture firm or general contracting company, it’s critical to find out exactly who’ll be working on your project, he says. Often the people who make the initial presentations—and who are generally senior and qualified to do the work—aren’t involved to any great extent in the day-to-day work, he warns. For example, a senior architect may present a design for an addition to your center, but hand off the rest of the job to a junior architect after you sign the contract. But this shift of responsibility isn’t fair to you because you’ll likely have made your hiring decision based on the experience of the people with whom you originally discussed your project. To help ensure that you know who will be working on your project, set staffing requirements for the architect or contractor you hire to follow. In particular, require the architect or contractor you hire to include a list of all key project members in the contract you sign with it. Also, bar the architect or contractor from removing those members from the project without your consent, suggests Schenk. We’ll give you a Model Clause spelling out these protections that you can adapt and add to your construction-related contracts (see box, at right). What Clause Should Say The standard American Institute of Architects (AIA) contract that many architects and contractors use doesn’t adequately address staffing issues, Schenk notes. So you’ll need to include a clause that addresses such issues in a

rider to the AIA contract (or to your own contract). Your clause, like our Model Clause, should do the following: List key project members. Require the architect or contractor to include a list of key project members either in the contract clause or in an exhibit attached to the contract, suggests Schenk. Architects should include the following key project members (referred to in the model clause as the “Architect’s Principal Staff ”): the architect’s principal representative, the project manager and the project designer, and, if the project is large or complex, the field representative. And contractors should include the following key project members (referred to in the model clause as the “Contractor’s Principal Staff ”): the

project executive, project manager and superintendent, and, if the project is large or complex, the engineer and trade coordinators. (Note that on smaller projects, one individual may serve in more than one role.) Also require the architect and contractor to assign other staff members to the project when necessary or appropriate without any additional cost to you, Schenk adds [Clause, par. a].

PRACTICAL POINTER: It’s also a good idea to get resumes and references for the key project members so that you can verify that they have the necessary training, skills, and experience for your project. (continued on p. 10)

MODEL CLAUSE

List All Key Project Members in ConstructionRelated Contracts Here’s a Model Clause based on one drafted by Chicago attorney David R. Schenk that you can adapt and use in your contract with either an architect or a general contractor. Show this

clause to your attorney before adapting it for use in any contract you sign with an architecture firm or general contractor’s company.

PROJECT STAFFING REQUIREMENTS a.

Principal staff. [Architect/Contractor]’s personnel listed on Exhibit A attached are collectively referred to in this Agreement as [“Architect’s Principal Staff”/”Contractor’s Principal Staff”] and include [insert names of key staff members]. [Architect/Contractor] shall supplement [Architect’s Principal Staff/Contractor’s Principal Staff] with such other persons as may be necessary to fulfill [Architect/Contractor]’s undertakings and obligations in accordance with the Contract without any additional cost to Owner.

b.

Changes in staff. None of the members of the [Architect’s Principal Staff/Contractor’s Principal Staff] shall be changed or removed without Owner’s prior written approval. Owner’s approval will not, however, be required if such change or removal is by reason of a staff member’s death, permanent disability, or termination of employment with [Architect/Contractor]. In any event, replacements must be acceptable to Owner. If, at any time, one or more members of [Architect’s Principal Staff/Contractor’s Principal Staff] become unsatisfactory to Owner, such staff member(s) shall be removed from the Project and replaced with individuals acceptable to Owner.

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Set Staffing Requirements (continued from p. 9)

Require your consent to staffing changes. Require the architect or contractor to get your written consent before it removes any key staff members from the project, advises Schenk. But say that the architect or contractor doesn’t need your consent when a staff change is necessary because a key project member quit or was fired, became disabled, or died, he notes.

MANAGEMENT INSIDER

PRACTICAL POINTER: Most architects and contractors will agree to sign a contract containing this clause. But an architect or a contractor may balk at giving you such a broad right to approve replacements of key staff members. As a compromise, include language saying that your approval “will not be unreasonably withheld.”

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Make Sure You Have Tenant’s Correct Address on Eviction Notice Before you send a tenant an eviction notice, make sure the notice contains the tenant’s correct address, says Stamford, Conn., Charles F. Martin, III. Simply relying on the tenant’s address as it’s listed in the lease may backfire; the lease may include a typographical error or list an address that is out-of-date. If the eviction notice lists the tenant’s wrong address, the court may rule that the eviction notice is defective and dismiss your case. In late 2006, a Connecticut owner learned this lesson the hard way. Its lease listed the tenant’s address as “1375 Silver Lane.” The owner sent the tenant an eviction notice that listed the tenant’s address as 1375 Silver Lane in the salutation. A marshal tried to deliver the notice and realized that the number “1375” was wrong. He changed the address in the salutation to 1365 Silver Lane, but didn’t change it in the body of the notice, which still listed the 1375 Silver Lane address. The tenant claimed that the eviction notice was defective. A Connecticut court ruled that the owner’s eviction notice was defective and dismissed the proceeding. The court noted that the address in the body of the notice controls whether the notice is defective. Although the eviction notice here tracked the lease’s language, “confusion exists as to the correct address” for delivery of the notice, noted the court. An ambiguity was created because state and local authorities recognized the tenant’s address as 1365 Silver Lane, while the lease recognized it as 1375 Silver Lane. And the eviction notice didn’t describe the tenant’s space “with the specificity required,” said the court.

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Also require the architect or contractor to get your approval of the replacement staff members, he adds. And require it to remove any staff member from the project whose performance you’re dissatisfied with and replace him with a staff member acceptable to you, he advises [Clause, par. b]. ■ Insider Source David R. Schenk, Esq.: Partner, Barnes & Thornburg LLP, 1 N. Wacker Dr., Ste. 4400, Chicago, IL 60606-2833; (312) 214-5648; [email protected].

D O N ’ T S

To find a tenant’s correct address for your eviction notice, go to the tenant’s space or check what state and local authorities list as the tenant’s address, suggests Martin. ■ 1375 Silver Lane Assoc., LLC v. Teal Landscaping Co., LLC: No. HDSP137467, 2006 Conn. Super. LEXIS 2990 (Conn. Super. Ct. 10/2/06).

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Don’t Try to Use Estoppel Certificate to Change Lease Terms Don’t try to use an estoppel certificate to change the terms of a tenant’s lease, warns New York City attorney Jeffrey A. Moerdler. A tenant generally signs an estoppel certificate for a lender or a buyer to confirm the lease’s terms and that you aren’t in default under the lease, he explains. But too often, owners—and sometimes lenders or buyers—try to use an estoppel certificate to make material changes to a lease’s terms. And if you try to sneak such changes past the tenant, a court may rule that the tenant isn’t bound by those changed terms, he says. That is what one Illinois center tried to do. Unlike other tenants’ leases, a department store tenant’s lease didn’t specifically require it to pay a management fee as part of its pro rata share of the center’s CAM costs. Nonetheless, the center’s monthly bills for the tenant’s estimated CAM cost payment included a management fee, although that fee wasn’t spelled out in the bills. The center’s yearend reconciliation of its CAM costs included a line item for management fees, but didn’t explain how such fees were calculated. As part of the later sale of the center, the tenant signed an estoppel certificate that said its estimated monthly pro rata share of the center’s CAM costs was

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$3,604.22—an amount that included a management fee. When the tenant later challenged the center’s right to charge it a management fee, the center argued that the tenant was bound by the estoppel certificate, which required it to pay the CAM amount that included a management fee. An appeals court ruled that the tenant didn’t have to pay a management fee. The court noted that the tenant’s lease didn’t require it to pay a management fee. And the court said the estoppel certificate didn’t change the lease’s terms. The court explained that a party can’t use an estoppel certificate to make “undisclosed changes to the lease.”

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Here, the estoppel certificate didn’t specifically mention management fees; instead, it simply included such fees in its recitation of the tenant’s estimated monthly pro rata share of the center’s CAM costs, the court pointed out. ■ ■ K’s Merchandise Mart, Inc. v. Northgate LP: 835 N.E.2d 965 (Ill. App. Ct. 2005).

Insider Sources Charles F. Martin, III, Esq.: Robinson & Cole LLP, Financial Ctr., 695 E. Main St., P.O. Box 10305; Stamford, CT 06904-2305; (203) 462-7500; [email protected]. Jeffrey A. Moerdler, Esq.: Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., The Chrysler Ctr., 666 Third Ave., New York, NY 10017; (212) 692-6700; [email protected].

C O U R T

➤ Owner’s Bad Conduct Negates Tenant’s Waiver A lease included a waiver provision in which a tenant agreed not to get an injunction if the owner tried to terminate its lease. A dispute arose between the owner and the tenant when sewage overflowed into the tenant’s space and hurt the tenant’s business. The tenant stopped paying rent, and the owner threatened to terminate the lease. The tenant asked a court for, and got, an injunction to prevent the lease termination. The owner then sued to evict the tenant because the tenant’s injunction had violated the lease’s waiver provision. A New York court dismissed the owner’s lawsuit without a trial. The court ruled that the owner could not enforce the waiver provision against the tenant for three reasons. First, the owner had defaulted under the lease by not repairing the sewer pipe that caused the sewage overflow in the tenant’s space. Second, because the owner “willfully” didn’t repair the sewer pipe, the owner violated an implied duty to deal honestly and fairly with the tenant. Third, the lease’s waiver provision operated as a penalty because it would result in the tenant’s losing its entire investment in the space, while the owner “acted in complete disregard of its contractual obligations,” said the court. ■ Malik v. Toss 29, Inc.: No. SP 135/07, 2007 N.Y. Misc. LEXIS 1207 (N.Y. Sup. Ct. 3/29/07).

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➤ Zoning Ordinance Barred Sign’s OffSite Advertisements In 1962, an owner erected a large sign on top of a 14-foot pole in front of its office building. The local city enacted a zoning ordinance in 1986 that barred using signs for offsite advertisements, except with a permit. From 1962 through 2003, the advertisements on the owner’s pole sign related to the businesses operating in the office building. But then the owner rented the sign to a tenant that didn’t lease space in the building. The sign tenant displayed an off-site ad for a new film. The city issued citations to the sign tenant and the owner for violating the ordinance. The city asked a court to block off-site advertisements on the owner’s pole sign permanently. The owner argued that the zoning ordinance didn’t apply. A California appeals court permanently blocked offsite advertisements on the owner’s pole sign. The court noted that the owner had a sign permit that predated the zoning ordinance, but the owner still had to prove that the pole sign’s use was exempt from the zoning ordinance. To do that, the owner had to show that it used its pole sign for off-site advertisements before the zoning ordinance took effect. Instead, the evidence indicated that the off-site advertisements began after the ordinance took effect. Thus, the zoning ordinance applied to the owner’s pole sign. ■ Pallco Enterprises, Inc. v. City of West Hollywood: No. B186378, 2007 Cal. App. Unpub. LEXIS 2524 (Cal. Ct. App. 3/28/07).

LESSON LEARNED: Even if your lease requires a tenant to waive an important right, the waiver may not be enforceable if you are in default of the lease, if you didn’t act honestly and fairly with the tenant, and if the waiver operates as a penalty. (continued on p. 12)

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Recent Court Rulings (continued from p. 11) ➤ Tenant Entitled to Fees, Defense Costs from Owner A pedestrian slipped and fell on a sidewalk outside of the tenant's store, which was located in a mall. The pedestrian sued the tenant and the mall owner for damages. The tenant, in turn, demanded that the owner indemnify the tenant for fees and other expenses relating to the tenant’s defense in the injured pedestrian’s lawsuit. A lower court refused to set the amount of the fees and defense costs that the owner owed the tenant. An Ohio appeals court ordered a hearing to set the amount of fees and defense costs the owner owed the tenant. Under the lease, the owner had the duty to maintain the common areas, including the sidewalk, and to indemnify the tenant for claims arising from the common areas. There was no evidence that the tenant or any of its employees contributed to the defective state of the sidewalk, noted the court. Rather, the injured pedestrian’s claims related to the owner’s negligence in maintaining the sidewalk. Therefore, the lease clearly covered the pedestrian's lawsuit, said the court. Thus, the tenant was entitled to reimbursement of its legal fees and defense costs. ■ Chapman v. Tri-County Mall: Appeal No. C-060271, 2007 Ohio App. LEXIS 928 (Ohio Ct. App. 3/9/07).

➤ Owner Violated Implied Duty of Cooperation A shopping center lease gave a tenant a renewal option for five years at a specified base rent, plus unspecified common area maintenance and taxes. Months before the deadline to exercise the option, the tenant requested information from the owner about the estimated charges

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for maintenance and taxes. The owner declined the request, claiming that the lease didn’t require the owner to supply that information. After the deadline to exercise the renewal option had passed, the owner asked the court to determine that the option had expired and the tenant must vacate the space. The tenant exercised its option following the deadline, after the court had ordered the owner to disclose the maintenance and tax information. A Florida appeals court dismissed the owner’s lawsuit. By refusing to supply the tenant’s requested information, the owner had violated an implied duty to cooperate with the tenant, said the court. The court said that if the lease had expressly stated that the owner was not required to furnish the requested information, the owner would have been allowed to withhold that information. However, the lease was silent on that issue. Therefore, the owner should have supplied the requested information to the tenant, which would have allowed the tenant to make an informed decision about whether to exercise the renewal option, said the court. ■

LESSON LEARNED: Make sure your lease doesn’t include language permitting the owner to withhold information from you relating to renewal terms. Without that lease language, you have a stronger case that the owner violated a duty to cooperate or act in good faith with you if the owner refuses to supply your requested information before the renewal option deadline passes.

■ PL Lake Worth Corp. v. 99Cent Stuff-Palm Springs, LLC: No. D06-1541 (Fla. Ct. App. 3/7/07).

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© 2007 by Vendome Group, LLC. Any reproduction is strictly prohibited. For more information call 1-800-519-3692 or visit www.vendomegrp.com.