Buried language can burn you

I am sure I sound like a broken record to anyone who has ever taken more than one of my classes because I always (seriously always) bring up how language can be buried deep within a lease that can change the cash flow from a tenant. The best example I can give is one landord’s prorata tax section requiring that tenant pay a full prorate share of taxes based upon the “Gross Leasable Area of the Shopping Center.” The lease continues with other excluded area definitions. But, the bottom line is that you read the requirement as “Gross Leasable Area.” That’s not a typo in how I used “Gross Leasable Area” with all caps.

When something is capitalized mid-sentence in a lease, it typically means that it is defined elsewhere in the lease. In the case of this particular landlord’s standard lease, Gross Leasable Area is defined elsewhere, and it is defined to exclude vacancy. So, if you go to the tax section only, you think you are paying based upon leasable, but you are really required to pay based upon leased.

Remember that. If it is capitalized, it is typically defined. Go look for it.

So, as someone who preaches about buried lease language, I should not have issues with it myself, right? But, this week, I got burned myself by buried language.

One particular retailer had negotiated changes to the definition of anchors to specifically exclude anchors that are a use competing with their own use. So the anchor definition essentially reads that anchors are Occupants greater than 50,000 square feet, except for Occupants selling x, y and z (a use competing with theirs). I wasn’t burned on the “Occupants.” (The use of Occupant vs. Premises is a major distinction in and of itself. It means that we can only consider a tenant in more than 50,000 sf. A vacant 50,000 sf space is a vacancy rather than a defined anchor. That makes a difference if a tenant does pay based upon leasable, or if a tenant pays based upon leased with a minimum occupancy.)

No – I was burned in a cotenancy section. The lease stated that a cotenancy condition only existed if there were less than three anchors. The property had three department stores, another tenant greater than 50,000 sf that was a competing use (so not an anchor), and a 75,000 sf theater. So, I had four anchors (the three department stores and the theater) when one of the department store closed. I had three remaining anchors – two department stores and the theater. But, five paragraphs into the cotenancy section, in a paragraph defining acceptable replacements was a stand-alone line. For purposes of cotenancy, a theater shall not be considered an anchor. Sure enough, I had abstracted this requirement, but essentially saying that you could not replace an existing anchor with a theater (which is a very typical limitation). However, that wasn’t the requirement. For cotenancy purposes, I did not have four department stores when I lost one. I had three when I lost one. So, a cotenancy condition existed.

Buried language burning someone who preaches not to get burned by buried language. I have to give props to the retailer’s attorney. It was intentionally buried, and it worked.

It can happen to you.

It can happen to you too!

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