Drafting a More Effective Default Clause
Attorneys are making too much money litigating disputes between commercial landlords and tenants. Even the most frequently used 'standard form' leases permit tenants to stall and strangle property owners. Moreover, these same leases leave tenants without proper recourse when property owners fail to follow written commitments. Instead of blaming the judicial system, a judge, a landlord, or tenant ' to paraphrase Shakespeare ' it is time that we practitioners recognize that the fault is not in our stars but in our leases. Because they are the enforcement provision in a commercial lease, default clauses must be revised and developed to better meet the needs of landlords and tenants under the judicial system.
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REITs: The Challenge of Parking Facilities
The careful negotiation of the rights and responsibilities involved with the operation of parking facilities associated with commercial properties is an often-overlooked component of the acquisition and leasing of those properties. It has been noted that the inadequate resolution of the competing interests between owners, lessors, and lessees of parking facilities can harm the interested parties' businesses and ultimately drive the parties into costly and time-consuming legal battles. Stacy E. Smith, Negotiating Parking Privileges in Commercial Leases: What Every Tenant Should Know. <i>Com. Leasing L. & Strategy</i>, July 2005, at 1. Unfortunately, the presence of a real estate investment trust ('REIT') among the concerned parties adds an additional layer of complexity to an already challenging situation.
Post-Petition Enforcement Against the Seller of Contracts for the Sale of Goods
Generally speaking, after a bankruptcy filing, executory contracts are not enforceable against a debtor that has not yet assumed the contract. <i>N.L.R.B. v. Bildisco and Bildisco</i>, 465 U.S. 513, 531 (1984). However, the reverse is not true. During the pre-assumption period the non-debtor party to the contract is presumed to be obligated to perform in accordance with a contract. Howard C. Buschman III, <i>Benefits and Burdens: Post-Petition Performance of Unassumed Executory Contracts</i>, 5 Bankr. Dev. J. 341, 346, 359 (1988); <i>Univ. Med. Ctr. v. Sullivan (In re Univ. Med. Ctr.)</i>, 973 F.2d 1065, 1075 (3d Cir. 1992); <i>McLean Indus., Inc. v. Med. Lab. Automation, Inc. (In re McLean Indus., Inc.)</i>, 96 B.R. 440, 449 (Bankr. S.D.N.Y. 1989). Of course, a debtor who elects to receive the benefits of a contract while deciding whether to assume or reject the contract is expected to pay for the value of the goods and services received in accordance with the contract. As the Supreme Court noted in <i>Bildisco</i>, 465 U.S. at 531, 'If the debtor-in-possession elects to continue to receive benefits from the other party to an executory contract pending a decision to reject or assume the contract, the debtor-in-possession is obligated to pay for the reasonable value of those services ... ' <i>See also Schokbeton Indus., Inc. v. Schokbeton Prods. Corp. (In re Schokbeton Indus., Inc.)</i>, 466 F.2d 171, 175 (5th Cir. 1972).
Forbearance Agreements: A Useful Tool for Lenders After Default
With a borrower in default and facing the threat of imminent litigation or bankruptcy, both lenders and borrower are increasingly looking to the appealing alternative of forbearance agreements. These are arrangements whereby lenders refrain from exercising their available default remedies in exchange for certain concessions from the borrower. Depending on the circumstances, forbearance agreements give lenders an alternative to the expenses and delays associated with litigation or bankruptcy. Forbearance agreements can also be used to take the place of a more long-term modification of the parties' arrangement. Accordingly, a forbearance usually gives up little on the part of the lender, but allows the lender to secure a number of benefits that will be very helpful in the event of a subsequent default by the borrower.
