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Best practices" seem to be on the tips of everyone's tongues these days. At the recent ELA Executive Roundtable Conference, the concept of applying best practices to leasing companies was a key focus of discussion. This trend is a clear endorsement of continually benchmarking performance and learning from others what works and what doesn't.
When equipment lessors evaluate the risks of underwriting lease transactions for manufacturing equipment, one of the primary considerations in the credit decision is the resale value of the equipment in the event of default. In preparing for this risk, a key component of an underwriter's evaluation must be how to access and market the equipment in the event of a default. Therefore, it is critical to look at every transaction from the perspective of how much money a piece of equipment will bring in a sale, if there is an established market for the particular equipment, and also, how and where the equipment can best be marketed and sold if a liquidation is necessary. An often-overlooked and significant factor in this analysis is whether the lessor will have unfettered access to remove the equipment to sell, refurbish, and/or prepare for liquidation at the location where it has been used.
The first part of this article, published in last month's issue, addressed the importance of the distinction between true leases and loans and began a detailed analysis of the rules that courts use for state law and bankruptcy purposes to determine the category in which a given transaction belongs. <br>As outlined in part one of this article, courts utilize the Two-Part Test provided in §1-201(37) of the Uniform Commercial Code, and any transaction that satisfies that Two-Part Test creates a security interest as a matter of law. The first prong of the test is satisfied if the lessee does not have the option of terminating the lease early or if any such early termination option requires the lessee to pay the lessor a significant sum. The second prong, which addresses the issues that are most often litigated, is discussed below.
Features
As franchisors find new ways to reach out to prospective franchisees, there are inevitably questions about how franchise laws ' written long before electronic media such as the Internet and e-mail were contemplated ' might apply. Recently, the Federal Trade Commission's (FTC) staff provided some guidance to help franchisors understand how the FTC Franchise Rule applies with respect to earnings claims made in the context of Internet advertising.
Last month's International Franchise Association (IFA) Legal Symposium brought together many of the world's leading franchise attorneys and in-house counsel for large franchisors. The items below are brief accounts of some of the presentations and discussions.
Features
Highlights of the latest franchising news from around the country.
Highlights of the latest franchising cases from around the country.
Features
Rights of first offer and first refusal are frequently sought by tenants, especially for space contiguous to the original leased premises, in order to give tenants a combination of flexibility and leverage when dealing with their potential expansion requirements. Landlords are understandably reluctant to grant such rights, as they may interfere with the landlord's ability to accommodate the future needs of existing or prospective tenants.
Features
Most retail and shopping center leases contain a provision — which appears fair and reasonable on its face — to the effect that the tenant's proportionate share of the center or retail area is fixed at a certain percentage, <i>eg,</i> 35%. This percentage is then utilized by the landlord for the purpose of calculating the tenant's contribution to real estate taxes, common area maintenance expenses, and insurance premiums incurred by the landlord in operating the center or building. However, it's not always simple to calculate that share. For example, assume a theater tenant negotiated a lease in a center under construction, which provided that its proportionate share of the center was 35.2%, based upon the detailed plans and specifications for the center then in existence. Upon completion of the center, the tenant was presented with a statement by the landlord advising that the theater occupied 50%. In addition, when the theater tenant was negotiating the lease, it was advised by the landlord that its share of the common area maintenance charges was estimated at approximately $250,000. The bill the tenant received for its share of common area maintenance charges for the first year of operations was approximately $3 million. How could this happen? And how can you prevent this from happening? Read on.
In most shopping center leases across the country, there is a provision that relates to the landlord's right to modify, change, add to, subtract from, and/or alter the size, dimensions, character, and construction of the shopping center. Very often, these provisions further grant the landlord the right to change the entrances, the number of parking spaces, the dimensions of hallways and corridors, the number of floors, the placement of kiosks, carts and retail merchandising units in the common areas, the location and arrangement of the common areas, and the merchandising mix of tenants. Generally, this type of a provision is viewed as boilerplate within the lease document and does not receive a great deal of negotiation from tenants.