True Lease or Secured Financing: Recovering Meaningful Residual Value
March 31, 2004
Equipment lessors bargain for a very different set of legal rights than secured creditors. These bargained-for rights are often subject to attack, particularly in the Chapter 11 context where it is common for interested parties to challenge the characterization of a Chapter 11 debtor's obligations under an agreement styled as a lease. <i>See In re APB Online, Inc.</i>, 259 B.R. 812, 815 (Bankr. S.D.N.Y. 2001). As the recent decision by the Third Circuit in <i>Duke Energy Royal, LLC v. Pillowtex Corp. (In re Pillowtex, Inc.)</i>, 349 F.3d 711 (3d Cir. 2003) illustrates, when faced with the question of whether a transaction constitutes a "true" lease or a secured financing, Bankruptcy Courts will look through the cosmetics of the deal to its substance. To avoid the re-characterization of an equipment lease by a Bankruptcy Court, an equipment lessor must structure its transactions to retain an economically meaningful "residual value" in the leased property.
Lien Waiver, Access Clause in a Lease Can Be Crucial
March 22, 2004
Although the primary purpose of real estate leases is to rent space, tenants should take the time to develop and implement lease strategies that facilitate their operational methods and strategic plans.
Shopping Center Remodeling and Expansion: Model Language for Drafting a Lease
March 22, 2004
This two-part article explores some of the issues that arise when negotiating a lease form that contains clauses defining the rights of the landlord and obligations of the tenant with regard to remodeling or expanding a shopping center. The first part of the article discussed negotiating points that could benefit the parties during the administration of the lease. The conclusion provides some suggested model language to consider when drafting a lease.
The Leasing Hotline
March 22, 2004
Highlights of the latest commercial leasing cases from around the country.
In the Spotlight: Address Exclusions from Operating Expenses Prior to Lease Negotiations
March 22, 2004
Exclusions from operating expenses are frequently the subject of much wrangling between landlords and tenants in lease negotiations. Many sophisticated parties will deal with such exclusions in the Letter of Intent, a method which allows the business people to focus on the issue early, rather than having the lawyers argue about it during the lease negotiation.
Using Letters of Intent in Real Estate Leasing Transactions
March 22, 2004
Everyone wants to do the deal, but no one is ready to sign the lease. Zoning approvals, construction plans, financing, and a host of other issues need to be firmed up before the lease will be signed, but it is a lot of time and expense to go through if there's no agreement on the essential terms of the relationship. Hence, the Letter of Intent ("LOI"). An LOI is intended to, and should, give assurances to the parties, fix the agreed-upon terms of the deal, provide information and assurances to third parties, and provide a framework for further negotiations and the definitive agreement. It can, however, also be a minefield of potential problems and an invitation to litigation. This article reviews some of those problems and suggests ways to accommodate the parties' needs while avoiding the most common dangers.
Landlord & Tenant
March 03, 2004
Recent rulings of importance to you and your practice.
