Landlocked Cemeteries

For insight into Kansas’ current jurisprudence regarding historic cemeteries and access thereto, see the recent Kansas Court of Appeals case, McCoy v. Barr et al., Greenwood District Court – affirmed in part, reversed in part, and remanded with directions, NoO. 105,362 – APRIL 6, 2012.   This case has been litigated for over 6 years.  Of particular note to real estate practitioners are the following concepts:

  1. Cemetery land in Kansas is not subject to a number of laws pertaining to real property, including abandonment and adverse possession.
     
  2. Cemetery land in Kansas may not be sold at a county’s tax foreclosure sale.
     
  3. A Kansas landlocked cemetery, public or private, maintains the implied easement by necessity first created when title to the cemetery and adjacent land is severed, regardless of the passage of time or extent of use.   The scope of such easement, however, must be a fact-based determination.
     
  4. The Kansas public has a vested interest in access to all cemeteries, whether created as private or public cemeteries, for: (i) paying respects; (ii) historical research; and (iii) genealogical matters.
     
  5. The County Clerk in each Kansas county has a statutory duty to exclusively maintain and control burial grounds not otherwise provided for.

 The text of this decision is interesting and can be found at http://www.kscourts.org/Cases-and-Opinions/opinions/CtApp/2012/20120406/105362.pdf.

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Kansas City, Missouri Stormwater: Maximum Fees & Credits

Earlier this year, Kansas City Missouri amended Chapter 61 of the city code to double the maximum stormwater fee per property.  This increase raised the maximum fee from $2,000 to $4,000 per month.  The scheduled rates otherwise did not increase.

If you own property served by a private detention structure, you may be entitled to a credit against stormwater fees billed for that property.  Depending on its determination of how much stormwater runoff is reduced downstream, the Water Services Department can authorize credits between 10% and 50% of the fees you otherwise would pay.

Credits of 50% are also available for properties having a ratio of total area to impervious surface area of at least 30 to 1.  This credit, combined with any credit available for a detention structure, cannot exceed 75%.

If you meet either or both of these qualifications, a credit against your stormwater fee is not automatically provided. Owners must apply to the Water Service Department for stormwater credits.

Can You Enforce an Email Signature on a Contract?

Since 2000, every state has adopted a version of the Uniform Electronic Transactions Act (the “Act”) to give legal effect to e-signatures and the retention of electronic records (as opposed to paper documents).  All states and the federal government now afford full legal significance and enforceability to most electronic signatures and electronic documents governed by their laws, so long as the parties consented to conducting the transaction in an electronic form.

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Rails to Trails in Kansas

Recently, Miami County, Kansas successfully defended its right to require a maintenance bond and impose other restrictions on non-governmental operators of converted railroad lines. The federal “Rails to Trails” law spurred the development of abandoned railroads for recreational uses. Several states – Kansas among them – then enacted laws to further regulate the operation of those newly-created trails within their states. A private trail operator in Kansas objected to the additional regulations. The operator argued that, similar to railroads, the trails should be controlled only by federal laws as to maintenance and operations. The court disagreed, noting that the Rails to Trails Act is primarily concerned that a trail’s use does not conflict with the potential future use as a railroad. Private operators of rails-to-trails in Kansas will need to comply with the federal law, but also with the more stringent operational and maintenance standards of the Kansas Recreational Trails Act.

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Will the Current State of the Economy Change 70 Years of Missouri Law on Foreclosures?

For 70 years, Missouri law has provided lenders the ability to seek recovery of their deficiency remaining after foreclosing on real property securing the debt. There is a chance, however, that the law may be about to change.  In an unusual move, a Missouri Court of Appeals has, on its own, sent a foreclosure case to the Missouri Supreme Court for further review because the case “presents issues of general interest and importance and for the purposes of reexamining existing law.” 

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Commercial Lease Love Triangle: Using Letters of Credit to Secure Commercial Leases

In today's economy, commercial landlords must use more creativity to win a new retail or office tenant.  One tactic landlords use to attract new tenants is to offer generous allowances for fancy leasehold improvements or to install such customized improvements themselves.

Of course, landlords who front the expenses of leasehold improvements will recoup some or all of those expenses from higher rent throughout the lease term.  Thus, if a tenant who has received extensive compensation from the landlord defaults early in the lease term, the landlord will not have recouped its expenses incurred for improvements.  If the improvements are specific to the tenant and cannot be used by future tenants, the landlord is left with a large loss even if a replacement tenant can be obtained quickly.

This risk can be mitigated by requiring that the tenant deliver a large security deposit, in some instances exceeding one year’s rent.  Assuming the landlord obtained a large security deposit from the tenant, the landlord can usually recover its losses resulting from an early tenant default under the provision of applicable state law.

However, if the tenant files bankruptcy, additional issues will confront a landlord holding a large security deposit.  This post examines the bankruptcy risks associated with the use of large security deposits in commercial leases and proposes a creative alternative (yet unproven) method landlords may use to avoid (or at least reduce) risks resulting from tenant bankruptcies.

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Inserting the "Green" into Commercial Leases

The “greening” of real estate development is gaining traction, and with it, there will be increased attention to the appropriate lease provisions necessary to carry out the intentions of landlords and tenants.  The final post in this "Sharing the Green to Go Green" series examines a variety of complex issues being addressed by the parties to a so-called "green" commercial lease.

Before They Were Green:  Commercial Leases in a Nutshell

Most leases fall into one of 3 categories:  gross, net or modified gross.  In a gross lease, such as an apartment lease, the tenant typically pays a gross amount as rent, and the landlord is responsible for all operational expenses of the project, including taxes, insurance, maintenance and often certain utility costs.  In this sort of arrangement, the landlord is highly incentivized to minimize operating costs, but the tenant has no incentive to do so.  For example, the tenant’s rent is the same whether it uses 10 gallons or 200 gallons of water per day.  In these circumstances, a LEED strategy could be to separately meter (or sub-meter) utilities consumed by each tenant, with tenants paying for their own utility consumption; however, this often entails more expensive construction than if there were just one or only a few meters, and often a landlord is prevented by the utility company tariff from charging its tenants based on the sub-metered consumption.

Conversely, in a net lease (typical of a retail lease), all of the operational expenses are passed through to the tenants, and theoretically the landlord has no special interest in minimizing operating expenses, since they are totally reimbursed by the tenants.  In fact, the landlord often charges an administrative fee to the tenants which is based on a percentage of operating expenses, so some could argue the imposition of such an administrative fee encourages the landlord to have higher operating expenses; however, in reality, landlords recognize that tenants lump all of the lease charges (whether characterized as fixed rent, taxes, CAM or other charges) together as rent, and when evaluating a prospective location, the tenants typically are comparing the gross rent proposals.  Consequently, at least in theory, the less a tenant has to pay for operating expenses, the more fixed rent the landlord can charge, so in reality the landlord has an incentive to minimize operating expenses.

In a modified gross lease, such as an office lease, the building’s first year operating expenses are typically included in the tenant’s fixed rent, but after the first year of occupancy, the tenant pays increases in operating expenses over the operating expenses for the first year or other base amount.  A cynic would observe that under this structure, the tenant would like the first year’s expenses to be artificially high (since this establishes a higher base amount of expenses for calculating later increases the tenant will have to pay), with economies sought in subsequent years, and the converse could be true of landlord (i.e., it would seek to minimize the first year’s expenses).

What happens when "green" is added to the lease?

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To LEED or Not to LEED?

This second post in the "Sharing the Green to Go Green" series provides a brief overview of benefits and detriments developers must assess when determining whether to take the "green" leap, and examines some of the governmental incentives which have emerged over the past several years as a key motivating factor for developers to justify the costs associated with green development.

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Sharing the Green to Go Green

More than ever before, the nation’s leading businesses are using words like “green," “renewable," “eco-friendly” and “sustainable” to describe their practices and products.  This cultural shift toward promoting the welfare of the environment is also impacting the real estate industry, since many developers are now finding that they must conform to certain designated environmental standards in order to gain public entitlements for their proposed projects.  This series of posts will provide an overview of the U.S. Green Building Council’s LEED standards, provide examples of how governmental entitlements may be tied to these standards, and analyze how these standards may impact lease negotiations as landlords and tenants seek to allocate the benefits and burdens of “going green.”

The first post of this series describes the green standards and the process for obtaining LEED certification.

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New BOMA Standards: 2010 Office Space Odyssey

Given that it was 1996 when the Building Owners and Managers Association International (BOMA) last issued its standards for measuring floor area and rentable area in office buildings, one should expect the new 2010 BOMA standards to contain extensive revisions.  At roughly 70 pages, that expectation has been met.

Perhaps to ease the transition, the 2010 BOMA “Office Buildings: Standard Methods of Measurement And Calculating Rentable Area” actually includes two separate, different methods of measurement that may be used.  Method A, also known as the “Legacy Method,”  offers a less drastic change for those familiar with the 1996 BOMA methodology, while Method B, the “Single Load Factor Method,” is the massive overhaul one would expect after a 14-year hiatus.  New definitions are used under both methods, some replacing otherwise familiar terminology.  However, Method B contains concepts that are unfamiliar to the 1996 BOMA methodology, such as calling for one load factor to be used for all floors of a building instead of individual floor load factors, and, as a result, Method B has more terminology that is new to the office industry.

The two methods are intended to generate the same total rentable area of a building.  Both also are designed to provide for more rigid comparisons between buildings and, as a result, to readily highlight efficiencies between buildings.  To accomplish either, however, requires getting through the long voyage necessary to familiarize oneself with the new 2010 BOMA standards and calculations.

John Cruz also contributed to this post.

Rent Reductions and Lease Buyouts: Traps for the Unwary (Part 5 of 5)

This series of posts has addressed the common situation of commercial tenants requesting (and receiving) rent reductions or similar relief from their landlords.  However, in some cases, it may make more sense for the parties to terminate their lease relationship entirely.

Assuming the landlord and tenant agree to a consensual lease termination (which typically will require some lease termination payment from the tenant to the landlord), both parties should consider the associated risks.

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Rent Reductions and Lease Buyouts: Traps for the Unwary (Part 4 of 5)

In today's economic climate, many tenants are approaching their landlords to request reduction in their rent.  In many circumstances, it may make sense for landlords to oblige, but some landlords have other business objectives.  Assuming the landlord in such a scenario is non-responsive or quickly denies the tenant's request for relief, this fourth post in the series examines the tenant's remaining options.

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Rent Reductions and Lease Buyouts: Traps for the Unwary (Part 3 of 5)

This series of posts focuses on troubled (or opportunistic) tenants who seek rent relief from their landlords in the form of a lease modification.  Assuming the landlord is willing to reduce the rent, the landlord needs to evaluate the quid pro quo for the rent reduction.  This post examines the specific issues the parties should address in the negotiations for the terms of the rent reduction.

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Rent Reductions and Lease Buyouts: Traps for the Unwary (Part 2 of 5)

This post discusses a landlord's response to its tenant's initial request for a reduction in rent.

The normal reaction of most landlords will be to resist a rent reduction under nearly all circumstances, but this might be short sighted.  Instead, the landlord should take the opportunity to perform an in-depth evaluation of its tenant.

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Rent Reductions and Lease Buyouts: Traps for the Unwary (Part 1 of 5)

The recession has caused a material decline in retail sales, resulting in a substantial number of tenants seeking rent concessions or early lease terminations. As this trend has accelerated, most retailers have concluded that it is an opportune time to seek rent reductions, irrespective of whether it is necessary for the continued viability of their businesses.

In these times of diminishing profits, most retailers feel compelled to “share the pain” with their landlords.  Accordingly, legions of real estate representatives have been unleashed with the single mission of reducing occupancy costs.  The following series of posts will examine the “rent relief” phenomenon from the perspectives of both landlords and tenants, including a discussion of potential pitfalls that are inherent in these transactions.

How tenants take the first step:

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