Archive for the ‘Business Planning’ Category

The Mysteries of Cloud Storage Explained

We demystify the cloud, your virtual hard drive in the sky.

By Jeff Bertolucci, From Kiplinger’s Personal Finance, August 2015
Using an internet-based service to save, sync or back up files is convenient. The Big Four—Apple iCloud Drive, Dropbox, Google Drive and Microsoft OneDrive—are all free, if you don’t warehouse a lot of data. The very best thing about cloud storage? When your computer implodes (as mine did recently), your personal files are secure. Life in the cloud can seem a bit hazy to newcomers, so we’ve compiled answers to some common questions.

How do I install the cloud on my Mac or PC? The first step is to download the cloud provider’s app, which integrates the service with your computer’s filing system. If you’re a Windows user loading Dropbox, for example, a folder will automatically appear in File Manager. You can then move or copy files from your hard drive to your cloud account by dragging them from the PC folder to the cloud folder.

Can I save files directly to my cloud account? Yes. Say you’re writing a letter in Microsoft Word. By saving the file to the cloud folder, you’ll have a copy of the letter on your PC and in the cloud. This is particularly handy if you work on multiple devices. Back up your files to another source, too, be it a removable drive, USB stick or memory card. Why? Because redundancy is the best way to protect yourself from the Four Horsemen of the Datapocalypse: fire, theft, hardware crashes and malware.

I’m a little unclear about what “syncing” means. When you sync a file, a copy goes to your cloud account and you can access it from other devices. Apple iCloud and Microsoft OneDrive transfer files well within their own ecosystems, and the iCloud for Windows app lets you back up PC files. But Dropbox is the only cloud storage that works across all platforms. To retrieve a file, browse the cloud folder or open it from inside a program.

I use more than one service to avoid paying for storage. Can I manage them all from one screen? There’s an app for that. Otixo is a file manager that lets you search for files across your cloud folders, and copy or move files between folders without first downloading them to your computer. You can also make cloud files available to other Otixo users. The free version allows for five file transfers at a time between clouds, and one workspace for collaborating with other users.

Is there a file-size limit for cloud storage? Yes, and it varies by service. You can upload files that are up to 15 gigabytes to iCloud Drive. With Dropbox, there is no size limit if you upload files via the service’s desktop or mobile app, but a 10GB limit via its Web site. OneDrive has a 10GB limit, too. Google Drive is a bit more complicated. Uploaded documents that convert to the Google Docs format can’t be larger than 50 megabytes, but files you upload without converting to a Google format can be up to 5 terabytes each! (A terabyte is roughly equal to 1,000GB.)

Which service is the cheapest? Google Drive and OneDrive offer 15GB at no charge; iCloud users get 5GB free. Users of Dropbox’s free Basic service start off with 2GB, but may add an additional 500MB of storage for each new Basic customer they refer—or 1GB for each new paid, Dropbox Pro subscriber—up to 18GB total. For mega users, OneDrive is the price leader at $7 per month for a terabyte of storage. Dropbox and Google Drive charge $10 per month, and iCloud is $20 per month, for 1TB.


Planning to Pass On Your Family Business

Don’t put succession planning on the back burner. Grooming a successor could take several years.

By Meghan Streit, From Kiplinger’s Retirement Report, May 2014
Larry Berman spent most of last winter in Palm Beach Gardens, Fla., perfecting his golf game and enjoying 85-degree days. Meanwhile, in snowy Newton, Mass., his 30-year-old insurance-adjusting business was growing steadily and was on track to add 50 new customers in 2014.

Berman, 68, is in the process of handing over his business to his son, Jonathan Berman, and Jeffrey Sabel, a family friend whom Berman considers a second son. Last winter, Berman alternated ten-day stays in Palm Beach Gardens with four-day stints in Newton to check up on the business. After about a year of succession planning, Berman says he feels comfortable transferring most day-to-day operations, such as handling claims and managing finances, to Jonathan, 31, and Jeffrey, 36.

That arrangement enables Berman to work fewer hours, often remotely, while still keeping a hand in high-level responsibilities such as networking and marketing. “I’m looking at the palm trees, sitting in front of a laptop and surrounded by papers,” Berman says. “I played golf on Monday with a client, which is a nice way to spend an afternoon, and it’s also good client relations.”

Most small business owners are so busy running their companies that succession planning continually gets pushed to the back burner. “Many owners haven’t thought about the fact that if something happens to them suddenly, all of the value in their business can be lost,” says Mark Rosenbaum, a financial planner at Succession Consulting Group, in Portland, Ore. “If you haven’t worked out with your senior management team who will take over if you get sick or pass away, you leave your business in jeopardy and risk losing customers.”
Identifying a successor is the first step in the planning process. Many owners of family businesses turn to an adult child, a grandchild or other relative to take over the reins. If a family member doesn’t fit the bill, an owner is likely to sell, perhaps to a key employee or to an independent third party.

When evaluating a family member, consider his or her attributes as both a manager and an entrepreneur, Rosenbaum says. Someone may be a good manager but lack the ability to focus on the big picture or think strategically—the kinds of skills needed to run a successful company.

Rosenbaum’s business partner Leo MacLeod says good leaders must “have the ability to look beyond what they need to do today. That is a skill set many companies don’t think about—can this person think beyond just doing their own job?”

Kathleen Richardson-Mauro, co-founder of Business Transition Academy, with offices in Boston and Tampa Bay, Fla., says business owners should not presume their eldest son or daughter is the best person to run the company. A successor could be a younger child or a grandchild. Richardson-Mauro, co-author of Cashing Out of Your Business (Book Publishers Network, $18), says one reason so many family businesses fail to make it to the second or third generation is because many families view the corner office as a birthright, and an unqualified successor may not be able to keep the business afloat.
If you have several children, passing on your business to one of them can spark sibling rivalry. David Karofsky, president of Transition Consulting Group, a family-business consulting group, with offices in Framingham, Mass., and Palm Beach Gardens, Fla., says it often becomes apparent to business owners which one of their adult children is best suited to take over the company. Some children may be uninterested, live far away or be committed to another career.

However, when several siblings or cousins are hoping to take the helm, Karofsky says business owners should consider the needs of the company—not family dynamics—to choose a single successor. “We have worked with businesses that have decided to have joint leadership,” Karofsky says. “It’s not our first choice, but there is no playbook for running a family business.”

Choosing one successor doesn’t mean leaving your other kids high and dry, says Karen MacKay, a succession-planning lawyer at Burke, Warren, MacKay and Serritella, in Chicago. She says if you are giving a business to one child, you might give his siblings a larger share of other assets, such as real estate, investment accounts or life insurance proceeds.

However, because a business is usually the largest asset in an estate, MacKay says some parents decide to give children who aren’t involved in the business non-voting shares of stock, while the child who runs the company retains the voting shares. This strategy ensures that all of your heirs share in the wealth your business created, but MacKay says it can cause conflict. “Oftentimes, the business owner wants to plow cash back into the business and doesn’t want to give it to a sibling who isn’t working in the business,” MacKay says. “And the sibling who isn’t in the business is saying, ‘Give me a dividend.’ ”

Grooming Your Successor

Once you choose a successor, it’s important to prepare that person to run the company. Ideally, Rosenbaum says that the process should take place over three to five years. That allows time for the successor to earn employees’ respect and to work in different areas of the business. During the transition period, the would-be successor also should develop relationships with key clients and vendors and begin representing the company publicly. “You are giving them a trial run, and it’s not impossible that you learn in a year or so that this isn’t going to work,” Rosenbaum says.

In the case of Larry Berman’s insurance-adjusting business, his son Jonathan Berman and business partner Jeffrey Sabel had both been working at the company for several years when Berman began grooming them for leadership. Berman says that the young men were eager to advance in the business, and he embraced the idea because he had previously worked for another family’s business that suffered when the founders were reluctant to cede control to the next generation.

The three men worked with a team of professional advisers to draft a succession plan. They decided that Jonathan and Jeffrey would earn equity in the company over a five-year period, at the end of which they would become co-owners. Meanwhile, Larry Berman has a five-year renewable contract that provides for his salary, expenses and a draw against commission.

Berman relinquished his post as president and chief executive officer, but he remains the chairman of the board. Jonathan and Jeffrey were named president and chief executive, respectively, in January. “It’s a matter of learning to let go of the things you don’t need to do,” Berman says.

While he is still active in the business, Berman is making sure his protégés reap the benefit of his experience. He frequently copies his successors on important e-mails. He also makes a point to share stories from his 40 years in the adjusting business, which he says Jeffrey affectionately refers to as “Larry lessons.” “They are earning the business by ‘sweat equity’ and by taking care of my salary and expenses,” Berman says. “And at the same time, they are the beneficiaries of learning from me.”
When you’re passing on a business to a family member, you and your successors will need to find a way for you to be compensated or create a stream of income for your retirement. Steven Faulkner, head of private business advisory for J.P. Morgan Private Bank’s Advice Lab, advises business owners to review all of their assets and income sources during succession planning to determine how much money they’ll need from the business to live comfortably in retirement.

Some owners decide to work on a consulting basis for their former companies and collect a salary. You can require your children to purchase the company, either with their own capital or with a bank loan. Faulkner says another option is a seller-financed buyout, in which the company, the seller or both finance a loan for your successors to purchase the business, thereby creating an income stream for you.

Estate planning is another important aspect of succession planning. Susan Link, an estate-planning lawyer at Maslon, Edelman, Borman and Brand, in Minneapolis, says gifting shares of stock in the family business is one of the most tax-efficient methods of transferring the value of a company from one generation to the next. A well-executed plan will enable you to pass on your family business—while you’re alive or after you die—and minimize the estate-tax bite.

You can transfer shares worth up to $14,000 ($28,000 for a couple) to an individual each year without having to file a federal gift-tax return. Any amount above $14,000 counts against the estate-tax threshold when you die. The threshold in 2014 is $5.34 million for an individual ($10.68 million for a couple). If you have a number of years to plan, you may be able to use these gifts, as well as certain trusts or partnerships, to transfer a large portion of your business to your successors while enabling you to retain control until you are ready to give up the reins. In the meantime, you’ll be removing taxable value from your estate.
The IRS also permits people who are gifted shares of privately held companies to discount the value of that stock if certain standards are met. That allows owners to shift additional shares while limiting their gift-tax exposure. Link says appraisals cost about $8,000.

Selling to a Third Party

For some small business owners, selling to an independent party makes more sense than choosing a successor from within the family. That was the case for Peter Fairbanks, 66, who sold his Norwell, Mass., energy engineering company to a private equity firm in 2011.

Fairbanks and his wife started their company in 1990, and it grew to a 30-person operation. Although the couple’s two sons were working for and had ownership interests in the business, the family decided that selling was their best option.

Fairbanks says he had declined previous offers to sell his company, but this firm made an offer that caught his interest. “It seemed like these folks could provide us with the value we thought the business had,” Fairbanks says. “I made sure my sons benefited at the time of sale as well.”

Getting a business ready for sale requires a different kind of preparation than when you’re passing it on to a relative. Early in the selling process, Fairbanks realized he would need professional assistance, so he hired Richardson-Mauro’s consulting firm, and it connected him with other advisers. The consultants helped Fairbanks prepare the financials in the format that the prospective buyer wanted. “We also engaged an investment banker who helped us with the negotiations and with presenting the company in the best way,” he says.

If you think you might want to sell your business to a third party, you should begin getting your financials in order two to three years ahead of time, says Mark Ferm, a certified public accountant with Tronconi Segarra & Associates, in Williamsville, N.Y. For example, you should stop writing off club memberships and vehicles as business expenses. Ferm says companies are usually valued based on a multiple of earnings, so if your business income is being reduced by personal expenses, that could lower the selling price.

Richardson-Mauro says that it’s particularly important for small businesses to have organized financial documents because the current resale market is competitive. With baby boomers hitting retirement age, she says there’s a surplus of small businesses for sale, creating a buyer’s market. And while lending restrictions have eased since the recession, she says credit is still tight when it comes to buying a company. “Buyers are more discerning and there are more businesses to choose from, so you really want your company to be dressed for success,” Richardson-Mauro says.

Whether you’re selling to a third party or passing on your business to the next generation, you need to prepare yourself for a life without a company to run. Amelia Renkert-Thomas, co-owner of Withers Consulting Group, in New Haven, Conn., and London, says she helps retiring business owners come up with a plan for how they will spend their time and for ways that they can redirect their energy. She says the kinds of people who have the ambition to build successful businesses often are unhappy when they have too much downtime or aren’t working on meaningful projects.

That is why Renkert-Thomas recommends that retired business owners get more involved in philanthropy or put their business experience to good use by volunteering for an organization such as SCORE, which connects new business owners with mentors. What you don’t want to do is name a successor, but then show up at the office every day. “I see business owners who do that for 20 years, and everybody defers to them,” she says. “That can be really dangerous for a business because the senior person isn’t running it full time, and the next generation can’t run it because no one will give them the respect and power they deserve.”

Berman says he had watched too many friends fail to thrive in retirement because work had been the sole focus of their lives. He says he wanted to be more deliberate about how he will spend his retirement years, and for him that includes leisure time with his wife and warm weather.


How to Start Your Business with Crowdfunding   Use sites such as Kickstarter, Indiegogo and Peerbackers to make your big idea a reality.   By Lisa Gerstner, April 10, 2013

Do you have a great idea for a product or business, but lack the funds to bring it to life? Especially for you less-seasoned entrepreneurs who may not qualify for traditional loans or have a flush network of investors to tap, crowdfunding may be the perfect way to get your project off the ground. It certainly worked for Pebble, a watch that connects wirelessly to an Android phone or iPhone and lets its wearer run apps and see who’s calling from her wrist. Last year, the entrepreneurs who created it aimed to raise $100,000 through crowdfunding site Kickstarter. They managed to wrangle almost $10.3 million. Not bad.

A bonus of submitting ideas to the public online is that innovators can get a feel for how popular their concepts might be with consumers. Gauging market interest is one of the primary reasons that Phu Nguyen, 26, and Peter Seid, 23, proposed their idea to the masses using Kickstarter in late 2011. The masses responded with gusto: The pair raised nearly $115,000 — well over their $32,000 target — to develop Romo, a robot that’s controlled by a smart phone. A year later, they raised about $170,000 in a second Kickstarter campaign to develop advanced software for Romo. Today, their business, Romotive, has grown to 19 full-time employees, and the company has plans to expand sales of the robots from its Web site to retail locations.

You don’t have to invent slick smart phonetechnology to get in on the game — crowdfunding sites are sprinkled with proposals for everything from a bike-in movie theater to a line of flavored coconut butters. But you do need passion and a plan. “You have to believe in your heart of hearts that you can create a certain amount of interest to get a certain amount of money,” says Scott Gerber, founder of the Young Entrepreneur Council. If you think you have a winning idea, use these tips to boost your chances of raising big bucks. Or small bucks, if that’s all you need.   Pick the Right Platform   With sites such as Kickstarter, Indiegogo and Peerbackers, entrepreneurs can solicit donations for a project — as opposed to gathering investors who share in a piece of the business — to participate in crowdfunding legally. In return for contributions, funders may receive perks, such as a T-shirt or a shipment of the product once it’s ready for prime time.

These sites charge nothing for you to post your project, but they collect a portion of the funds you raise. Some sites require participants to fully meet their funding goals; otherwise, the money is returned to the donors. Other platforms allow you to keep any funds you gather, but they may take a larger cut of the proceeds if you don’t meet your goal. Indiegogo, for example, charges a 4% service fee to those who fulfill their goals but 9% to those on a Flexible Funding plan who don’t meet their targets.

Set Clear and Realistic Goals   Don’t pull a number out of thin air for your funding target. Potential backers may expect you to defend the amount you request. Do the math to figure out how much money you need for your project, and be able to account for every dollar.

You should start the process with an end goal in mind. But you don’t have to fund the entire vision in your first round of solicitation, says Sherwood Neiss, principal at Crowdfund Capital Advisors. It’s better to exceed a target for a feasible goal than to fall short of one for which you overestimated interest. Break the process down into smaller milestones if necessary. “The crowd will appreciate the fact that you’re not biting off more than you can chew, and you’ll build trust,” Neiss says.

Be Engaging   Crowdfunding sites make it easy for potential donors to find you — they sort projects into categories such as technology, food and film, and call out the most popular, newest and soon-to-end campaigns. Kickstarter also features staff favorites. And the sites are equipped with buttons through which fans can “like” your project on Facebook and send posts about it to Twitter to help you and your backers spread the word about your idea.

But you’ll need to do the heavy pushing yourself. Promote your work through such media as Facebook, Twitter, YouTube and blogs. Update your project’s page with content such as videos and blog posts. Even after your campaign ends, keep the information on your page fresh, and send messages to backers to keep them posted on your progress. And don’t forget good old-fashioned word of mouth — talk to your family, friends, members of the press and anyone who will listen about your big dreams and how they can help you make them come true.

Check Your Time and Energy   Account for the hours and manpower necessary to keep up with the work. Nguyen says that he and Seid spent an hour or two per day just responding to e-mails and updating backers on Romo’s progress during their first Kickstarter campaign. Gerber used Indiegogo to crowdfund support for a Young Entrepreneur Council book, Fix Young America: How to Rebuild Our Economy and Put Young Americans Back to Work, which offers ideas and solutions to help Millennials get ahead. He says he had a team of three people on the case, assigned to handle such aspects as promotions and social media outreach.   Once your idea’s a hit (high five!), be prepared to spend more time and energy on your project. You might even need to hire more help to increase production and ship the goodies you’ve promised to backers.

Learn from the Crowd   Nguyen advises using feedback from supporters to shape your idea into the best possible product. “Your intuition is never as good as what your customers tell you they want,” he says.

And you may find future employees, too. Part of Nguyen and Seid’s motivation to put their project on Kickstarter was to seek likeminded folks who could build phone applications compatible with Romo. They found developers and even ended up hiring a Kickstarter connection as an engineer.


Six Steps to Starting Your Own Business

Looking to be your own boss? Here’s how to get started on the right foot as an entrepreneur.   By Gwen Moran, March 15, 2013

Maybe you have a million-dollar idea, or maybe you have just grown tired of working for someone else. Either way, becoming your own boss requires a mix of creativity, strategy and street smarts. We’ve tapped the minds of experienced entrepreneurs and business experts to give you six secrets to success. Heed these guidelines as you take the next steps toward starting your own business.   Know your customer   The better an entrepreneur understands the target audience, the more likely he or she is to create products and services that buyers are willing to pay for, says Joel Wiggins, chief executive of the Enterprise Center of Johnson County, a business incubator in Lenexa, Kan. It sounds simple enough, but that critical edge, whether gained from experience or market research, can separate failing companies from successful ones.   That’s certainly the case with Marcie Carson. Based on what she learned from running IE Design + Communications, a Hermosa Beach, Cal., graphic design firm she co-founded in 1995, Carson was confident that customers would pay a premium for high-end, eco-friendlypaper products. But before jumping into the design process, Carson spent two years researching gaps in the upscale paper market. The result: a product line shaped not by aesthetic whim but rather by a thorough analysis of the target audience. Carson’s new venture, Mixt Studio, sells sustainable goods ranging from cards and gift wrap to totes made from fabric-like paper.   Test your idea   One of the best decisions an entrepreneur can make is not to go into a business that’s doomed to fail. A simple way to determine the likelihood of failure is to test an idea before sinking time and money into it. Business consultant and author Jim Beach recommends taking a new idea to ten prospective customers and finding out how many would buy it.



6 Things to Know About Credit Scores   FICO isn’t the only number in town. The score that counts is the one your lender uses.   By Jessica L. Anderson, August 2012

1. There is no single number.The compilers of the widely accepted FICO credit score allow lenders to customize their system, so different lenders produce different scores. Plus, each of the credit bureaus—Experian, Equifax and TransUnion—has a proprietary scoring model. As if that weren’t enough, the credit bureaus together invented VantageScore a few years ago to compete with FICO.   2. Different scales, different scores. FICO scores range from 300 to 850. You’ll need about 760 or better for the best mortgage rates, but a score of 720 should be sufficient to get you the best deal on an auto loan. About 10% of lenders now use VantageScore, which ranges from 501 to 990 and has corresponding letter grades from A to F. The best rates go to borrowers with scores in the A range (above 900). If you are denied a loan or given less than the best rate, a lender must tell you the score it used, along with the corresponding range and factors that adversely affected your score.   3. Do a credit checkup. You can monitor your credit yourself by requesting a free report once a year from each of the credit bureaus through But the free report won’t include your credit score; you’ll pay about $8 to get the credit bureau’s proprietary number. The majority of lenders (especially mortgage lenders) use FICO scores, however, so if you’re in the market for a loan, that is the one you want. At, you can get your credit report and a FICO score from Equifax or TransUnion (but not Experian) for $20.

4. Free doesn’t always mean free. If you are just looking for a ballpark estimate of how you’re doing, go to You’ll get free estimates of your FICO score and VantageScore along with Experian’s own PLUS score. Sites such as and, however, will give you a free PLUS score, but only if you sign up for a free trial subscription to a credit-monitoring service; if you don’t cancel in seven days, the service costs $15 to $20 a month. Likewise, at, you can get your FICO score free, but only if you accept a trial subscription to the com­pany’s Score Watch system.   5. Maintain credit health. All of the scores measure the same factors from the information in your credit file, and they all indicate the same thing: creditworthiness. Try to keep your credit-utilization ratio low—that is, be aware of the amount of debt you have compared with the amount of available credit you have. A history of paying your bills on time helps. Having a variety of loans—for example, a revolving line of credit (such as a credit card), a car payment and a mortgage—will boost your score, too.

6. It’s a moving target. The information in your credit files at the bureaus is continually changing—and so will your score. If you’re about to apply for a loan, check your reports for mistakes that could impact your score. Pay down balances as much as possible. And if you’re not applying for a credit card or making a big-ticket purchase anytime soon, says Jason Alderman, a senior director at Visa, “it doesn’t matter what your score is tomorrow.”


What’s The Key To Getting Results In Your Business?
By Peter Hobler

Here’s a question everyone wants to know the answer to! Another way to ask it would be “I feel like I’m doing everything, why aren’t I getting results?”, or “Why aren’t I getting the same results so and so is?”

Why do some individuals get great results and make a lot of money while most just keep on spinning their wheels and going nowhere?

Is it the marketing? Is it the training? Is it because there’s not a system to follow? Could it be a lack of desire or commitment?

The answer to each of these could be “Maybe.”

The more realistic response boils down to the basic fact that the majority of people do not have a clue about how to be efficient as far as utilizing their time, to manage themselves and be extremely productive in order to get the results they simply dream about.

There are a lot of different theories on how to be efficient and productive. Most of them seem to be focused on “Time Management”. It has to be challenging attempting to manage something that’s so limited and therefore so valuable.

Time cannot increase. Time will not change. Time is a constant and it’s always on the go. There’s never enough time to do all the things we think we have to do.

The bottom line? It’s how we manage ourselves in the time we have. Let me repeat this. It’s how efficiently and effectively we manage ourselves that directly determines what kind of results we get.

In reading a great piece by Andrew Cass today called “Extreme Productivity Secrets”, it became evidently clear how we can make changes so we can get the results we want.

In order to recondition ourselves and develop new patterns, we have to figure out what we want and then erase the old patterns we have allowed to linger for way too long. You know, the ones that have so many people stuck in the comfort rut in which they get so mired down with all the muck of their unaware mindset.

The process starts with knowing what you want. Next comes finding a vehicle having the methodology and potential to take us to our destination and get us what we want and to where we want to be (and maybe even who we want to be).

Structure, organization, focus and discipline are core components that will align us and keep us heading in the right direction.

Mindset and patience are virtues that will keep us energized and keep us from quitting. Quitters never get results. (Though there may be times when tweaking what you are doing can really be beneficial).

Choose a particular time of day when you can laser focus in on the vital revenue producing activities that will get you the results you desire. Think about them in detail. Set them as your daily goals the night before.

Make sure there are NO distractions of any kind. Period. Set up your focus time blocks. Commit to them and make sure you get them done each and every day in line with your productivity plan, preferably first thing in the day

This means making a commitment to yourself. This is not being selfish, which is when someone doesn’t care about anyone but themselves.

It is be self-centered, which is the ability to focus on yourself first in order to grow and transform, to make yourself strong. Now you can be strong for others in your life.

It’s really important to realize that during your productivity time periods you schedule each day, to put on record to let anyone and everyone know that no matter what there are no distractions allowed. Have the awareness to avoid multi-tasking at all costs. This is poison for productivity.

Design a personal productivity plan and a self-management plan. Figure out what you want, what you need to do and schedule your time blocks or time batches when you will do your most important productive actions, activities that will get you closer to your goals.

Don’t give overwhelm an ounce of energy or it will distract you and sap you. Be your own boss and be accountable!

As Andrew Cass says, “Extreme Productivity = Maximum Profits.” Commit. Focus. Take daily action. No more procrastination!

Put your productivity plan and self-management plan into action and replace the terrible feeling you get when overwhelm and procrastination are in control, with the feeling of tremendous results so you can be the successful entrepreneur you envision!

Top 6 Costly Mistakes to Avoid When Developing Trade Credit
By Scott Letourneau

When people start a business, it is very important for them to establish business trade lines of credit. Without doing so, they are oftentimes unable to cover their expenses until there is enough income to actually cover the overhead. As such, business people absolutely need to know about trade credit. Company owners have various forms of credit available to them.

One such form is trade credit, which is a critical component to running a successful venture. Trade credit is unique because it is an open account with other organizations that allows people to receive goods or services in advance of payment. Unlike a corporate credit card, trade credit is specific to whichever organization the business line of credit is opened with.

Most individuals are familiar with credit from their personal finances. However, unless an individual has run a business, it is unlikely that he or she will understand the intricacies of trade credit. As such, many novice business people make costly mistakes when becoming familiar with this form of credit. It would be wise to learn from the mistakes of others to avoid repeating their errors. The following summarizes some of the more common mistakes people make when dealing with trade or vendor credit:

1. People use cash lines of credit when they should be using trade or vendor credit to save on cash flow. If you are purchasing office supplies for your business use an office supply card with trade credit. Do not use your business credit card that gives you access to cash.

2. Please fail to develop a profile with Dunn & Bradstreet and have their vendors report to D & B to help build the business Paydex score.

3. Business owners fail to have a vendor to report to Corporate Experian® to build your business credit profile with them also. You are not able to pay a fee to Corporate Experian® to build a profile. It can only be triggered by a vendor.

4. People fail to make payments on time. Those who extend trade credit expect timely payments. By not making payments on time, business people not only jeopardize their ability to receive future credit, but they damage the reputation of their businesses.

5 .People forget to ask for increases in their trade or vendor lines of credit. These increases are looked upon favorably by banks when it comes to secure cash lines of credit. A business owner’s good payment history with vendor credit is a good measuring stick by the banks for when they determine how much in cash lines to grant your business!

6. People forget that vendor or trade credit still must be part of the business budget and it must be paid back. It does not mean frivolously spend on trade credit to get your business in a position to get more cash lines. Everything must be used in balance and a business budget is key to keep on track!

It is critical for individuals to keep these points in mind when dealing with trade or vendor credit. Trade or vendor credit can be very beneficial or very detrimental, depending on how the individual uses it. This applies to trade credit as well as other types of credit.

Electronic Records Management – Benefits and Security
By Daniel A Baker
Electronic records management is a way to manage your documents electronically so that you can store them electronically, but have access to them from different computers. Many businesses today are moving towards, if not already at a point of managing their records electronically.

In this day and age of computers, it makes sense to manage records electronically. With companies spreading out or having different locations, yet totally being tied together with the internet, it just makes plain sense to have an electronic records management system. In fact, it is so important that many companies absolutely require it, It has become the standard in business, rather than the exception. If there is a company who is not managing their records electronically, usually they are a very small company, or they are doing something very wrong that they could improve upon.

When you have electronic records management, it means that you need to have a very secure network, that is one thing to be really focused on when you are storing records electronically – security. If your network is not safe or of someone can easily break into it, then you need to fix that. Even if it is secure from the inside. Records that are private or confidential need to be kept away from every employee – many companies have very strict standards about that.

Because electronic records management has become the status quo lately, it is important to be able to have the infrastructure to manage it. Organization is key. What this means is that the files have to be grouped and stored in a way that is easy to understand, so that documents don’t get lost in the shuffle. Part of this means that there should be an understandable and clear method for naming the files that is intuitive and not gibberish.

For example, it is better to use a system of names and numbers that make sense in your electronic records management. For example, you would not want a bunch of electronic records named things like “ZI47a23FGE” unless they were in a sequence that could be understood. It is much better to name files something with the date along with names and numbers, for example: “2011-06-23 Personnel Review”.

Managing records electronically just makes sense in the modern world of computers and filing. There are so many benefits to it, and as long as your network is secure and administered well, the choice to use electronic records management makes financial and organizational sense.

Lease Negotiations
Involving Franchisors
By Gary A. Kravitz

Lease negotiations are normally a two-party activity; the
landlord and the tenant go head-to-head to work out
the best deal. When dealing with a franchisee as a ten-
ant, however, a third party often lurks in the background: the
franchisor. With more than 900,000 national franchised busi-
ness establishments, growing at a 4.3% annual rate according
to the International Franchise Association, landlords and their
counsel need to be aware of potential pitfalls-and benefits-
of having that third party at the negotiating table. This article
will explore the various ways franchisor involvement can
affect the course of lease negotiations.
Many franchisors have a standard addendum they require
franchisees to add to a lease. The addendum is designed to
protect the franchisor’s interests in the transaction. These
interests run the gamut from making sure the franchisee is
operating according to certain specified standards to protect-
ing the location for the franchise and for potential future
franchisees. Contrary to first impressions, landlord interests
do not necessarily run counter to franchisor’s. The parties can
reach a mutually beneficial arrangement-one that offers the
landlord greater long-term security and protects the interests
of the franchisor. For the purposes of this article” franchisee”
should be considered generally the same as tenant. The term
“tenant” will be used when discussing an issue that would
relate to nonfranchisee tenants as well.
Regardless of whether counsel represents landlord or
tenant, it is to everyone’s advantage to disclose the existence
of any franchisor addendum at the outset of the negotia-
tion. The landlord and its counsel do not appreciate being
surprised with additional terms at the end of a negotiation,
and the parties are likely to work out a more comprehensive
and mutually beneficial solution if all the facts are laid out in
advance. Nevertheless, landlord’s counsel must be aware of
the possibility that a franchisee will be subject to a franchisor
addendum and should inquire if one exists before starting
Although the goals of each party in a lease negotiation are
different, there are areas where the goals of the franchisor and
landlord coincide.

A landlord’s goals are simple: (1) limit the number of land-
lord’s obligations and liabilities, (2) eliminate opportunities for
franchisee or franchisor to terminate the lease, and (3) maintain
security interests such as guaranties, liens, and security deposits.
The landlord also wants to maintain consistency between the
lease and the addendum and avoid having conflicting obliga-
tions to the franchisee and the franchisor.
The franchisor’s goals relate to both the lease and the fran-
chise itself: (1) protect the location, (2) protect the franchise’s
reputation (that is, have control over a troublesome franchisee),
and (3) maintain consistency across franchise operations. The
tenant has little interest in franchisor addenda apart from making
sure that the deal gets done. The next sections address several
common clauses in franchisor addenda. Fortunately, sufficient
middle ground exists to satisfy the needs of each party.
Franchisor addenda frequently include a clause allowing the
franchisor to take an assignment of the lease. These provisions
take different shapes, but the common thread is that the fran-
chisor is given the right to take an assignment in the event of a
franchisee default-either under the lease or under the franchise
agreement. From a landlord’s perspective, this provision can be a
great advantage because it provides additional security. It affords
the landlord another ready and available party to take over the
lease if the original franchisee defaults. More importantly, the
franchisor will likely have deeper pockets than its franchisee.
Landlord’s counsel should make sure that the assignment provi-
sion contains adequate notice requirements, however, so that the
landlord will know which entity is responsible under the lease.
The keys to making this provision work for all parties are
knowing who is responsible for the liabilities of the defaulting
franchisee and clearly identifying those responsibilities in the
addendum. Generally, the franchisor will take the position that
the liabilities of the franchisee stay with the franchisee, and the
franchisor will not have to assume its existing debts. This ap-
proach would result in the landlord pursuing the franchisee for
outstanding debts. Landlords, of course, will take the position
that the franchisee was chosen by the franchisor, and the franchi-
sor should share in the burden of the franchisee’s failure to meet
its obligations. The resulting language in this provision often will £
be determined by the relative leverage of the parties.
Assignt:nent to New Franchisee
Closely connected with the above provi-
sion is a second assignment clause allowing
the franchisor to assign the lease to a new
franchisee. As with the assignment to fran-
chisor provision, the landlord can benefit
from this clause. Having another franchisee
take over the lease, particularly when faced
with a defaulting franchisee, is a welcome
event—especially when another new tenant
may not be readily available. Franchisors
desire this provision because many franchi-
sors either do not have a business plan that
includes company-owned stores or may not
have the administrative capacity to manage
a company store in a location far from corpo-
rate headquarters. Allowing a franchisor to
assign the lease to a new franchisee gives the
franchisor the ability to continue business in
a desirable location or target market.
One way to address this provision is to
determine under what conditions a franchi-
sor will be able to make an assignment. The
addendum may not contain any limita-
tions on the free assignment of the lease by
the franchisor. Under these circumstances,
however, a landlord could argue that having
a new franchisee is akin to having the lease
start anew. With that understanding, land-
lord’s counsel should require that any new
franchisee be subject to the same review and
approval requirements as an original fran-
chisee. The landlord could retain the right to
request a review of financial statements, tax:
returns, and other financial indicators before
approving a new franchisee as a tenant. In
addition, the landlord may want to require
a guaranty and security deposit from a new
franchisee. With these protections in place,
the parties can balance the business needs of
both the landlord and the franchisor.

Franchisor addenda also can have a tertiary
effect on the default clause of the lease.
Franchisors have an obvious interest in
knowing when or why a default leading
to a termination might arise. They want to
protect the location and protect against er-
rant franchisees. In addition, as noted below,
a franchisor may even want to add to the
list of possible defaults to protect its interest
under the franchise agreement.
Notice of Defaults
Most franchisor lease addenda contain
a requirement that the landlord give the
franchisor notice of defaults that occur
under the terms of the lease. A franchisor
may not have day-to-day knowledge of
the operations of each of its franchisees
and may not have the capacity to per-
form regular reviews. In such cases, the
franchisor relies on landlord notices to
advise of trouble because the franchisor
will not always know if the franchisee
is working within the terms of the lease
agreement. Notice from the landlord of
the franchisee’s default affords a franchi-
sor the ability to address a breach in the
lease while options are still available. The
landlord also benefits from this require-
ment by having a second party ready to
cure a breach of the lease (or as discussed
above, accept an assignment of the lease).
From the landlord’s perspective, the
more parties available to cure a potential
default and pay rent, the better. Even if
the default is not one that could lead to
immediate termination, a franchisor that
receives multiple notices of default from
the landlord should recognize that the
franchisee is in need of assistance.
The notice requirement might appear
harmless at first, but it contains many
potential problems for the landlord that
need to be addressed. Initially, land-
lord’s counsel must make sure that the
landlord has the capacity to provide an
additional notice. Some landlords may
be too small to have the administrative
wherewithal to provide an additional
notice; quite simply, they may forget
to even look at lease addenda when
considering notice requirements. Further,
landlords who work from computerized
lease abstracts instead of the full leases
themselves may not have a system that
allows for a second party to receive no-
tice. If the computer program allows for
it, possibly the simplest way to address
the notice issue is to add the franchisor as
a specified party to receive notice in the
lease itself rather than just in the adden-
dum. This way, the obligation to provide
notice to the franchisor is in plain sight.
If the landlord agrees to provide
notice, and the provision is left in the
addendum rather than moved to the
lease, landlord’s counsel must consider
another critical issue. The notice lan-
guage should be consistent between
the lease and the addendum. In many
landlord form leases, a landlord does
not have to provide notice in the event
of a failure to pay rent. Landlords argue
that the tenant should know rent is due
at specified times and should not need
a written reminder of that ongoing and
unchanging obligation. There may even
be other automatic defaults in the lease
that also do not require notice from the
landlord. If the landlord’s form lease
does not require notice to its tenants, but
the franchisor addendum requires notice
of all defaults to franchisor, the landlord
may have unwittingly agreed to provide
notice when none is regularly given.
As this discussion suggests, it is criti-
cal for landlord’s counsel to ensure that
the landlord’s notice requirements, what-
ever they may be, are consistent between
the lease and the addendum. A simple
solution is for the landlord to agree to
give the franchisor only those notices
given to the franchisee, thus eliminating
what may become a separate obligation
with different terms. At a minimum, if
the parties are negotiating the lease and
addendum at the same time, the notice
requirements, whatever they may be,
can be drafted in a consistent manner
and agreed to in both the lease and the

Along with notice, cure requirements
often appear in franchisor lease ad-
denda regarding defaults. These clauses
afford the franchisor the right to cure the
franchisee’s defaults and an additional
time period to cure such defaults. As
noted previously, granting the franchi-
sor the right to cure a franchisee’s breach
benefits both parties and should be freely
granted by landlords. The additional
time period to cure, however, can be
more problematic. This provision can
take several forms, such as a simple 30-
day time period to cure a lease default or
a requirement that a second written no-
tice be sent to the franchisor in the event
that the default was not cured within the
standard time provided. There are other
variations, but the bottom line is that the
franchisor is demanding additional time
to provide a cure.
From the franchisor’s standpoint, this
provision makes sense: the franchisor
may not be aware of the daily operations
of the franchisee, or the franchisor may
require additional time to review the
problem and assess the appropriate
remedy. Or the default may be a critical
one, and the franchisor may need time
to assess whether to take control of the
location or seek out a new franchisee.
Whatever the reason, the result for the
landlord is the same-increased delay
before a default under the terms of the
lease can be properly addressed.
A landlord’s receptiveness to provid-
ing additional time to cure rides mainly
on two factors: the economy and the
financial security of the franchisor. 1£ the
economy is strong, a landlord may have
a long list of tenants ready to occupy
the space in question. In this case, a
landlord may have no patience to deal
with a problem tenant. Conversely, if
the economy is poor and there are no
prospective tenants, the landlord may
want to make considerable efforts to
keep the franchisee in the space, so long
as the cost of doing so does not exceed
the rent paid.
In addition, the landlord’s response
to this issue may ride on the size and
draw of the franchisor. Is this a business
that draws a good deal of traffic into the
property (particularly important with
shopping centers)? Does the franchisor
have a large, financially sound operation
with the capacity and desire to take over
the space and operate the unit in default?
Either way, a landlord that agrees to pro-
vide additional notice should make sure
that the time period is reasonable and
that the trigger for a franchisor response
is clear. During this extended cure pe-
riod, the franchisor will likely determine
whether it will take over the location as
a corporate-owned store or with a new
On the one hand, a landlord should
avoid being stuck in the position of
suffering a defaulting franchisee that is
continuing operations on the premises
or, if the franchisee simply vacates the
premises, having a vacant space for an
unnecessarily long period of time. A
landlord should have the opportunity to
secure a new tenant quickly, if necessary,
because a vacant space or a problematic
tenant can injure the reputation of the
landlord’s property and have an adverse
effect on the landlord’s relationship with
its other tenants. On the other hand,
having a franchisor willing to step into
its franchisee’s shoes may be worth the
wait in a slow economy.
One additional factor that should be
considered when dealing with notice
and cure provisions is the type of default
under the lease. Not all defaults are cre-
ated equal or viewed in the same light
by all parties. A landlord may be willing
to allow for a delayed cure for a minor
technical breach of the lease, but not so
willing if a franchisee is two months
behind on rent. A landlord should be
wary of agreeing to wait an additional
30 or 45 days before possibly receiving a
rent payment or being able to exercise its
remedies under the lease. When con-
fronted with the specific issue of defaults
on the payment of rent, the parties can
consider a provision requiring the fran-
chisor to pay the past due rent while the
franchisor weighs its long-term options.
Frequently a franchisor addendum
will state that a franchisor’s cure of a
default does not constitute an assump-
tion of the lease. Such a provision should
be acceptable to landlords, because it
means the franchisor makes the land-
lord whole again, and the landlord can
proceed against the franchisee for any
ongoing defaults. There are certain
circumstances, however, when a land-
lord may have a tenant that repeatedly
defaults under the lease and cures at the
last possible second. In such cases, the
tenant is using the cure period as an ex-
tension of time on rent payments, which
causes the landlord to incur significant
administrative costs. Although this issue
goes beyond the scope of this article,
landlord’s counsel should ensure that
language is included in the lease, under
all circumstances, that penalizes a tenant
for repeated defaults under the lease.

Some franchisors take the additional step
of requiring landlords to provide notice
of any correspondence that pertains to
the lease, even if such correspondence
does not relate to a default. In addi-
tion, franchisors may insert clauses that
require landlords to provide notice to the
franchisor in the event of an assignment,
sublease, or modification to the lease.
Typically, these situations will require
franchisor approval before any action
takes place.

It is easy to see why a franchisor would
want to know about these events-they
may have a considerable effect on the fran-
chisor’s rights. The landlord, however, will
have to consider whether the addendum
is the best place for this provision. First, as
with notices of default, the landlord must
determine whether it has the administrative
capacity to send out these additional notic-
es-particularly when there is no default or
other trigger to send such a notice. Second,
a landlord may reasonably ask why such a
burden should be its responsibility.
Because the landlord does not have the
direct relationship with the franchisor, the
landlord may determine that it does not
want to be in the middle of the franchisor’s
relationship with its franchisee. In those
instances, the landlord can suggest that such
notices should come from the franchisee
to the franchisor. The landlord may also
decide that it does not want the burden
of determining whether the franchisor’s
approval has been obtained before one of
these actions takes place. More importantly,
a landlord will want to avoid making its
failure to provide notice to the franchisor a
default under the lease. That being said, the
franchisee’s success will rely heavily on sup-
port from its franchisor. A careful landlord
will want confirmation that the franchisor
concurs with its franchisee’s actions. There-
fore, in the event that the landlord does not
agree to provide notice to the franchisor,
the landlord can still consider requiring the
franchisee to confirm in writing that it has
obtained its franchisor’s approval when
such events (for example, an amendment to
the lease) occur.

Some of the remedies that a franchisor
may request, as discussed previously, are
reasonably free of conflict. For example,
assignment of the lease to the franchisor on
franchisee’s default is generally acceptable
and may be a preferred alternative for the
landlord given that the franchisor is likely in
better financial condition than the franchi-
see. Other franchisor remedies may be more
problematic. One such remedy would allow
the franchisor to “take over” the lease for
a set time period, six months, for example,
but not have any liability under the lease
(that is, the franchisee is still the responsible
party). This provision places a landlord in
an impossible position: the landlord can
neither evict the franchisee nor make any
long-range plans without knowing whether
the franchisor will ultimately take over the
location. In this case, the landlord should
be allowed to terminate, or at least limit,
the franchisor’s occupancy period if the
landlord secures a new tenant.
The limitation of liability provision in
the franchisor’s “take over” remedy is also
a source of dispute. This type of provision
states that the franchisor is responsible for
paying rent and for day-to-day operations
only during the applicable time period and
that the franchisor has no ongoing liabilities
under the lease. If the existing franchisee is
already in default, presumably for failure
to pay rent, the landlord should be wary of
allowing the franchisor to continue operat-
ing the business. In such a situation, the
landlord is left with no one, other than a
defunct franchisee, to take responsibility for
the liabilities that existed before the franchi-
sor took over the lease or for subsequent
liabilities beyond the mere obligation to pay
rent. Here a landlord may well require the
franchisor to either accept an assignment of
the lease with an assumption of its duties
and liabilities or allow the landlord to evict
the tenant. Presumably, if the landlord has
agreed to give the franchisor the right to
cure defaults on behalf of the franchisee
(and possibly has given the franchisor
the right to additional time to implement
a cure), the franchisor should have ad-
equate time to make a determination about
whether the location is worth keeping.
Franchise Agreement Defaults
One common clause in franchisor lease
addenda does place landlords squarely in
between the franchisor and franchisee. It
also threatens to undermine the integrity
of the lease agreement by providing the
franchisee and the franchisor a way out
of the lease. This clause provides that any
default under the franchise agreement
triggers a default under the lease. Although
the franchisor has an interest in limiting
its liabilities and terminating obligations
if a franchise relationship does not work
according to plan, a landlord should not
have to grant a third party the ability to
terminate the lease. Such a remedy puts the
landlord in between the franchisor / franchi-
see relationship. landlords will not want
to be in the position of having to terminate
a lease because of a technical default under
the franchise agreement. A landlord may
reasonably propose that if the franchisor
does not approve of the operations of
its franchisee, the franchisor can termi-
nate its agreement, remove branding
and equipment, and employ whatever
other remedies it has under its franchise
agreement. The franchisee’s lease agree-
ment with the landlord, however, should
remain, and the landlord and franchisee
will have to determine separately how
or whether that contractual relationship
will continue.

In addition to notice from landlords,
franchisor addenda often include the
right of the franchisor to inspect and
repair or modify the premises. Allow-
ing the franchisor onto the property will
presumably permit the franchisor to spot
problems and assist the franchisee before
a crisis occurs. Nevertheless, the landlord
should consider certain protections and
restrictions before providing a franchisor
unlimited access to the premises and the
unlimited right to make repairs on the
franchisee’s behalf.
First, the landlord could require that
the franchisor indemnify the landlord
in case the franchisor causes damage
on the property. Second, the landlord
could require that the franchisor provide
additional insurance-particularly if the
franchisor is making improvements on
the property-with the landlord listed as
an additional insured. Landlords should
also consider limitations on what type of
improvements the franchisor is allowed
to construct.
Landlord form leases often have
extensive language restricting when and
what improvements a tenant/franchisee
can make. Similar restrictions should be
employed when the franchisor is making
the improvements, for example, requir-
ing the landlord’s reasonable input and
review of the improvements. Also of
critical concern is what happens to such
improvements once the term of the lease
expires. Do the improvements become
the property of the landlord? Does the
franchisor have to remove the improve-
ments? Can the landlord specify specific
improvements that must be removed
at the expiration of the lease, and when
should the landlord make such a speci-
fication? landlords should be prepared
to discuss all of these issues during lease

The final addenda item to address is a
landlord security instrument that often
directly conflicts with the standard se-
curity interests of franchisors. Quite fre-
quently, landlords want to take a security
interest in the equipment and inventory
of a franchisee. Some states currently af-
ford landlords a statutory lien right over
tenant’s equipment and inventory. See,
e.g”f Ariz. Rev. Stat. § 33-362; Fla. Stat.
Ann. § 83.08; Or. Rev. Stat. § 87.162; Va.
Code Ann. §§ 55-230, 55-231. Where the
statutory framework is missing, land-
lord’s counsel can seek to provide for a
landlord’s lien in the lease.
In those leases involving a franchisee,
the franchisor will be, in many instances,
the party that provides the equipment
and inventory for the franchisee’s opera-
tions either on a rental or financed basis.
A franchisor will likely have a security
interest on such equipment and inven-
tory to protect the franchisor in the event
the franchisee is unable to meet its obli-
gations. Given that the franchisor has an
ongoing or equity interest in the equip-
ment and inventory, it makes sense that
the franchisor should have the priority
interest. In these instances, the landlord
can either eliminate or subordinate its
lien interests. The landlord can instead
rely on its other security measures, such
as security deposits and guaranties, to
protect itself. Further, in those states
(Arizona, Florida, Oregon, and Virginia)
where the landlord has a statutory lien
on tenant’s equipment, a franchisor
might request that the landlord provide a
lien waiver.

As with many lease negotiations, the
outcome of these various issues depends
on which party has the greatest amount
of leverage. Nevertheless, there is often
enough middle ground to arrive at a
solution that works well for all of the
parties. By knowing about the issues
that can arise in franchisor addenda and
bringing them to the negotiation table
both the landlord and the franchisor can
realize greater protection than if they
were operating without a franchisor addendum.

Ten Lease Provisions That Get No Respect
By Jerald M. Goodman, Sharon D. Brown, and Stephen J. Messinger
When negotiating commercial leases, lawyers typically focus
on achieving the business objectives and protecting the legal rights
and remedies of their clients. Often, however, without much thought, at-
torneys tack on a litany of boilerplate provisions. These provisions, which are
usually relegated to the end of the lease or are sprinkled casually throughout the
more “important” lease clauses, are frequently overlooked while the lawyers
dwell on the weightier issues. Nevertheless, boilerplate provisions address
important legal underpinnings and, if improperly drafted, can have significant
legal and financial consequences. A heightened degree of care and respect
toward crafting these provisions can help the parties avoid surprises.
1. Force Majeure
Occurrences defined as force majeure events excuse parties for nonperfor-
mance of their obligations under the lease. Generally, the party with the
most performance obligations will want an expansive definition of force
majeure events. In many cases, the determination of whether an event of de-
fault has occurred can turn on whether the cause for nonperformance is within
the definition of a force majeure event as set forth in the lease. The following
is a typical force majeure provision. The time for the performance of any
act required to be done by either party shall be extended by a period
equal to any delay caused by or resulting from an act of God, war,
terrorism, civil commotion, fire, casualty, labor difficulties, short-
ages of labor or materials or equipment, governmental regulation, a
restraint of law (e.g., injunctions, court or administrative orders or
a legal moratorium imposed by a governmental authority), act or
default of the other party, or other causes beyond the reasonable control of
the party seeking the extension of time (which shall not, however, include the
availability of funds), whether that time be designated by a fixed date, a fixed
time, or otherwise.  Depending on the relative bargaining
power of the parties and the allocation of performance obligations under the lease,
applicability of the force majeure provision may be expressly limited to one of the
parties. Adding a notice requirement to a force majeure provision is another means
of limiting the applicability of the provision. Because the force majeure provision
is effective to excuse a party from liability for nonperformance, parties often seek to
expand the applicability of the provision. The following are some specific examples
of force majeure issues.

Government Prohibition
A New York court has held that a temporary restraining order against a landlord
was a “government prohibition” described in a lease force majeure provision. Reade
v. Stoneybrook Realty, LLC, 882 N.Y.s.2d 8 (App. Div. 2009).

Acts of God
After Hurricane Katrina struck in 2005, lease parties litigated over the extent to
which a party could be excused from performance because of force ma-
jeure. The Louisiana Court of Appeals rejected one tenant’s argument that
the post-hurricane depressed business climate was a continuing force ma-
jeure event under the lease. The court noted that the tenant had presented no
evidence of any physical damage to the leased premises. The tenant thus
was obligated to continue paying rent for the remainder of its five-year lease
term following Hurricane Katrina. The tenant was excused, however, from
paying rent for the two months immediately following the hurricane because
the court found that “the building was inaccessible due to the aftereffects of the
storm.” Meadowcrest Prcf’! Bldg. P’ship v. Toursarkissian, 1 So. 3d 555, 556 (La. Ct.
App. 2008). The court therefore narrowly interpreted the force majeure provi-
sion to exclude the economic effects of the hurricane: “To rule otherwise
would be to make the enforceability of leases dependent on the vagaries of
the marketplace, and this we decline to do.”Id.

2. Limiting Liability
Exculpatory Provisions Landlords typically require that their
liability for claims under the lease be limited by exculpatory provisions. Ju-
dicial treatment of exculpatory clauses varies from state to state. For example,
in North Carolina, courts will generally uphold exculpatory clauses unless
there is evidence that the provision is actually an unconscionable penalty for
enforcing the terms of the lease, that there were formation irregularities in
the lease, or that there is inequality of bargaining power between the parties.
Blaylock Grading Co. v. Smith, 658 S.E.2d 680,682-83 (N.C. Ct. App. 2008) (up-
holding provision in surveying contract limiting the surveyor’s damages to
$50,000). In Pennsylvania, however, although the relative sophistication of the
parties is similarly a factor, the courts have held that an exculpatory clause
is valid and enforceable if the clause does not contravene public policy; the
contract relates entirely to the parties’ own private affairs; is not a contract of
adhesion; and the intention of the parties is expressed with particularity and
demonstrates clear and unambiguous intent to release a party from liability.
Princeton Sportswear Corp. v. H & M Assacs., 507 A.2d 339, 341 (Pa. 1986).
Some courts have held that an exculpatory clause in a commercial lease
“must be construed strictly against the party seeking its protection.” Kaplan
v. Bankers Sec. Corp., 490 A.2d 932, 934 (Pa. Super. Ct. 1985). See also Ultimate
Computer Servs., Inc. v. Biltmore Realty Co., 443 A.2d 723, 726 (N.J. Super. Ct.
App. Div. 1982) (general exclusion of liability for landlord’s negligence did not
keep landlord from being responsible for damage to computer equipment
caused by defective roof). Nebraska has applied general contract law to excul-
patory clauses, considering whether the provision was clear and unambiguous;
whether there was any disparity in bargaining power between the parties;
and whether the provision contravened public policy. Keenan Packaging Sup-
ply, Inc. v. McDermott, 700 N.W.2d 645, 653-54 (Neb. Ct. App. 2005).
The following is a sample exculpatory provision: Landlord’s liability under this Lease
shall be limited to its interest in the Demised Premises, and neither
Landlord nor any member or partner in Landlord nor any member,
partner in any such member or partner nor any other person having any
direct or indirect interest in Landlord, shall have any personal liability
with respect to any of the provisions of this Lease.
Although most tenants will accept such a limitation, many will add language
that precludes limitation of liability in the event of intentional misconduct of
the landlord.

3. Notices
A vague or unclear notice provision can prevent the parties from efficiently en-
forcing critical rights and remedies under the lease. Notice provisions should
specifically identify the acceptable methods of delivery and clearly specify
when notices will be deemed to be given. Hand Delivery Method ~
If hand delivery is an acceptable means of providing notice, the parties should
consider whether that method is likely to be effective under their particular cir-
cumstances, taking account of the size of the entities involved and other practical
considerations. In addition, the hand delivery method must expressly require an
acknowledging signature, receipt, or other documentation to evidence the actual
delivery. Facsimile and E-Mail: Delivery Methods: The parties should also consider whether
to allow notice given by the more convenient methods of facsimile and e-mail,
which will depend in part on the term of the lease since facsimile numbers and
e-mail addresses will likely change over time. Accordingly, the notice provision
must require the parties to update their contact information as needed. Most
practitioners still require that faxed and e-mailed notices be effective only in ac-
companied by a hard copy.

4. Integration Provisions
An integration provision states that all prior oral agreements and representa-
tions are integrated into the final signed lease. In general, integration provisions
are interpreted by the common law plain meaning rule: “When a contract contains
an integration clause, extrinsic evidence may not be admitted to prove different or
additional terms in the contract, although such evidence may be admitted to inter-
pret ambiguous terms of an integrated contract.” United Artists Theatre Circuit,
Inc. v. Sun Plaza Enter. Corp., 352 F. Supp. 2d 342 (E.DN.Y. 2005) (citing Proteus Books
Ltd. v. Cherry Lane Music Co., 873 F.2d 502, 509-10 (2d Cir. 1989)). The parties should
consider, however, how this provision applies to lease exhibits. Typically, the parties will provide that
the exhibits are incorporated into the integrated document even when the exhibits
are attached or finalized after full execution of the lease. Although it is not unusu-
al for the exhibits to be included as part of integrated lease provisions, the parties
may overlook the effect of terms contained in the exhibits. In one recent
case, a dispute regarding the meaning of the word “proposed” contained
in the exhibits to a lease allowed the tenant to introduce extrinsic evidence
to interpret the lease. Chesterfield Exch., LLC v. Sportsman’s Warehouse, Inc. 572
F. Supp. 2d 856, 867 (ED. Mich. 2008). The tenant argued that in its lease the
landlord represented that Sam’s Club was the “proposed” anchor tenant for
the shopping center because a plan of the shopping center attached as an ex-
hibit to the lease depicted Sam’s Club as a “proposed” tenant. The tenant
argued that in this context “proposed” meant “planned” or “intended,” and
that the tenant entered into the lease based primarily on the presence of
Sam’s Club as the anchor tenant. The landlord argued that the word “pro-
posed” merely meant “possible” or “likely” The court disagreed, holding
that the extrinsic evidence demonstrated that the lease meant “intended”
because “[ajfter all, it was the participation of Sam’s Club that rekindled the
lease negotiations.” Id. at 867.
5. Surrender
Lease surrender provisions describe the physical condition of the premises
required at the time of surrender by the tenant. Lease parties frequently litigate
over the condition required by surrender provisions.
Common Law Surrender Requirements
If the lease is silent, the standard at surrender is generally that the “lessee is
under a duty at common law to return the premises in substantially the same
condition as when they were received, reasonable wear and tear excepted.”
Statler Arms, Inc. v. APCOA, Inc., 700 N.E.2d 415, 428 (Ct. c.P. Cuyahoga Cty.
Interaction with Maintenance Provisions
When surrender provisions are litigated, a court will likely interpret the sur-
render provision in the context of the lease as a whole, especially in conjunc-
tion with the maintenance provisions contained in the lease. Depending on
the scope of the tenant’s maintenance obligations during the term of the lease,
the tenant may be liable for repairs or replacements at surrender that are not
apparent from a reading of the surrender provision alone. Statler Arms, 700
N.E.2d at 423-25,429. See also SLWj UTAH, t.c. v. Griffiths, 967 P.2d 534, 536
(Utah Ct. App. 1998) (surrender clause read with the maintenance clause to
require a new roof). For example, although a lease was silent about surren-
der, because the tenant was obligated to maintain and repair structural elements
of the leased premises during the term of the lease, the court held that the
tenant was liable to replace the roof on surrender of the premises. Statler Arms,
700 N.E.2d at 428. Addressing Special Personal Property:  In drafting a lease, counsel should
be sure to address the disposition of tenant’s specific personal property or
fixtures on lease surrender. Satellite dishes and other telecommunications
equipment installed by a tenant at its sole expense can become problematic
on surrender. In many cases, the landlord will require such equipment to be
removed and for the tenant to repair any damage caused by the removal.
6. Waiver Provisions
Waiver provisions address acts or omissions that have the potential to
function as a renouncement of rights and remedies otherwise available
under the lease. As one New York court explained: “A waiver is the voluntary
abandonment or relinquishment of a known right. It is essentially a matter of
intent which must be proved.” Jifpaul Garage Corp. v. Presbyterian Hoep., 61
N.Y.2d 442, 446 (N.Y. 1984). By including waiver provisions in a lease, the parties expressly agree that specific acts
and omissions that could constitute a waiver will not be deemed a waiver.
In some leases, waiver provisions also can address conduct of parties other
than landlord and tenant. For example, a waiver provision that is applicable
to a defined category of “Landlord’s Parties,” which expressly includes
“independent contractors,” will likely be held by its plain meaning to apply to
landlord’s construction subcontractors. H & M Hennes & Mauritz LP v. Skanska
USA Bldg., Inc., 617 F. Supp. 2d 152, 159 (EDN.Y. 2008).
Another basic function of waiver provisions is to “give a contracting
party some assurance that its failure to require the other party’s strict adher-
Compliance with law provisions can shift liability to one party
for the costs of making the leased premises compliant with
govern ment-ordered alterations or repairs. Will not re-
sult in a complete and unintended loss of its contract rights if it later decides
that strict performance is desirable.” Rehoboth Mall Ltd. P’ship v. NPC mn.
Inc., 953 A.2d 702, 704 (Del. 2008) (quot-ing Viking Pump, Inc. v. Liberty Mut.
Ins. Co., No. Civ.A. 1465-VCS, 2007 WL 2752912, slip op. at 27 (Del. Ch. Apr. 13,
2007)). For example, when a restaurant tenant was entitled to seven successive
five-year renewal terms under a lease, the landlord could not prevent the ten-
ant from exercising its second five-year renewal term based on the tenant’s
defaults during the original term, when the landlord failed to enforce
its remedies during the original lease term. Rehoboth Mall, 953 A.2d at 704-05.
In Alaska, the landlord of a supermarket property was similarly precluded
from enforcing the use provision of the lease six years after the tenant’s
initial violation thereof. Carr-Gottstein Foods Co. v. Wasilla, LLC, 182 P.3d 1131,
1140 (Alaska 2008). In that instance, the tenant relocated an affiliate-owned
liquor store from a satellite location to a portion of the leased premises, and the
landlord not only knew about the move but helped to facilitate it. The Supreme
Court of Alaska held that the waiver clause preserved landlord’s right to
object to tenant’s future violations of the use provision of the lease but that
the landlord had effectively waived its right to object to the use of the premises
for the sale of liquor.
7. Compliance with Laws
Compliance with law provisions can shift liability to one party for the
costs of making the leased premises compliant with government-ordered
alterations or repairs. In addition, these provisions typically make a tenant’s
criminal or tortious use of the property an event of default.
In general, except when the party that has assumed responsibility for
legal compliance has much less bargaining power than the other party, in
a commercial lease a court is likely to enforce a provision shifting the risk and
expense of government-ordered alterations and repairs. Fresh Cut, Inc. v. Fazli,
650 N.E.2d 1126, 1130-32 (Ind. 1995). A common example of a government-or-
dered repair is asbestos abatement. See, e.g., Brown v. Green, 884 P.2d 55 (Cal.
1994) (lessees assumed responsibility for complying with asbestos abatement
order). A blanket requirement in the lease, however, stating that the tenant is
responsible for all government-ordered repairs and alterations may not be
effective to shield landlord from all liability. The California Supreme Court
has noted that when the parties seek to allocate to the tenant the burden
of legal compliance, “the legal and practical scope of that duty may well
be less, especially where a short-term commercial lease is at issue and the cost
of compliance is more than a small fraction of the aggregate rent reserved over
the life of the lease.” rd. at 57. Similarly, if the nature of the government-ordered
repair is not expressly addressed and, from the circumstances, it seems un-
likely to have been anticipated by the parties, the court is unlikely to hold that
the tenant is liable for it. For example, in California where a tenant paid $650
in monthly rent for a three-year term to operate a cabaret and bar on the leased
premises, despite a lease provision shifting to tenant all liability for compli-
ance with laws, the tenant was not held responsible for a city-mandated earth-
quake hazard reduction reconstruc- tion that would cost $34,000. Hadian v.
Schwartz, 884 P.2d 46 (Cal. 1994). Counsel must take care to define
precisely the respective obligations of the parties. The Indiana Supreme Court
has held that a compliance with laws provision is in the nature of an indem-
nity, which is “strictly construed and the intent to indemnify must be stated
in clear and unequivocal terms.” Fresh Cut, 650 N.E.2d at 1132 (citing Wilson
Leasing Co. v. Gadberry, 437 N.E.2d 500,501 (Ind. Ct. App. 1982)). In that case,
a fire destroyed a warehouse, and the court deemed ambiguous an allocation
of risk for maintaining a fire sprinkler system when the lease required the
tenant to maintain “electrical systems, heating and air conditioning systems,
and structural frame of the building” but also impliedly required the land-
lord to maintain the roof, exterior walls, and foundation. The court therefore
vacated the lower court decision granting summary judgment and remanded
the case to the trial court. A tenant may seek to curb its liabil-
ity by limiting its compliance with law requirements to orders that are related
to the tenant’s particular use. Brown, 884 P.2d at 59. Tenants should also
seek to have the landlord represent and warrant that the leased premises
do not violate applicable building codes, regulations, or ordinances in ef-
fect at the commencement of the lease term. See Hadian, 884 P.2d at 48.
8. Estoppel Certificates/Status Statements
Over the term of a lease, estoppel certificates will be required if the
landlord seeks to sell or refinance the property. Similarly, large commercial
tenants also may require estoppel certificates in the event of a transfer
or refinance. The party that seeks the estoppel certificates will want
assurances that the other party will promptly execute them, whereas the
other party will want to ensure that the form of certificate and turnaround
period are not onerous.

In view of the potential for significant monetary damages in the event a -party
is unable to complete a contemplated transfer or financing because it is unable
to produce the necessary estoppel certificate, the lease provisions requiring
that the other party furnish this detailed estoppel certificate are of paramount
importance. A cautionary tale from New York is illustrative. When a commercial
tenant attempted to refinance its leasehold mortgage, it requested an estoppel
certificate from the landlord, which the tenant was entitled to receive within
20 days. The landlord refused to issue the certificate on the grounds that the
certificate form was more extensive than required by the lease and that the tenant
did not send its request in accordance with the lease notice provision. The court
rejected the landlord’s arguments, stating that landlord” could have marked
up the certificate or supplied its own form of certification …. The fact that
plaintiff may have requested a certification of items not specifically identified in
the lease did not relieve defendant of its absolute obligation to issue an estoppel
certificate within 20 days of the request.” Juleah Co., L.P. v. Greenpoint-Coldman Corp.,
853 N.y.s.2d 313, 315 (App. Div.2008). As a result, the court held the landlord
liable for more than $450,000 in damages, which was the amount that tenant
would have saved had the contemplated refinancing been consummated.
Another consideration when drafting estoppel provisions is to avoid the po-
tential use of an estoppel certificate by one of the parties beyond the intended
purpose. In one New York case, a tenant inadvertently continued to pay rent on
a portion of the leased premises that it had actually vacated. The landlord
had actual knowledge of the tenant’s mistake and kept silent. When the ten-
ant refinanced, the landlord executed an estoppel certificate. The landlord then
attempted to use the estoppel certificate to prevent the tenant from recovering
its rent overpayments. The court applied equitable principles to permit the
tenant to recover, basing its decision on the fact that landlord had actual knowl-
edge of the mistake. NHS Nat’l Health Servs., Inc. v. Kaufman, 673 N’y’S.2d 129
(App. Div. 1998).

9. Holdover
When a tenant fails to vacate the leased premises at the end of the lease term
and the landlord continues to accept rental payments, the common law
presumption is that the parties have agreed to extend the lease on a month-
to-month basis, subject to the original terms of the underlying lease.
Because leases provide tenants with certain rights and remedies, an exten-
sion of the lease term is an extension of those protections to the tenant. In
general, lease holdover provisions can clarify that the tenant’s failure to vacate
the leased premises is not an extension of the original lease, but rather creates
a special, separate agreement. Lease holdover provisions also can delineate
distinctions from the otherwise applicable common law. Marsh-McLennan
Bldg., Inc. v. Clapp, 980 P.2d 311, 315-16 (Wash. Ct. App. 1999).
Unenforceable Penalties Regarding the rental rate during a hold-
over tenancy, it is important to consider whether the jurisdiction will regard a
double or triple holdover rental rate as an unenforceable penalty. In one such
case, the Tennessee Court of Appeals held that a double rental rate during
holdover was not an unenforceable penalty. Brooks v. Networks of Chattanoo-
ga, Inc., 946 S.W.2d 321, 324-25 (Tenn. Ct. App. 1996). The court also held the
tenant liable for the holdover rate even if the landlord initially accepted a lesser
amount. Id. at 326-27. The holdover tenant in that case initially continued
to pay only the regular rental rate applicable at the end of the lease term.
The tenant argued that, because it was negotiating a new lease with the land-
lord and not retaining possession of the  leased premises against the landlord’s
will, it was not a holdover tenant. Eight months later, when the parties’ negotia-
tion for a new lease broke down, the court permitted the landlord to collect
double rent for the holdover period retroactively.

10. Defining Common Areas and Facilities
Tenants typically pay as additional rent a proportionate share of the real estate
taxes, insurance, and maintenance costs for areas that are defined as com-
mon areas and facilities. Accordingly, the obligations of the tenant can vary
widely depending on whether areas are included as part of common areas or
part of the leased premises. Electrical and Telephone Closets: A common item that parties dispute
is the categorization of electrical and telephone closets. In one unreported
case in New York, the tenant claimed that its lease provided the tenant with
the right to use electrical and telephone closets for its telecommunication wires
and equipment. The landlord argued that tenant’s use of the closets was not
part of the leased premises and therefore that the tenant owed the landlord
licensing fees. Although the description of the leased premises specifically
excluded “electrical and telephone closets,” the definition of the common areas
did not expressly include them. Nonetheless, the court found the definition of
the “common areas” (which included “the pipes, ducts, conduits, wires and
appurtenant meters and equipment” serving the leased premises in com-
mon with other areas of the building), to be broad enough to encompass the
electrical and telephone closets. Marine Buffalo Assoc., L.P v. HSBC Bank USA,
781 N.YS.2d 625 (Sup. Ct. 2003). Control:  when a lease does not include a store’s
loading dock within the definitions of either common area or leased premises,
the parties’ liability for personal injuries from unsafe conditions on the loading
dock has been held to depend on the amount of control over the area respec-
tively exercised by the parties. Stalter v. Prudential Ins. Co. of Am., 632 N.Y.S.2d
602,603 (App. Div. 1995). Insurable Interests:  If not carefully defined, the distinction
between “leased premises” and “common areas” may produce unexpected outcomes. For example, a Michigan
shopping center lease required the tenant to obtain insurance covering its
leased premises and to pay a proportionate share of landlord’s cost of insuring the shopping center’s com-
mon areas. In addition, the parties intended for the tenant’s policy to cover
the sidewalks immediately outside of the tenant’s store. Therefore, the tenant
obtained a policy covering premises “owned or used by” the tenant. When a customer slipped and fell on
the icy sidewalk immediately outside of the tenant’s store, the customer brought
a suit against the tenant and the landlord. The landlord was held liable as
the record owner of the property. The landlord settled with the customer and
then attempted to recover from the tenant’s insurer. The tenant’s insurer denied coverage,
arguing that the phrase “owned or used by” the tenant was required to be interpreted in conjunc-
tion with the tenant’s lease, which provided that tenant must obtain insurance
covering “leased premises.” Because the lease definition of “leased prem-
ises” did not include the sidewalks, the insurer argued that the sidewalks were
not covered areas. The Sixth Circuit agreed with the insurer and upheld the
denial of coverage. Minges Creek, L.L.c. v. Royal Ins. Co. of Am., 442 F.3d 953 (6th
Cir. 2006); see also Zurich Am. Ins. Co., v. ABM Indus., Inc., 397 F.3d 158 (2d Cir.
2005). Accordingly, if a tenant assumes maintenance or insurance obligations
for a portion of the common area, the lease should expressly require the ten-
ant to maintain insurance covering the specific areas.

In the press to meet deadlines and be responsive to clients, lawyers can over-
look some of the “standard” or “boilerplate” provisions in a lease form. Also,
many of these provisions appear at the end of the document, where attention
spans seem to wane. Nevertheless, these provisions often address impor-
tant legal foundations that, if neglected, can have unintended consequences for
clients. To avoid embarrassing or costly surprises, attorneys should spend suf-
ficient time in reviewing these less than glamorous sections of the lease and
give these provisions the respect they deserve.

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