(Posted 3/13/2009)
This final memo assignment is designed to reinforce material discussed in class and to help you exercise analytical and practical skills in transactional planning, in preparation for the more complicated assignments we will undertake after we return from spring break. As indicated in the course syllabus, 10% of your final grade will be determined your performance on the memo assigments. As announced in class, if you turn in all three assignments, we will drop your lowest score when computing final grades; and if all three assignments receive the same high score, this will count in your favor as extra credit if your grade is on the margin.
As before, your memo should be no longer than two pages. Please submit it via e-mail to Nick Harley, our TA, at nicholas.harley@law.columbia.edu. To help him keep track of all the files he receives, please give your memo a filename that includes your last name (e.g., myname.memo3.doc). Please also be sure to include your name somewhere in the memo text as well.
We will presume, unless you tell me otherwise in your cover message, that if we find your essay to be among the best we receive, we have your permission to post it [with your name deleted] as part of our feedback to the class. If you do not wish to grant such permission, please let us know expressly.
This assignment is due on or before Monday, March 23, at 5 pm. Extensions will not be granted absent compelling circumstances. You should not do any additional research in preparing your analysis, beyond the materials assigned for class and the link provided below.
Your client, New Educational Ways School (NEWS), is a fledgling private, nonprofit elementary school located on the Upper East Side of Manhattan. Its lease will expire at the end of the present academic year and there is no prospect that it will be renewed, so it needs new space badly. It does not have the funds to buy or build, so its board is searching for suitable property to lease for a 5-10 year period, after which time it hopes to raise funds to acquire a permanent site.
The board is scared about ending up on the street during the next academic year, but fortunately there are a couple of prospects that may be available in time. Negotiations have just begun on the most attractive prospect (it has the best location and the owner seems willing to charge a reasonable rent, although the parties currently disagree regarding what price adjustment is appropriate in light of recent fall-offs in New York City commercial rents).
A major problem with this site, however, is that significant renovations would be required, perhaps $1 million or more, to make the property suitable for use by NEWS. These renovations — new heating system, roof repair, bringing the building up to code, and so forth — would have value long after the lease expires and NEWS has moved on. It will take some time, however, to work out the details of what is needed, and the school is anxious to get a site locked up soon, in large part because this is the time of year in which acceptances are sent out and deposits taken for positions in next year's class. If NEWS is not in a position to tell incoming students and their parents where the school will be located, they may lose enrollment to competing schools. The school's competitive environment is already difficult because plunging financial markets have made it difficult for many families to afford private school tuition, so that next year's class is likely to be smaller in any event. For the same reason, the prospective landlord is concerned to have provisions in the lease contract that will ensure that it receives its rent payments even if NEWS falls into financial difficulties.
How should NEWS handle the timing issue with regard to the negotiations for its commercial lease — i.e., should it sign now and then work out an agreement on renovations? Should it try to negotiate for a binding option that would allow it to lease the property only if a renovation agreement can be worked out? Or should it try to negotiate everything all at once?
In your answer, you should also briefly address what provisions, if any, NEWS should try to obtain in the lease or in a follow-on agreement for the renovation, regarding how the costs will be shared, the nature of the renovations, and related matters.
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