Legal Advice Blog: Legal Advice, Case Insights, & Local Law Information

Finding the right property can allow customers to start patronizing a new business quickly, but opening a physical location will also drastically increase an organization’s operating expenses. Any new commercial lease likely comes with several years of payment requirements. In addition to the base rent amount, there will usually be additional fees assessed to commercial tenants. Those renting a space in a multi-unit building or development, like a strip mall or office complex, will likely have to pay common area maintenance (CAM) fees for the spaces that they share with the landlord and other tenants. Although landlords often suggest a set fee or a specific percentage of the overall costs, tenants may want to try to negotiate those terms to arrive at a more favorable agreement. What are some of the reasons for a new commercial tenant to ask for concessions related to CAM fees? 1. THEY WON’T HAVE MUCH CUSTOMER TRAFFIC Exactly how a landlord determines the percentage of CAM fees that each tenant pays can vary depending on the amenities provided. Often, the traffic in and out will be a major consideration. The visitors at a retail storefront, for example, create parking and security demands. The less a business model relies on customer or client traffic, the lower the business’s demand concerning shared infrastructure will be. 2. THEY WILL HAVE FEW OR NO EMPLOYEES Much like customers, workers for commercial tenants are often expensive for commercial landlords. They use shared bathroom facilities and need someone working security to ensure they don’t end up mugged on their way to their car in the parking lot. When an organization does not have many employees, that can reduce the utilities and other services required by the commercial tenant and could therefore help convince the landlord to reduce the CAM fees the tenant will pay. Any reason to believe that a business will place less demand on shared resources or require less support from the landlord could influence the appropriate amount of CAM fees. Those who are focused on developing a business may have a hard time handling the negotiations often involved in securing a commercial lease. Seeking proper legal support can make it easier for entrepreneurs to review and negotiate commercial leases so that they can benefit from the most favorable terms possible.

Investing in real estate has been one of the most encouraged and profitable business ventures for years. You can invest in a vast range of options, depending on your preferences and goals. Further, you can go for a project alone or with a partner(s). This guide discusses three benefits of investment partnerships in real estate. LARGER INVESTMENT When you are in a partnership, every developer will contribute to the capital. This means you can put your money on a larger investment than you would have. A larger investment also translates to a higher return. With more capital, you may also invest in a diversified portfolio of investments. Thus, people with high capital in real estate development are at an advantage. MORE TALENT When you have partners, you bring different talents to the table. Your strength may lie in an area where another one is weak, and vice versa. This balance can give you a competitive edge in the industry, as you will always have new ways of doing things and solving obstacles. EXPANDED NETWORK Networking is crucial when investing in real estate. It’s essential to connect with buyers, sellers, realtors, inspectors, contractors, architects, lawyers and other professionals. Further, you should attend networking events to meet professionals and learn more about the industry from other developers. When investors partner, the chances are each will come with a network to the table. One may come with a list of clients, and another may have a close relationship with a real estate firm that has reliable agents. Partners may also be courageous to interact at events, as they can motivate each other to go around the room and find contacts. Investment partnerships are beneficial, but they can work to your disadvantage. You should get legal help to craft a protective agreement and minimize risks.

Investing in real estate has been one of the most encouraged and profitable business ventures for years. You can invest in a vast range of options, depending on your preferences and goals. Further, you can go for a project alone or with a partner(s). This guide discusses three benefits of investment partnerships in real estate. LARGER INVESTMENT When you are in a partnership, every developer will contribute to the capital. This means you can put your money on a larger investment than you would have. A larger investment also translates to a higher return. With more capital, you may also invest in a diversified portfolio of investments. Thus, people with high capital in real estate development are at an advantage. MORE TALENT When you have partners, you bring different talents to the table. Your strength may lie in an area where another one is weak, and vice versa. This balance can give you a competitive edge in the industry, as you will always have new ways of doing things and solving obstacles. EXPANDED NETWORK Networking is crucial when investing in real estate. It’s essential to connect with buyers, sellers, realtors, inspectors, contractors, architects, lawyers and other professionals. Further, you should attend networking events to meet professionals and learn more about the industry from other developers. When investors partner, the chances are each will come with a network to the table. One may come with a list of clients, and another may have a close relationship with a real estate firm that has reliable agents. Partners may also be courageous to interact at events, as they can motivate each other to go around the room and find contacts. Investment partnerships are beneficial, but they can work to your disadvantage. You should get legal help to craft a protective agreement and minimize risks.

Securing a commercial tenant usually means that a property owner can count on a year or more of regular payments. Commercial leases frequently run for several years and therefore help guarantee a steady stream of income for some time. Unfortunately, businesses often fail. Especially if your tenant is a startup business, it might reach a point wherein it is insolvent and has no means of continuing to operate. Most business owners will communicate with their creditors, including their landlords, and do their best to fulfill their obligations. However, some people will try to cut and run. You might drive by and realize that the space is unoccupied, or you could hear from utility companies or neighboring business owners about the sudden vacancy. YOU CAN TERMINATE THE LEASE EVENTUALLY The law factors in the possibility of miscommunication or other issues by creating a waiting period before a landlord can take action over an abandoned rental property. California law gives a tenant several days after a rent default occurs under the terms of a commercial lease before they can be served with a Notice of Belief of Abandonment. If they fail to do so, at that point, the landlord can potentially treat the property as though the tenant abandoned it after another 15 days, after which they can terminate the lease with finality. COMPLICATED COMMERCIAL PROPERTY SITUATIONS REQUIRE GUIDANCE The wrong move when trying to regain possession of a commercial property could negatively affect your rights as the property owner and landlord. There could be financial risks involved and a tenant could even choose to file a lawsuit against you, especially if they leave behind furniture or equipment and you take possession of those items or sell them. Mistakes when handling a default related to rented property can end up being very expensive for a landlord. Talking about your situation and getting professional advice can help you avoid mistakes when dealing with an issue related to your commercial lease.

Securing a commercial tenant usually means that a property owner can count on a year or more of regular payments. Commercial leases frequently run for several years and therefore help guarantee a steady stream of income for some time. Unfortunately, businesses often fail. Especially if your tenant is a startup business, it might reach a point wherein it is insolvent and has no means of continuing to operate. Most business owners will communicate with their creditors, including their landlords, and do their best to fulfill their obligations. However, some people will try to cut and run. You might drive by and realize that the space is unoccupied, or you could hear from utility companies or neighboring business owners about the sudden vacancy. YOU CAN TERMINATE THE LEASE EVENTUALLY The law factors in the possibility of miscommunication or other issues by creating a waiting period before a landlord can take action over an abandoned rental property. California law gives a tenant several days after a rent default occurs under the terms of a commercial lease before they can be served with a Notice of Belief of Abandonment. If they fail to do so, at that point, the landlord can potentially treat the property as though the tenant abandoned it after another 15 days, after which they can terminate the lease with finality. COMPLICATED COMMERCIAL PROPERTY SITUATIONS REQUIRE GUIDANCE The wrong move when trying to regain possession of a commercial property could negatively affect your rights as the property owner and landlord. There could be financial risks involved and a tenant could even choose to file a lawsuit against you, especially if they leave behind furniture or equipment and you take possession of those items or sell them. Mistakes when handling a default related to rented property can end up being very expensive for a landlord. Talking about your situation and getting professional advice can help you avoid mistakes when dealing with an issue related to your commercial lease.

As a commercial real estate professional in Los Angeles, it can be hard to keep up with the ever-evolving landscape of local tax policies. Measure ULA has been garnering much attention from the industry recently, and for a good reason — it could have serious implications for the future of commercial real estate in LA. What does this new policy mean for existing businesses, potential investors and real estate developers? THE “MANSION TAX” In November 2022, Los Angeles voters approved Measure ULA, a new transfer tax on all property sales over $5 million in the city. The measure is commonly known as the “Mansion Tax” and would impose a 4% tax on the sale or transfer of properties with a value of more than $5 million. Properties valued at more than $10 million would have an additional 5.5% tax on their sale or transfer. Lawmakers expect to raise between $600 million to $1.5 billion annually. However, this has sparked some blowback from commercial real estate owners concerned about its impact on their businesses. For commercial real estate owners, Measure ULA could mean an increase in taxes that could affect their bottom line. Additionally, any funded projects of 40 units or more must be bound by a project labor agreement requiring nearly 100% union labor which could add additional costs to construction projects. Furthermore, they argue that the measure is illegal because it is a real estate transfer tax for a particular purpose, meaning the money can be used only for that purpose and not for other city services. While Measure ULA has been designed to help reduce homelessness and provide housing solutions in Los Angeles, it may also impact commercial real estate owners. It is vital for those affected by this measure to understand how it will affect them so they can make informed decisions about their businesses going forward.

As a commercial real estate professional in Los Angeles, it can be hard to keep up with the ever-evolving landscape of local tax policies. Measure ULA has been garnering much attention from the industry recently, and for a good reason — it could have serious implications for the future of commercial real estate in LA. What does this new policy mean for existing businesses, potential investors and real estate developers? THE “MANSION TAX” In November 2022, Los Angeles voters approved Measure ULA, a new transfer tax on all property sales over $5 million in the city. The measure is commonly known as the “Mansion Tax” and would impose a 4% tax on the sale or transfer of properties with a value of more than $5 million. Properties valued at more than $10 million would have an additional 5.5% tax on their sale or transfer. Lawmakers expect to raise between $600 million to $1.5 billion annually. However, this has sparked some blowback from commercial real estate owners concerned about its impact on their businesses. For commercial real estate owners, Measure ULA could mean an increase in taxes that could affect their bottom line. Additionally, any funded projects of 40 units or more must be bound by a project labor agreement requiring nearly 100% union labor which could add additional costs to construction projects. Furthermore, they argue that the measure is illegal because it is a real estate transfer tax for a particular purpose, meaning the money can be used only for that purpose and not for other city services. While Measure ULA has been designed to help reduce homelessness and provide housing solutions in Los Angeles, it may also impact commercial real estate owners. It is vital for those affected by this measure to understand how it will affect them so they can make informed decisions about their businesses going forward.

To say it’s been a rough few years for the restaurant industry is an understatement. As the owner of one hospitality group puts it, “It’s like being kicked in the shins, over and over again.” Now, restaurant owners in Los Angeles are facing another potential challenge. In 2020, a program called LA. Al Fresco allowed them to quickly obtain permits to set up or expand outdoor dining areas. That allowed many restaurant owners to get back on their feet at a time when dining indoors wasn’t allowed or, if it was, attracted few customers. Now, a proposed ordinance is threatening to jeopardize this outdoor expansion and making many restaurant owners nervous. NEW, MORE RESTRICTIVE PERMITS The proposal would require restaurants in the city to apply for new permits to continue to have outdoor dining. The cost of these new permits – if they can be obtained — could drive some restaurants out of business. The proposal would also limit the amount of space that could be allotted for customers outdoors. Many restaurants invested tens of thousands of dollars or more in outdoor furniture, landscaping and other necessities to provide or expand their outdoor dining. Now some will have to scale that back, and others may have to end their outdoor dining completely. OWNERS CALL IT A “MONEY GRAB” AND “SUCKER PUNCH” The owner of one Sherman Oaks eatery calls it “a huge money grab of the city” and “government overreach.” The owner of a Los Feliz restaurant calls the proposal “another sucker punch” to the city’s restaurants. As one noted, this proposal still doesn’t address the requirements of other city departments regarding the various areas like sections of parking lots, “parklets” and even alleys where outdoor seating was set up. The proposal is a ways from going into effect. The planning commission will vote on it this spring, and it will require approval by the L.A. City Council. That leaves restaurant owners who need to renew their lease in a difficult position of not knowing whether they’ll be able to stay in business – at least at their current location. It’s also a challenge for property owners who may have to decide whether to continue to lease their space for restaurant use. However any changes to this program will affect you, it’s wise to have legal guidance.

To say it’s been a rough few years for the restaurant industry is an understatement. As the owner of one hospitality group puts it, “It’s like being kicked in the shins, over and over again.” Now, restaurant owners in Los Angeles are facing another potential challenge. In 2020, a program called LA. Al Fresco allowed them to quickly obtain permits to set up or expand outdoor dining areas. That allowed many restaurant owners to get back on their feet at a time when dining indoors wasn’t allowed or, if it was, attracted few customers. Now, a proposed ordinance is threatening to jeopardize this outdoor expansion and making many restaurant owners nervous. NEW, MORE RESTRICTIVE PERMITS The proposal would require restaurants in the city to apply for new permits to continue to have outdoor dining. The cost of these new permits – if they can be obtained — could drive some restaurants out of business. The proposal would also limit the amount of space that could be allotted for customers outdoors. Many restaurants invested tens of thousands of dollars or more in outdoor furniture, landscaping and other necessities to provide or expand their outdoor dining. Now some will have to scale that back, and others may have to end their outdoor dining completely. OWNERS CALL IT A “MONEY GRAB” AND “SUCKER PUNCH” The owner of one Sherman Oaks eatery calls it “a huge money grab of the city” and “government overreach.” The owner of a Los Feliz restaurant calls the proposal “another sucker punch” to the city’s restaurants. As one noted, this proposal still doesn’t address the requirements of other city departments regarding the various areas like sections of parking lots, “parklets” and even alleys where outdoor seating was set up. The proposal is a ways from going into effect. The planning commission will vote on it this spring, and it will require approval by the L.A. City Council. That leaves restaurant owners who need to renew their lease in a difficult position of not knowing whether they’ll be able to stay in business – at least at their current location. It’s also a challenge for property owners who may have to decide whether to continue to lease their space for restaurant use. However any changes to this program will affect you, it’s wise to have legal guidance.

Operating a successful business requires sound decision-making, especially as the company grows. For example, if you must relocate due to growth, you’ll need to decide between leasing or buying your next commercial space. Unfortunately, there is no easy answer to whether it’s better to buy or lease commercial real estate as it depends on factors unique to your company. However, knowing some general advantages and drawbacks of both options can make your decision easier. PROS AND CONS OF BUYING One benefit of purchasing is that the property appreciates over time, meaning it will increase in value. On the other hand, a significant downside of buying is that it requires a large down payment. Other possible pros and cons are: Pro: Rental income potential Con: Financing difficulties Pro: Potential tax benefits Con: Increased liabilities (premises injuries, etc.) When considering the pros and cons of buying a particular property, ensure you account for issues relevant to your business (location, access, etc.). PROS AND CONS OF LEASING Many business owners like the flexibility that comes with leasing a commercial space. If the property fails to meet their needs, they can relocate when the current lease ends. Other advantages and a few downsides of leasing include: Con: No potential for rental income Pro: Fixed (and dependable) monthly expenses Con: Lack of control over the space Pro: Fewer upfront costs Weigh these pros and cons carefully to ensure your commercial real estate decisions do not pose hardships for your business operations. GUIDANCE CAN BRING CLARITY You want to make sound choices in all areas of your company’s operations. An analysis from someone knowledgeable about California commercial real estate can help you find the clarity to make well-informed business property decisions.

Operating a successful business requires sound decision-making, especially as the company grows. For example, if you must relocate due to growth, you’ll need to decide between leasing or buying your next commercial space. Unfortunately, there is no easy answer to whether it’s better to buy or lease commercial real estate as it depends on factors unique to your company. However, knowing some general advantages and drawbacks of both options can make your decision easier. PROS AND CONS OF BUYING One benefit of purchasing is that the property appreciates over time, meaning it will increase in value. On the other hand, a significant downside of buying is that it requires a large down payment. Other possible pros and cons are: Pro: Rental income potential Con: Financing difficulties Pro: Potential tax benefits Con: Increased liabilities (premises injuries, etc.) When considering the pros and cons of buying a particular property, ensure you account for issues relevant to your business (location, access, etc.). PROS AND CONS OF LEASING Many business owners like the flexibility that comes with leasing a commercial space. If the property fails to meet their needs, they can relocate when the current lease ends. Other advantages and a few downsides of leasing include: Con: No potential for rental income Pro: Fixed (and dependable) monthly expenses Con: Lack of control over the space Pro: Fewer upfront costs Weigh these pros and cons carefully to ensure your commercial real estate decisions do not pose hardships for your business operations. GUIDANCE CAN BRING CLARITY You want to make sound choices in all areas of your company’s operations. An analysis from someone knowledgeable about California commercial real estate can help you find the clarity to make well-informed business property decisions.

When another company breaches its contract with your business, you may end up scrambling to find an alternate service provider or supplier. Contract breaches can be very expensive. They can delay or complicate operations at one business or force a company into a position where it defaults on an agreement with a third party. When businesses take action over breach of contract issues, the focus is often on recovering losses in the form of damages. However, a company could also request specific performance as part of a breach of contract lawsuit. Specific performance involves a judge ordering a party to fulfill its obligations under the contract. Is specific performance the right solution in your case? THE BEHAVIOR OF THE OTHER PARTY CAN DETERMINE THE BEST OPTION If the other party failed to fulfill their contractual obligations for some technical or complicated reason and would likely still prefer to do business with your company, then an order of specific performance might convince them to absorb the necessary losses caused by their initial failure and move on in their relationship with you. However, litigation and a court order to perform work or deliver certain materials or goods might result in resentful behavior from the other party. You might end up receiving lackluster services or substandard materials from the other party because they begrudged the obligation to fulfill their contract with you. A careful review of what the other party failed to do and their current attitude toward your organization can help you determine if specific performance would be a reasonable solution or likely to result in future disappointment. EVERY CONTRACT DISPUTE IS A UNIQUE CHALLENGE There is no one solution for breach of contract matters that will work for every business dealing with a default or similar breach of contract issue. The nature of your relationship with the other company, the losses you suffered because of the breach of contract and your potential future relationship will all influence the best approach to a breach of contract matter. Sometimes, negotiating a settlement outside of court is the best option. Other times, going to court and asking a judge for a particular solution may be the better choice. Learning more about how the courts help resolve business disputes can facilitate a faster solution for your contract issue.