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

Overhead expenses have a big impact on the breakeven and profit points of your business. No matter how much revenue your company pulls in, big overhead expenses can make it impossible for the business to become truly successful. The cost of the lease is not the only factor here either. Who is responsible for premises liability claims? What about utility bills? Will you pay the property taxes or will the landlord? The type of lease agreement impacts this. Forbes highlights the main four. Modified gross or full-service gross lease Business owners split some of the operating expenses and structural repair costs with the landlord. This includes utilities, property insurance and property taxes. This is included in a base rent, which typically does not increase even if operating expenses do. Triple net lease The landlord pays only for structural repairs. The tenant becomes responsible for everything else. This includes insurance, taxes and utilities. This is a risky lease agreement to sign up for, especially if you are new to business ownership and unfamiliar with property management. Double net or net-net lease Tenant pays for insurance premiums, property taxes and utilities. The landlord handles the cost of maintenance repairs. This might work well for buildings that are older and liable to have problems over time, such as with the plumbing or HVAC. Net lease or single net lease Tenant pays for the property tax and the utilities. The insurance premium is the responsibility of the landlord. The landlord also pays for maintenance and repairs. This is a good idea for buildings and spaces that have the potential to create liability issues. Some landlords and property managers might make it clear from the start that they only offer a certain type of lease arrangement. If that lease type does not suit you, you might be able to negotiate a better agreement with a professional’s help.

Some people dream of providing adequately for their families so that everyone is comfortable. There would be no more couponing in the grocery store or second-guessing a reasonable upgrade of the family vehicle. This is the six-figure American dream in most cases. Some others dream a little bigger: more along the lines of how to make their first million. Forbes reports that there are several ways to use commercial real estate as a legitimate path to the millionaire club. One common path is to become a real estate broker. This field continues to grow exponentially and people advance quickly within a few years of hard work. After two years or so, a dedicated professional could bring in $250,000 in an annual salary. This adds up over time. Investing some of that money also helps to grow it. Then, there are developers. Creative people often look forward to taking on these projects, but it is not without risk. In fact, it is considered the highest-risk position to take in real estate. One reason for this is that developers are the most susceptible to market changes. The most common option that people tend to look into is becoming an investor. This involves building a diverse portfolio through long-term ownership of income properties, which may also include rented residential properties. CNBC also points out that when it comes to investing, buying property is not the only option. Investors often choose real estate investment trusts. This allows people to take part ownership of office buildings, personal storage and apartment buildings without the added stress of qualifying for loans and managing the properties. Whichever option a person chooses, the key is building a diverse portfolio. This covers most areas to give the person an idea of what to focus more closely on later. It also provides some protection against the risks inherent in market changes.

Some people dream of providing adequately for their families so that everyone is comfortable. There would be no more couponing in the grocery store or second-guessing a reasonable upgrade of the family vehicle. This is the six-figure American dream in most cases. Some others dream a little bigger: more along the lines of how to make their first million. Forbes reports that there are several ways to use commercial real estate as a legitimate path to the millionaire club. One common path is to become a real estate broker. This field continues to grow exponentially and people advance quickly within a few years of hard work. After two years or so, a dedicated professional could bring in $250,000 in an annual salary. This adds up over time. Investing some of that money also helps to grow it. Then, there are developers. Creative people often look forward to taking on these projects, but it is not without risk. In fact, it is considered the highest-risk position to take in real estate. One reason for this is that developers are the most susceptible to market changes. The most common option that people tend to look into is becoming an investor. This involves building a diverse portfolio through long-term ownership of income properties, which may also include rented residential properties. CNBC also points out that when it comes to investing, buying property is not the only option. Investors often choose real estate investment trusts. This allows people to take part ownership of office buildings, personal storage and apartment buildings without the added stress of qualifying for loans and managing the properties. Whichever option a person chooses, the key is building a diverse portfolio. This covers most areas to give the person an idea of what to focus more closely on later. It also provides some protection against the risks inherent in market changes.

Not every real estate disagreement has to make its way to a courtroom. There are times when alternative options may provide benefits to both parties. It may help to preserve privacy and protect the reputation of both parties involved. The resolution process is also usually less drawn out and more cost effective. Cornell Law School describes this as alternative dispute resolution. It notes that sometimes public courts still get involved to review the final decision. However, very rarely do these entities decide to overthrow agreements made through ADR. Here are some of the most common options available: Conciliation Arbitration Neutral evaluation Mediation While parties often enter into ADRs voluntarily, there are instances when it is mandatory to seek resolutions outside the courtroom first. Some states have begun to put rules for this in place due to the long wait times for disputes as cases pile up in local courts. Inc. magazine reports that this is a stark contrast to the earlier days of attempting ADR solutions. Local courts often resisted these efforts because they felt that business owners were infringing on their jurisdiction. These attitudes began to change around the 1980s as new case laws emerged that favored provisions for arbitration. By 1998, the Alternative Dispute Resolution Act came into play. This made changes on a federal level in the court systems as to how disputes were handled. The changes affected not just real estate disputes but other business contract disputes as well. Since then, almost every state has made additions to the ADR law to fine-tune the process within their respective jurisdictions.

Not every real estate disagreement has to make its way to a courtroom. There are times when alternative options may provide benefits to both parties. It may help to preserve privacy and protect the reputation of both parties involved. The resolution process is also usually less drawn out and more cost effective. Cornell Law School describes this as alternative dispute resolution. It notes that sometimes public courts still get involved to review the final decision. However, very rarely do these entities decide to overthrow agreements made through ADR. Here are some of the most common options available: Conciliation Arbitration Neutral evaluation Mediation While parties often enter into ADRs voluntarily, there are instances when it is mandatory to seek resolutions outside the courtroom first. Some states have begun to put rules for this in place due to the long wait times for disputes as cases pile up in local courts. Inc. magazine reports that this is a stark contrast to the earlier days of attempting ADR solutions. Local courts often resisted these efforts because they felt that business owners were infringing on their jurisdiction. These attitudes began to change around the 1980s as new case laws emerged that favored provisions for arbitration. By 1998, the Alternative Dispute Resolution Act came into play. This made changes on a federal level in the court systems as to how disputes were handled. The changes affected not just real estate disputes but other business contract disputes as well. Since then, almost every state has made additions to the ADR law to fine-tune the process within their respective jurisdictions.

If you have decided to invest in real estate, you are understandably excited by the prospect. However, every new investor faces a learning curve. Here are five tips for avoiding major mistakes as you approach initial investment opportunities. Going too fast Do not rush into a purchase before finding out all you can about it. Make a thorough study of market conditions, such as neighborhoods, rents, resale values and the like. It is not unusual for an investor to review hundreds of investment opportunities before selecting one. Be prepared to put in a considerable amount of research, and resist the urge to jump into the first investment possibility that catches your eye. Underestimating renovation expenses A common mistake to avoid is underestimating the cost of renovation. Once you find a property that is truly appealing to you, get several quotes from contractors regarding any renovation projects required. Exceeding the budget Along with collecting estimates for all necessary work projects, you must set up a budget and stick to it. As a new real estate investor, do not let your excitement take precedence over common sense. If you are not careful, you could exceed the budget you set or possibly end up in a bidding war. Failing to account for soft costs Soft costs like agent fees, closing costs and carrying costs are easy to overlook, so be sure to pencil them into your budget. Not working with the right team To reduce the risk of failure, choose the right team to put in place to help you succeed as a new real estate investor. If you can, work with experienced investors who can teach you the ropes. You need to assemble a team of professionals who can guide you. An attorney will be an important team member to have because you do not want to make any legal missteps.

If you have decided to invest in real estate, you are understandably excited by the prospect. However, every new investor faces a learning curve. Here are five tips for avoiding major mistakes as you approach initial investment opportunities. Going too fast Do not rush into a purchase before finding out all you can about it. Make a thorough study of market conditions, such as neighborhoods, rents, resale values and the like. It is not unusual for an investor to review hundreds of investment opportunities before selecting one. Be prepared to put in a considerable amount of research, and resist the urge to jump into the first investment possibility that catches your eye. Underestimating renovation expenses A common mistake to avoid is underestimating the cost of renovation. Once you find a property that is truly appealing to you, get several quotes from contractors regarding any renovation projects required. Exceeding the budget Along with collecting estimates for all necessary work projects, you must set up a budget and stick to it. As a new real estate investor, do not let your excitement take precedence over common sense. If you are not careful, you could exceed the budget you set or possibly end up in a bidding war. Failing to account for soft costs Soft costs like agent fees, closing costs and carrying costs are easy to overlook, so be sure to pencil them into your budget. Not working with the right team To reduce the risk of failure, choose the right team to put in place to help you succeed as a new real estate investor. If you can, work with experienced investors who can teach you the ropes. You need to assemble a team of professionals who can guide you. An attorney will be an important team member to have because you do not want to make any legal missteps.

For new commercial landlords, understanding the difference between residential and commercial leases is vital. Particularly if you have been mainly involved with residential real estate in the past, there are some very striking differences in the commercial market. Any time a business rents a commercial property in order to conduct business from that specific location, you must offer a commercial lease. According to Business News Daily, commercial leases are generally less-regulated than residential ones and they do not offer as many protections. How do the regulations differ? One of the biggest differences is that, as a landlord, you will need to tailor each commercial lease uniquely to the business at hand. Most of the time with residential leases, all residents of a particular building will sign similar-looking contracts. This means that many of the assumptions that come along with residential leases do not apply to commercial leases. For instance, the most common length of a residential lease is one year. On the other hand, with a commercial lease, the length could be as long or as short as benefits both landlord and tenant. What protections are missing? This is also related to the comparative lack of regulation described above. Since residential leases govern residential properties, the government at all levels (federal, state, county) has protections in place to ensure that the landlord is providing safe and habitable housing. The caliber of tenant you will get with a commercial lease is generally higher in terms of knowledge about real estate, so the lack of protections actually give you and your potential commercial tenant more room to negotiate terms.

For new commercial landlords, understanding the difference between residential and commercial leases is vital. Particularly if you have been mainly involved with residential real estate in the past, there are some very striking differences in the commercial market. Any time a business rents a commercial property in order to conduct business from that specific location, you must offer a commercial lease. According to Business News Daily, commercial leases are generally less-regulated than residential ones and they do not offer as many protections. How do the regulations differ? One of the biggest differences is that, as a landlord, you will need to tailor each commercial lease uniquely to the business at hand. Most of the time with residential leases, all residents of a particular building will sign similar-looking contracts. This means that many of the assumptions that come along with residential leases do not apply to commercial leases. For instance, the most common length of a residential lease is one year. On the other hand, with a commercial lease, the length could be as long or as short as benefits both landlord and tenant. What protections are missing? This is also related to the comparative lack of regulation described above. Since residential leases govern residential properties, the government at all levels (federal, state, county) has protections in place to ensure that the landlord is providing safe and habitable housing. The caliber of tenant you will get with a commercial lease is generally higher in terms of knowledge about real estate, so the lack of protections actually give you and your potential commercial tenant more room to negotiate terms.

Whether it is a retriever trotting beside its owner or a poodle stuffed inside a handbag, dogs seem to be everywhere in the Los Angeles area. However, these pets can be both messy and destructive. If you are a landlord, you may have good reasons for wanting to prohibit renters from keeping a canine companion. You must be careful, however. Both federal and state law requires reasonable accommodations for service animals. Clearly, it is a violation of the law to prevent service dogs from living with their owners in a rental unit. What about emotional support dogs, though? In California, you must accommodate them as well. Accommodating service animals As a landlord, you must accept renters’ service dogs that have special training to perform specific duties. The law does not stop there, though. You have a general obligation to permit renters to bring both emotional support animals and psychiatric service dogs. Identifying emotional support animals An emotional support animal must alleviate an identified symptom of a renter’s disability or mental condition. Unlike service dogs, though, emotional support animals need not have any special training or skills. Furthermore, these creatures do not have to be dogs. For example, late last summer, an emotional support pony accompanied a passenger on an American Airlines flight from Chicago to Omaha. Restricting emotional support animals While you have a broad obligation to accept a renter’s emotional support animal, you do have some flexibility. First, you may ask for documentation that proves the individual has a need for the emotional support animal. You can also reject animals if they pose a direct threat to someone’s physical safety or property. You cannot, however, ask for a pet deposit for service dogs or emotional support animals. Even if you love animals, you may not want one living in the rental property you own. Still, if the creature is a service dog or emotional support animal, you must be careful not to violate the law.

Whether it is a retriever trotting beside its owner or a poodle stuffed inside a handbag, dogs seem to be everywhere in the Los Angeles area. However, these pets can be both messy and destructive. If you are a landlord, you may have good reasons for wanting to prohibit renters from keeping a canine companion. You must be careful, however. Both federal and state law requires reasonable accommodations for service animals. Clearly, it is a violation of the law to prevent service dogs from living with their owners in a rental unit. What about emotional support dogs, though? In California, you must accommodate them as well. Accommodating service animals As a landlord, you must accept renters’ service dogs that have special training to perform specific duties. The law does not stop there, though. You have a general obligation to permit renters to bring both emotional support animals and psychiatric service dogs. Identifying emotional support animals An emotional support animal must alleviate an identified symptom of a renter’s disability or mental condition. Unlike service dogs, though, emotional support animals need not have any special training or skills. Furthermore, these creatures do not have to be dogs. For example, late last summer, an emotional support pony accompanied a passenger on an American Airlines flight from Chicago to Omaha. Restricting emotional support animals While you have a broad obligation to accept a renter’s emotional support animal, you do have some flexibility. First, you may ask for documentation that proves the individual has a need for the emotional support animal. You can also reject animals if they pose a direct threat to someone’s physical safety or property. You cannot, however, ask for a pet deposit for service dogs or emotional support animals. Even if you love animals, you may not want one living in the rental property you own. Still, if the creature is a service dog or emotional support animal, you must be careful not to violate the law.

Before you invest in California commercial real estate, you should carefully check out its zoning restrictions. Why? Because local zoning laws and regulations with regard to the property in which you wish to invest may well determine your ultimate return on investment. Per FindLaw, zoning generally falls into one of the following five categories: Commercial where you can build and sell, lease or rent offices and/or retail space Industrial where you can build and sell, lease or rent manufacturing space Residential where you can build and sell, lease or rent only single- or multi-family structures Recreational where you can sell, lease or rent the land itself or the structures you build on it only for recreational activities Agricultural where you can sell, lease or rent the land itself or the structures you build on it only for farming activities If you desire, you can also operate a qualifying business yourself in any of these zoned areas. Zoning coverage Zoning laws not only determine what kinds of structures you can build in a particularly zoned area, but also may regulate such things as the following: How tall a building can be How much square footage it can contain How close one building can be to another How much parking space each building can or must provide How much noise a business or resident can make How the business owner or resident must handle waste In addition, these laws may well regulate the types, if any, of signs allowed, as well as their size, appearance, placement, etc. While you should not interpret this educational information as legal advice, it can help you understand the importance of thoroughly understanding the zoning laws in place on any commercial property in which you want to invest.