Live/work spaces have become increasingly popular in recent years – particularly in cities like Los Angeles where real estate prices are among the highest in the country. However, it’s not really a new concept. People have lived above their stores, bars, restaurants and other businesses for centuries.

Zoning laws, however, are much stricter than they used to be. Cities have zoning laws in part to protect property values. Many areas are zoned strictly for residential or commercial use. They can also be zoned as historic areas or for industrial or agricultural use. Some do allow a combination of residential and commercial use, with certain limits, like what kind of business can be conducted. These are known as mixed-used zones.

Can you let a tenant live in a space they rent for their business?

What if you are renting out a commercial property and your renter asks to live there? They’ll pay you extra, and you’ll have someone there during the night, so this might actually be a deterrent to crime. 

But is that legal? It depends. It’s crucial to check the zoning ordinances for the area. If it’s zoned only for commercial property, you may be able to get a permit. However, you’ll need to check with your insurance company to determine whether your policy covers something that might go wrong. What happens if your tenant leaves something on the stove and starts a fire or lets the bathtub overflow? You might not be covered for the damage.

If you go ahead and let a tenant live in a commercial space without getting the proper authorization, you risk fines if the authorities find out. Further, if your tenant is injured or killed by an intruder in the middle of the night, you could face civil and/or criminal liability if the space wasn’t meant for someone to live in.

Whether you want to live in a commercial property you own or you’re considering letting a commercial tenant use their space to live and work in, it’s crucial to determine the zoning restrictions for your area. Trying to get around them can only lead to problems. If you are facing legal issues involving the misuse of commercial property for residential purposes (or vice versa), it’s important to seek experienced guidance.

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A watertight commercial lease agreement is a must-have document for property and business owners alike. Being a legally binding agreement, a commercial lease needs to be accurately drafted within the California commercial rental property laws. In addition, it must be updated on a regular basis to ensure that landlord-tenant disputes are kept to a minimum.

Understanding the components of a commercial lease agreement is critical to the smooth relations between the tenant and the landlord. Here are some of the provisions that should be included in a commercial lease agreement.

The parties to the contract

Every contract must clearly outline the parties to it. While signing the agreement, it is important that you do so on behalf of your business rather than as an individual. It is not unusual for a commercial lease to require a personal guarantee. If you are the business owner, it is important that you find out the limitations of the personal guarantee such as time or dollar limitations.

Contract terms

While most residential lease contracts are valid for 12 months, commercial lease contracts can last for as long as 10 years or even more. Before signing a commercial lease contract, it is important that you consider both the initial term as well as the renewal rights. A lease contract might automatically grant renewal rights to the tenant while others may require both parties’ mutual consent before renewal. While considering terms, it is also important that you understand what will happen to the rental payments upon renewal.

Rent payment terms

Besides negotiating the rent amount it is important that both parties review other expenses related to the property in question and clearly state who will pay for them. Common expenses in commercial property may include maintenance fees, utilities, taxes, and insurance. Since these expenses are usually passed on to the tenants, it is important to understand how they are calculated and divided among the existing tenants.

A lease contract outlines the duties and responsibilities of both parties and minimizes disputes. Before signing a commercial lease contract, it is important that you understand the provisions you are getting into.

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After identifying your business premises, you may want to sign the lease and secure the property immediately. However, it may not be the best way to go about things. Even if the landlord asks you to sign a standard agreement, it is in your best interests to refrain from signing any legally binding contract before carefully reviewing it.

Ensuring that your lease agreement does not contravene local property laws is a good place to start. Then you need to understand all the terms and conditions in the agreement, especially those masked in legal jargon. Below are some terms to look out for, and if they are part of your lease agreement, you should consider not signing.

1. Making your security deposit non-refundable

Most landlords ask for a one to three-month deposit, but it is usually refundable upon the end of the contract. Watch out for clauses that imply you may not get it back.

2. Granting the landlord unlimited access

As the tenant, you have a right to privacy and quiet enjoyment of the property leased. Don’t sign a lease that gives the landlord unrestricted access to the property whenever they wish.

3. Requiring the tenant to be responsible for all maintenance

You should not sign a lease that puts all maintenance responsibility on yourself. The landlord should cover maintenance costs that make the property habitable such as a leaking roof or plumbing issues. Agreeing to bear all expenses related to maintenance could be a costly decision for you or your business if anything goes wrong.

Protecting yourself means being conversant with real estate law pertaining to lease agreements. Doing so will ensure that the lease you sign is not a burden for you in the future.

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A business partnership could last a lifetime or may only last for a few months before things turn sour. Whether you have spent decades running a business together and now have differing opinions about its future or you have just started the business and don’t work well together, you may need to buy out your business partner.

Buying your partner out allows you to keep the company operating despite the conflict between you and the other owner. They receive a fair value for their share of the business, and you get to continue running the company.

Buying out a partner can be a complex process, but taking the right steps will increase your chances of success.

Step one: Go over your partnership agreement

Discussing what will happen to the business or the circumstances in which one partner can buy out the other is a common inclusion in partnership agreements.

The longer it has been since you signed your contract with your business partner, the more likely it is that you may have forgotten important details within it. Going over your partnership agreement will help ensure that you meet all of the criteria in your contract for a buyout.

Step two: Put an appropriate price on the business

Once you know what obligations you have to your partner under your contract with them, you can then start to address the practical details of a buyout.

You obviously can’t offer a fair price for an asset if you don’t know its current worth. A thorough business valuation looking at your current assets and liabilities can help you determine what a reasonable offer for your partner’s share of the business would be.

Step three: Find a way to make your offer attractive to your partner

The longer you have done business with someone, the better you understand their personal preferences and negotiating style. You can use that information to help you make your bio offer as attractive as possible to your partner. Including the right terms can help you successfully negotiate a buyout without permanently damaging your relationship with your partner.

Thinking ahead can help you take the right steps when partnership disputes make you decide to buy out your partner to assume sole control over your shared business.

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There are numerous potential advantages of owning your own business, one of which is having the ability to choose who you partner with. However, this is not always a straightforward process. 

At times, individuals may believe that going into business with someone they like personally could be the key to success. Nevertheless, a good personal relationship is not always an indication that a business partnership will work out. Outlined below are three important factors to consider when choosing your next business partner. 

Be open from the beginning 

All parties in a new business venture are typically eager to get off to a positive start. However, this can occasionally result in concerns or potential roadblocks being hidden rather than discussed. Issues that business partners don’t address initially, but instead later in the process, may ultimately be trickier to resolve. It is unlikely that a new business venture will afford smooth sailing at all times. Therefore, partners must be able to communicate effectively and tackle issues head-on cooperatively. 

Clearly define responsibilities 

While it may be all hands on deck at the beginning of a new business, it can be vital to establish roles once operations are up and running. Confusion and misunderstandings over specific responsibilities could be a source of conflict later on in the process. Additionally, it may assist customers if they clearly understand who they are to contact to meet their distinct consumer needs. 

Express terms in writing 

It may be beneficial to have obligations and business terms documented in writing. Having written instructions could assist in preventing disagreements and resolving issues before they become detrimental to the partnership. 

Choosing a business partner is a major decision that warrants careful consideration. In the unfortunate event that you feel your legal rights have been violated, there may be options open to you. 

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An article published on The Business Journals’ L.A. Biz website just this week highlighted how demand for industrial real estate has recently reached all-time highest levels here in Los Angeles. That same report chronicles how vacancy rates have hit the lowest rates they’ve ever been.

The trend in L.A.’s real estate market may have you wondering whether you should sell your property off to a buyer that’s made the highest offer on your commercial property or capitalize on the low vacancies and high demand, and lease it out. There are a few different factors that you’ll want to weigh as you decide which option is ideal.

Do you hold or sell your commercial real estate?

In a situation like the one described on L.A. Biz, you’re aware that the high demand and low vacancy rates mean that you can command higher-than-average monthly rent. You can likely negotiate more terms in your favor as well.

Continuing to lease your property may be ideal if you believe that your property will retain a similar value to what it is now, or it still has room to increase. If you have any inkling that the value may drop, then you may opt to let it go now when you can command a top-level offer.

One factor that may render such a decision less than straightforward is if your commercial or industrial space is in a new development or emerging market. You might be able to command a much higher sales price at a later phase in the development or as it becomes more popular.

On the flip side, if taking the risk of the property value declining as you watch your rent trickle in from the lease makes you uncomfortable, then there may be no time like now to sell off your space. You may end up with just as much if not more (in a far shorter time) by putting it up for sale, especially if an unexpected costly repair were to be needed if you were a landlord.

Entering into a short-term lease while you closely monitor the market is also an option.

No matter what choice you make, it’s imperative that you closely analyze any contract you sign. It’s important to familiarize yourself with procedural or tax obligations that accompany your transaction as well.

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Owning a rental property is a great investment. However, it is not unusual for a landlord to get into a dispute with their tenant. A tenant may feel the landlord is too bossy or strict, while the landlord may discover that the tenant is anything but what they hoped they would be.

Multiple factors can contribute to disputes between landlords and their tenants. These can range from violations of the terms of the lease contract to the use of the rental property for unintended purposes.

Here are some of the common landlord-tenant disputes that you need to look out for.

Rent payment issues

Rent non-payment or delay is by far the most common trigger of landlord-tenant disagreements. Rent-related disputes can be caused by several factors, such as:

• When the tenant falls behind on rent or does not pay at all
• When the tenant starts sending bad checks or lying about rent payment
• When the landlord fails to follow through with routine repairs and maintenance resulting in the tenant withholding rent

Tip: To help address the issue of rent payment, the landlord can clarify when the rent should be due and what is considered late payment in the lease contract. The tenant, on the other hand, has the duty to report any repair issues or potential emergency situations that may hinder them from paying rent on time.

Habitability issues

Legally, the tenant has the right to a habitable premise. This means that the landlord is obligated to keep the rental unit clean and habitable, along with timely repair of defective conditions and complying with health and safety codes for rental facilities.

Habitability issues can become an item of conflict if the landlord believes their rental unit is habitable while the tenant feels otherwise. It is important that both parties are aware of the HUD guide on premise habitability.

Every landlord dreams of a trouble-free tenant who pays their rent on time and lives at peace with their neighbors. Every tenant, on the other hand, hopes for an understanding landlord who honors their end of the bargain and keeps the premise in a habitable condition. Understanding the common causes of landlord-tenant disputes can help both parties get into a contractual agreement that works for everyone.

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Last month, Gov. Gavin Newsom signed two bills into law that are aimed at providing more housing in some areas in a state where demand often exceeds supply – by as much as 3.5 million units according to some estimates. 

Both laws, which will increase housing density in some areas, have their critics. However, Senate Bill (SB) 9 has been the more controversial of the two. (The other allows more density of housing near mass transit hubs.)

What does SB 9 do?

Under the new law, which takes effect Jan. 1, 2022, lots in some areas that are zoned for single standalone homes can have up to four units of housing. There are some limits, though. For example, current tenants cannot be required to move, and the owner must continue to reside on the property for at least three years.

Gov. Newsom and those in favor of the law tout it as a step toward making more affordable housing available for Californians and decreasing the racial wealth gap in the state. However, a recent study by the University of California Berkeley found that it won’t affect most single-family-zoned lots in the state.

Cities speak out about the loss of local authority

Not surprisingly, a number of cities as well as the League of California Cities have objected to the authority the law takes away from them. The League’s executive director said that it “undermines the ability of local governments to responsibly plan for the types of housing that communities need, circumvents the local government review process, and silences community voices.” She also points out that although proponents of the law talk about it creating more affordable housing, it says nothing about pricing limits for any new units created.

Because of pressure from city governments, provisions were added to SB 9 to allow them to prevent construction if it would endanger public health or safety or if it’s being done simply to help speculators.

What does the new law mean for you?

The new law will no doubt affect real estate investors, developers, builders and other stakeholders. Experienced guidance can help you prevent any legal issues on your projects.

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When considering options for commercial spaces that suit your business needs, it is also important to contemplate possible complications. It is preferable to uncover any potential problems before entering an agreement, rather than further down the line.

Often, negotiations over a commercial lease will run smoothly. However, on occasion, issues will arise that could potentially impact the requirements of your business. Outlined below are some important factors to consider before entering a commercial lease.

How will the space be used?

It may seem obvious, but it is important that all parties are fully aware of how the commercial space is going to be used. Real estate owners often have to consider how the new business will fit in with corporations that are already established in the area. Occasionally, there are some types of businesses that a commercial real estate owner will simply not sign their property over to.

What are the operating costs of the building?

Frequently, business operators absorb the entire cost of using the building. On the other hand, this is not always the case. It is not uncommon for businesses to share commercial properties, which in turn could mean they must share the operating costs of the setting. It is important to consider the financial impact that any operating costs could have on your business.

Who is responsible for maintenance?

Tennants and commercial real estate owners may have different ideas about who will take on the responsibility of maintenance throughout a lease. There are some business operators who may be keen to make changes and improve the environment for customers. However, other businesses may operate in a manner that involves fewer face-to-face interactions, making the aesthetics of the environment a lesser priority. Ironing out who is responsible for repairs early in the negotiation process could prevent commercial disputes at a later date.

Giving careful thought to these key issues before entering a commercial lease could be in your best interests. As a business owner in California, it is important to remember that you have legal rights.

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Leasing out commercial premises can bring in good money. Yet, if your lease agreement is not up to scratch, the cost to your tranquility and finances can leave you wishing you had never bothered.

When you build property, you have a vision of how people will use it. To ensure that is what happens, you need to translate the thoughts from your head to paper. Expecting a client to abide by something you failed to specify is asking for trouble, and if it goes to court, you would probably lose.

The clearer a lease agreement, the less likely you have problems

Here are a few things to bear in mind when drawing up a commercial lease:

• Clarify exclusions: If bills and maintenance are extra, you need to say so in the agreement. Only putting what you do include increases the chance of a misunderstanding.
• Clarify time and price restrictions: You plan to rent the premises for a year to a local restauranteur to get the place a name, then, once customers know this is the building to come for great food, raise the rent. Defining the length of the contract and your options to raise the price is crucial from the outset.
• Clarify the types of business you will accept: If you envision your new mall having a classy vibe, you need to think carefully about how you word your contract. You cannot discriminate based on class or income. Yet, you can include careful wording to ensure no one sets up fast food joints and sex shops in your mall.

Getting help to ensure the wording of your commercial lease agreement covers everything you need is far easier than dealing with the fallout of a lease dispute because it does not.

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