Selecting the right business partner is essential for the success of any shared business venture. However, even with the best of intentions and due diligence, things can go wrong, and you might realize that you’ve made a mistake in choosing your business partner.

This can be a critical error that means the business will fail. It could also mean you’re more likely to find yourself engaged in partnership disputes. That’s why it’s so important to identify red flags in advance.

WHAT RED FLAGS SHOULD YOU LOOK FOR?

You want your business to run smoothly. To help, here are some signs that might indicate that you have the wrong business partner:

1. Lack of shared vision and values: If your partner’s vision and values don’t align with yours, it can create conflicts and hinder the growth of the business. You may even feel like you’re working against each other, rather than working together as partners.
2. Poor communication: Communication is key in any partnership. If your partner doesn’t communicate effectively, misunderstandings can occur, leading to problems down the line. Lack of communication also makes disputes far more likely since you both may make incorrect assumptions.
3. Different work ethics: If your partner is not as committed or hardworking as you are, it can create resentment and lead to a lack of trust. You need to work with someone who values the business the way that you do and who puts in the same time and effort.
4. Financial issues and disagreements: Money, pay and financing are often top sources of conflict in business partnerships. If your partner has different financial goals or is not transparent about finances, it can be a red flag. One important thing for partners to talk about when starting a business is just how much they are expected to invest and how much they will be paid. It’s best to have all financial decisions in writing.
5. Lack of complementary skills: A successful partnership requires complementary skills. If your partner doesn’t bring the necessary skills to the table, it can hinder the growth of the business. For example, your business is stronger with one person who is good at product development and one who is good at sales, rather than two salespeople who don’t have a good product – or two excellent designers who can’t sell the products they’ve made.

When starting your business partnership or trying to navigate a dispute, be sure you know what legal steps you need to take. Addressing these issues up front often makes things go smoothly and can lead to better protection of your interests and your company as you move forward.

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Investing in real estate is reputable for being profitable. Investors have a vast range of options, and one of them is commercial real estate (CRE), which is gaining a lot of attention as time goes by. This is because it has a higher income yield and low maintenance costs. However, you should consider crucial aspects when investing in CRE, including the property type.

Here is what you should know about this factor.

DECIDE A PROPERTY TYPE

CRE includes offices, retail, industrial and multifamily units. With offices, you will rent office spaces to businesses like law and accounting firms. These are the typical corporate-style workspaces. Retail CRE is for retail purposes. Thus, your clients will be shopping centers, restaurants, coffee shops and healthcare facilities.

With industrial spaces, you will rent to companies with heavy processes, such as manufacturing, storage (warehouses), assembly and production. Lastly, multifamily CRE defines the larger residential complexes with many units. They are for residential purposes but generate high rental income, hence commercial properties.

You should know which property type to invest in to make your work more manageable. It can be challenging to look at all types, and the market can have hundreds of each. Thus, consider the pros and cons of each and choose a type you can manage.

DECIDE OCCUPIED OR EMPTY

When investing in CRE, you can purchase a building that’s already occupied or an empty one, in which you will market to find tenants. Further, you can buy land and build the property. It will be best to know which one you want from the beginning to make informed decisions.

The property type you invest in is crucial. You should obtain adequate information about the industry to make the right moves. 

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Landlords may want to use cameras as a form of security. In a lot of senses, simply having security cameras in place can act as a deterrent. If someone does break into a unit, security footage can also go a long way toward showing what happened or to helping police find the perpetrators.

But it can be complicated. What rights do the tenants have to privacy? Are landlords still allowed to use cameras, or would that be a violation of the tenant’s rights?

OUTDOOR CAMERAS ARE PERMITTED

Outdoor security cameras are allowed to be used. However, it’s very important for landlords to understand where a tenant has an expectation of privacy. The camera can never film them in these locations.

This is why cameras inside of the unit are generally prohibited. They cannot be used in bathrooms, bedrooms, closets, changing areas, living spaces or anywhere else.

Interestingly, it’s even important for landlords to consider the angle of their outdoor cameras. For instance, it’s common for a security camera to include the front door of the unit in the field of view. But if someone is entering the unit and the angle means that the camera sees inside that person’s home, it’s still a violation of their privacy. The camera may be outside, but a tenant always has an expectation of privacy inside the unit.

RESOLVING DISPUTES

This is one area in which landlords and tenants may find themselves in a dispute, but certainly not the only one. All involved need to be sure that they know about their legal options.

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You can earn a lucrative income in the real estate development industry, but most people who gravitate towards this career do so because they enjoy making deals or because they enjoy creating. That means they are prepared to take bold risks in all aspects of property development.

Some business risks are to be expected, but you should never gamble on your good standing as a conscientious, law-abiding businessperson. Instead, look for ways to lower legal risks across all your real estate development projects.

BUILD A TEAM

Property development is a job best shared among industry professionals. While you remain in control of your development business, guidance and advice from others can minimize your legal risks and help your enterprise grow.

Consider bringing in professionals like these:

• Financial advisor
• Real estate consultant
• Civil engineer
• Land surveyor
• Architect
• Environmental consultant

Adding a legal representative experienced in real estate law to your team can also help you lower your risks as a real estate developer.

USE TAILORED CONTRACTS

A real estate development project means entering into contracts with several different parties. Instead of relying on one document for all your agreements, have them drafted for individual situations.

Examples to consider are:

• Lender contracts
• Consultant agreements
• Construction contracts

Of course, all purchase or sales contracts benefit from customization to protect your interests and prevent legal issues.

KNOW THE LAW

An ideal way to lower your risk and protect your company is to know what you can and cannot do under California law. For example, even a simple violation of California zoning regulations can cause problems for your operations.

You can perform the necessary research yourself or partner with a legal representative sensitive to the issues property developers face. The latter helps ensure that your business practices remain lawful across all of your projects.

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If you are looking to expand your commercial real estate portfolio, at some point you may consider taking on an investment partner. There are pros and cons to business partnerships, but they can prove lucrative for both parties when they succeed.

Below are some tips for selecting the best partner for your commercial endeavors.

THEY ARE TRUSTWORTHY

You should never have to worry about your business partner’s integrity in any given situation. Being able to trust your partner is the cornerstone of your business partnership, so be as sure as possible when selecting a partner.

YOU SHARE THE SAME VISION

While it’s handy to have complementary skills, you and your potential partner should share the same vision of your business partnership goals. For instance, if one partner intends to reinvest the profits and the other plans to buy a yacht, the two could clash over their apparent commitment levels.

YOU EACH APPRECIATE THE OTHER’S ROLE

Some of the best partnerships are where the venture is funded by one partner who takes a hands-off approach to the day-to-day operations. The other’s commitment is proven by their sweat equity, i.e., the actual labor and time invested in the partnership.

YOU BOTH HAVE A PASSION

Passion ignites drive, and it is important for both partners to be equally driven and committed to meeting shared goals. If one partner is sacrificing time and effort and the other is “phoning it in,” problems arise.

PLAN NOW HOW TO END A PARTNERSHIP

Many problems between partners can be averted by a clearly defined partnership agreement that details how the partnership can be dissolved under a variety of circumstances.

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If someone rents a home or apartment, they may wonder how many people are allowed to live there. Specifically, they are considering how many bedrooms they have and how many individuals are allowed to share each bedroom.

In California, the general rule is that there can be two people in each bedroom. The formula that is sometimes used is called the 2-plus-1 one formula. This means that two people can be in each bedroom, but you can have one additional person for the entire home.

It is worth noting, however, that there can be exceptions to the rule. Generally, the authorities are focusing on health and safety. If having more people in the unit doesn’t create health and safety problems, it can be allowed. But, overall, two people are allowed in each bedroom.

HOW THIS CAN CREATE PROBLEMS

This can cause problems for both tenants and landlords. For instance, a landlord could find themselves facing ramifications if they are intentionally renting to people who cannot fit the space. They may be tempted to do so if they’ve been having trouble filling that rental.

Additionally, tenants themselves could face legal issues if they are putting more people into the space than are permitted. With rising rent costs, people sometimes will be tempted to add extra tenants – perhaps without even telling their landlord that they are doing so. But if this creates health and safety concerns, it may be illegal.

All of this can lead to a lot of legal questions and even disputes between the two parties. Those involved need to know about the options at their disposal.

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Business partners have a legal obligation to act in the best interests of the partnership and other partners, collectively referred to as fiduciary duties. It is what keeps a partnership alive and running since it enables the partners to work towards a common purpose rather than pursuing individual goals.

If you are in a partnership or planning around one, it helps to understand what the law says regarding the duties of each partner. That way, running the partnership and avoiding legal issues will be easier.

THE LAW IN CALIFORNIA

California’s Corporation Code governs the legal relationship among business partners. It outlines each partner’s fiduciary duties to others and the partnership.

The law specifies three main fiduciary duties of partners in a business partnership, as explained below.

• The duty of loyalty requires partners to avoid engaging in any actions that would harm the partnership. This duty includes a requirement to disclose any conflicts of interest and to refrain from competing with the partnership or using it for personal gain.
• The duty of care requires partners to exercise reasonable care and skill in managing the partnership’s affairs. This duty includes a requirement to make informed decisions and to act prudently and diligently.
• The duty of good faith and fair dealing requires partners to act honestly, in alignment with the partnership’s rules, purpose and mission.

It is worth noting that fiduciary duties cannot be waived by agreement or otherwise. They remain in place as long as the partnership exists. In addition, the non-breaching parties are entitled to a remedy for a breach of fiduciary duty by a partner.

DEALING WITH A PARTNER BREACH OF FIDUCIARY DUTY

When a partner violates their fiduciary duty, it can hurt the company. The business could lose money or miss out on opportunities due to the selfish actions of a few.

Every situation is different. The most crucial thing is that you respond appropriately and promptly. Therefore, it is essential to seek legal help on how best to deal with such a situation and protect your business interests.

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Even the surest business venture comes with unforeseeable risks. Disruption in the supply chain might leave production facilities idle for months and push a company to the brink of insolvency. A few poor hiring choices could lead to a substantial drop in quality and expensive product liability claims could lead to the closure of the company.

Creditors, employees and unhappy clients could all pursue expensive lawsuits against a company. Yet, entrepreneurs and investors do not have to blindly accept risk simply because they want to run a business. They can proactively address known risk factors to limit their exposure. They can also purchase insurance. Numerous types of insurance are available to help organizations limit their risk.

1. GENERAL LIABILITY COVERAGE

Any time someone gets hurt or there is an incident that causes property damage, a business could be at risk of a lawsuit. General liability coverage is a great starting point for protecting the organization and its leadership from injury claims.

2. PREMISES LIABILITY COVERAGE

Any business with a physical location that employees or members of the public visit could end up subject to claims when people get hurt at that property. Premises liability coverage is an important addition to a general business policy for most organizations with offices or retail spaces open to the public.

3. PRODUCT LIABILITY COVERAGE

Any company producing products either for retail sale or used by other businesses will have the risk of product failures causing injury or property damage. Product liability coverage helps protect businesses against financial claims if one of their products causes a fighter or electrocutes someone.

4. ERRORS AND OMISSIONS COVERAGE

Businesses that provide professional services may need to carry insurance that protects them against mistakes when working with clients that would be comparable in many ways to product liability coverage for businesses that sell goods. Lawyers, doctors and similar professionals may need to carry specialized malpractice coverage.

5. BUSINESS INTERRUPTION INSURANCE

Any organization with substantial facility expenses or multiple staff members may need to consider investing in business Interruption coverage. Such insurance can cover rent and even staffing expenses when a business cannot operate due to extenuating circumstances, like a natural disaster.

Organizations that carry appropriate kinds of insurance can benefit from the knowledge that their daily operations have invested in protection from the uncertainties of an ever-shifting market and legal climate. Learning more about business insurance and securing the right coverage with the assistance of an experienced legal professional can help entrepreneurs and business owners who are worried about liability risks.

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In some cases, real estate investors are not going to be able to agree on what to do with the property that they own. Maybe you and a partner started an investment firm. You purchased some property and now you want to sell. Your partner doesn’t want to sell and doesn’t believe it’s the right time. What are you supposed to do?

If a case like this goes to court, the court may use a tool known as a partition action. This is done to divide real property between two individuals. There are two ways to do it, which we will examine below.

SPLITTING THE PROPERTY ITSELF

First and foremost, you can use a partition in kind. This divides the property itself. You end up with different ownership shares and the paperwork is adjusted to show that you both own a different portion of that property. This way, one person could sell their portion and the other person could retain theirs, dividing their investment.

SPLITTING UP THE EARNINGS

The other type of partition action focuses on dividing the money earned in the sale. This is done if it’s a type of property that can’t realistically be divided between two owners. The only remaining outcome is to sell the property to a third party and then split the money between the two owners. This isn’t necessarily the ideal outcome for all involved, but it might be the only one that makes sense.

Either way, if you find yourself in a dispute with your investment partner, it’s important to know about all of the legal options at your disposal. You may have a lot of money on the line and you need to know what steps you can take.

Posted in Real Estate Litigation | No Comments »

Dogs may be a man’s best friend. However, they can be a landlord’s worst nightmare. And this explains why most landlords include a “no pet “clause in their lease contracts. So, what happens when a tenant brings a pet into a rented property without your consent?

Regardless of how you feel about the tenant bringing a dog into the rented property, it is important that your actions are informed by the law.

UNDERSTANDING CALIFORNIA’S “REASONABLE ACCOMMODATION” LAW

California law requires housing providers, including landlords, to make “reasonable accommodations” for renters. Basically, this refers to an exception, adjustment or change in rules, practices, services or policies that is necessary for individuals living with disabilities to adequately use and enjoy their rented property. One of these accommodations may involve allowing an ailing or a disabled tenant to own an assistance animal despite the existence of a “no-pet” policy.

WHAT TYPES OF ANIMALS DO THE “REASONABLE ACCOMMODATION” RULE APPLY TO?

Under California law, the following animals fall under the “assistance animals” category:

Service animals – these animals are specially trained to offer specific assistance to disabled individuals, including those with mental health disabilities. These include:

• Service dogs – these dogs are trained to perform rescue work, pull wheelchairs or collect dropped items.
• Guide dogs – these dogs are trained by licensed trainers
• Signal dogs – these dogs are trained to alert owners with hearing difficulty
• Miniature horses – these horses are trained to perform similar tasks as service dogs

Support animals – these animals provide cognitive, emotional or other support to disabled individuals. Also known as emotional support or comfort animals, these animals may or may not be trained.

CAN YOU TERMINATE A LEASE CONTRACT IF A TENANT VIOLATES A “NO PET” POLICY?

The answer to this question depends on a number of factors, including whether the animal in question could reasonably be considered an assistance or support animal. With that said, understanding California’s tenancy laws can help you protect your rights and interests while dealing with a tenant who seems to have violated a “no pet” policy.

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