There are times in business when it feels like it makes sense to pool your knowledge, capital and expertise with another person. It gives you options that you wouldn’t otherwise have to work outside your comfort zone and to be a part of projects that excite you.

As with any relationship, it’s important you know just what you’re getting into. It makes sense to iron out how you want the partnership to work before signing any agreements. If it’s your first time forming a real estate development partnership, here are a few considerations to have in mind.

FIND A PARTNER WHO IS A GOOD FIT FOR YOU

Sharing business decisions with another person can be difficult. It’s important to be sure that the partnership is the right thing for you before you sign up. Look for qualities in a partner that you share and feel you can trust.

CHOOSE THE RIGHT TYPE OF BUSINESS ENTITY

Generally, people choose to operate under either a Limited Liability Company (LLC), Limited Liability Partnership (LLP) or a Real Estate Limited Partnership (RELP). Which type of entity is right for you will depend on a number of things including how you wish to be structured and the nature of your business.

HAVE A PARTNERSHIP AGREEMENT IN PLACE

This document is used to secure, in writing, the role and responsibilities of each partner. It should explain how finances will be dealt with, the goal of the business partnership and the commitment of each party to reaching that goal and how disputes will be handled. This is an important document to have in place as it can be used in legal proceedings should one party not meet their expectations under the agreement,

Forming a real estate development partnership can be incredibly beneficial for taking your business to the next level. Make sure you’re protected personally by having all the necessary documentation in place.

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Completing a commercial property and getting ready to lease is a proud moment for developers. You can lease your space to business owners for offices or industries for warehouses, data centers and other industrial activities. Further, you may lease your property for mixed uses, in which case your tenants may be malls, restaurants, department stores, and so on.

Thus, commercial real estate (CRE) is expansive and investing in it offers significant advantages. However, to enjoy these benefits, you need contracts to protect your investment.

Here are three factors to include in your commercial lease agreement.

PERIODS

Your tenants need to know about different periods. Examples include the period in which the lease is considered active, the renewal period of the lease, when insurance coverage requirements will go into effect, the due date of the security deposit and the period for giving notice of termination of the lease. You should write about these periods in individual clauses.

USAGE

You should explain how a tenant can and can’t use the property in the agreement. This may include the products and services they may offer or even the quality level of their operation.

Another aspect is the space to use. If you are leasing to one business, this may not be a major concern. But if you will have co-occupancy spaces, a tenant should know what portion of the property they can use.

MAINTENANCE

Maintenance is one of the leading causes of landlord-tenant disputes. Thus, your agreement should have this clause, clearly explained to avoid misunderstandings. You should state when you are responsible for maintenance and when a tenant will be held liable.

You should draft top-notch commercial lease agreements. It is essential to learn how to negotiate, draft and review agreements to protect your rights.      

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There’s no question that the commercial real estate market has weathered significant ups and downs over the past several years. Oftentimes, upping the rent on a property seems like the most obvious way to account for challenging marketplace conditions. Yet, inflating commercial property rents is a risk that isn’t always worth taking. 

Rental rate inflation above the market rate is always a risky business. But it is often a particularly risky proposition when an anchor tenant is either negotiating an initial rate or is looking to renegotiate a rate that has been inflated historically. 

IT’S ALL ABOUT RISK VS. REWARD

Entering into a commercial lease with a tenant involves a measure of trust. On the one hand, you need to be able to keep your business afloat during challenging times. 

On the other hand, if your tenant believes that you’re inflating their rent to an unreasonable extent, they may understandably feel like you’re taking advantage of their trust and utilization of your property. 

The risk vs. reward calculus in this scenario can impact more than just your company’s finances. It can affect your company’s reputation. If your tenants enjoy working with your company and believe that it negotiates rates fairly, those tenants may recommend your services to other potential tenants. 

If your tenants have concerns that their rental rates are always inflated but that they’re “stuck” with your company because they don’t want to risk losing customers by moving to new locations, they may badmouth your company to other potential tenants. 

GET HELP WITH YOUR COMMERCIAL REAL ESTATE INVESTMENTS

Carefully considering the broader risks vs. rewards of inflating commercial real estate rental rates is consequential business. Researching your options and consulting with professionals may be in your company’s best interests if you’re not sure of which direction to take at any given time. 

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When signing a lease agreement, you want to know that, as a landlord, you and your tenant won’t have any disputes. However, there’s always a chance that, once a tenant enters into an agreement, a problem can arise.

Being prepared for a landlord-tenant dispute may help ensure your new tenant isn’t stepping on your toes. Here’s what you should consider:

KNOW YOUR RIGHTS

The best way to overcome any issue, or prevent an issue before it starts, is to know your rights as a landlord. Landlords have rights when creating a lease agreement, but tenants have just as many rights.

For example, you ask your tenant to pay an application fee, no questions asked. Yet, asking about your tenants criminal history may depend on what county or city you live in. Likewise, landlords are to return a security deposit once their tenant vacates the premises, barring any fees that may be used for damages or cleaning.

REVIEW YOUR AGREEMENT TERMS

While many landlords use similar lease agreement terms, you should still consider reviewing all of its intricacies to ensure you and your new tenant aren’t breaking the agreement. Your agreement may use basic terminology, which could be used against you. But a complex agreement may make things confusing for everyone. If your tenant is unsure what you expect from them, you should discuss the terms of the agreement.

KEEP IT IN WRITING

When signing a lease agreement, you should ensure you and your tenant keep a hard copy and additional documents. The advantage to this is that, if your tenant believes you’ve violated the terms, you can review and present the agreement.

SEEK LEGAL HELP

If a tenant does believe you violated the terms of a lease agreement, then you may need to consider reaching out for legal help, especially if you believe you didn’t.

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It’s exciting to start your own business – whether it’s something that you’ve been planning for ages or something that happened after a sudden spark of inspiration.

However, operating your own business does carry some potential risks. You can end up in a legal dispute with an unhappy customer, fighting over a contract obligation with a supplier or distributor and more. This is why every entrepreneur needs to consider the different types of business insurance they need to mitigate their potential liabilities.

What insurance is most important for your small business?

Every situation is a little different, so exactly what you need may depend partially on the type of business you’re operating. A home kitchen, for example, may have vastly different insurance needs than a website design consulting firm.

Just the same, here are some insurances that may be the most important for everyone:

• General liability policies: This is the kind of insurance that you need if your customer claims that they fell over the unsecured doormat inside your store or your competitor alleges that you stole their product.
• Key person insurance: Are you launching your business with a partner or two? What happens to the business if one of you suddenly dies or disappears? You can give potential investors some security through key person insurance. This offers a safety net that can help you stay afloat.
• Business income insurance: Everything from a natural disaster to social upheaval can cause an interruption in your normal operations. Most small businesses simply cannot afford to be closed for even a few days – let alone weeks or months. This kind of insurance can provide some necessary relief.

It’s good to remember that some insurance policies don’t just provide a check – they also provide defense services if you’re facing a lawsuit. That’s an additional value, since it means you don’t have to handle things yourself while still trying to keep up your operations.

Like many other start-ups, you’re probably operating on a thin budget – so you want to stretch your dollars the furthest. That means making careful choices about your risk management strategies. Experienced legal guidance can often make it easier to understand where your biggest liabilities lie. It can also help you make sure you negotiate the right insurance coverage.

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Both the residential and commercial real estate markets have weathered significant turbulence since early 2020. As 2023 dawns, it’s important to assess both current and expected market conditions and trends to better ensure that real estate development decisions made this year are as informed as they can be.

One of the primary reasons why it’s so important to make informed decisions at every point in the real estate development process is that short-sighted and ill-informed thinking can lead to legal challenges and negative financial consequences. For example, failing to account for supply chain delays can cause parties to unintentionally breach their duties under a development contract. Anticipating such delays can inspire tiered completion clauses within contract language that protect the interests of all parties.

HOPEFUL SIGNS

Unfortunately, supply chain issues continue to impact development in every sector. Inflation continues to influence whether various developers are choosing to build or to pause certain projects until costs come down. And although it has been widely predicted that the Fed will stop raising interest rates at some point in 2023, it is likely that they will continue to rise in the coming months. Yet, certain property types are performing well and as the market continues to stabilize, there is hope that the real estate development industry will benefit from increasingly predictable conditions in the near future.

Multifamily properties are performing well at present, partially because owners and investors are in a position to adjust rent rates as the market changes. Industrial space is also performing above average as well, given that the evolution of the e-commerce market is such that warehouses and similar spaces are increasingly in high demand from e-commerce operators whose business models have either survived intact or successfully evolved since early 2020.

Understanding the ways in which recent economic turbulence is still affecting the market and planning for increased stabilization of market conditions over time seem to be the two primary focuses of many savvy developers as 2023 dawns. By treating these two issues seriously, developers will likely place themselves in the best possible position to succeed in the coming year.  

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Many people start business partnerships because it was the best and, likely, most financially stable decision at the time. It may have meant that many of the responsibilities for running a business were split. A partner can even bring in many connections that uplift a business. 

Times change, however, and some business owners want to buy out their partners. This may have happened because the business partner isn’t looking to continue supporting the business or because there were conflicts. Whatever the case may be, buying out your partner in the business may be beneficial, but where does one begin? Here’s what you should know:

1. CLARIFY THE TERMS OF THE BUYOUT

Maybe you want to buy out the entire business or maybe you just want to relax some of your partner’s ownership. It’s important to clarify what you want from the buyout so that you and your partner have a mutual understanding. It may be good to communicate with your partner early and be prepared to answer questions.

2. KNOW THE VALUE OF THE BUSINESS

It’s hard to put a price on something you’ve worked hard on, especially a business you put a lot of time and money into. Despite that, your business partner may have some idea of how much they’d value the business. You may even be able to get an expert opinion on a value to ensure you’re giving your business partner a fair deal.

3. KNOW YOUR LEGAL RIGHTS

You know that at every step of your business there have been many legal considerations. However, running a business and knowing your legal options don’t exactly go hand in hand. You may need to reach out to an experienced legal guide for more options.  

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Along with residential property values, commercial property values have climbed in recent years. For some, this may have been a dramatic increase in value. But it does appear that things are beginning to change.

For example, a report that came out just last month showed that property values had fallen 13%. It was noted that there had not been a bigger drop than this during the entire global financial crisis. It will be very interesting to see if it predicts future declines in the months and years to come, or if property values will recover.

WHY ARE THEY FALLING?

As is usually the case, there are numerous reasons why property values are falling. One is that interest rates have been rising, which tends to make property less affordable, and that takes people out of the market. For those who remain, this can reduce the value of the other properties because demand is lower.

Additionally, those who may have invested could be facing financial constraints. It is unclear if the United States is going to enter a full-blown recession, but there are certainly business owners who have encountered reductions in income and who may be concerned about the future. Additionally, many workers have been laid off and may simply be looking for new jobs, rather than buying commercial properties and intentionally leaving to start their own businesses. 

IS THIS A GOOD TIME TO BUY? 

As a result, if you’re looking to invest in commercial properties, it may be worth watching this decline carefully. This could be a prime time to buy property as the values fall, anticipating a return to form in the future. Be sure you know exactly what steps you’ll need to take.

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You operate a pretty tight commercial real estate business, and you fully understand how competitive the market can be in your location. Vacancies are low and rents are high.

You’d like to weed out the bad tenants in a prospective group as quickly as possible. Is it acceptable, then, to ask for “key money” in exchange for a lease?

It depends. Here are a few things you need to keep in mind:

YOU CAN’T ASK FOR KEY MONEY AS A BRIBE

It used to be fairly common for landlords to demand a certain amount of cash from a tenant in exchange for a lease. This lump-sum payment is neither a security deposit nor part of their rent, but a bribe. Even long-term tenants were sometimes expected to pay key money to renew their leases.

Typically, these payments were made “under the table” – meaning they were kept off the landlord’s books. This is illegal both under California law and under federal tax laws.

If you want to demand additional money from a commercial tenant aside from the actual rent, you can, but only under certain conditions. This means:

1. You must include the amount of the payment (however it is described) in the recorded rental agreement with your tenant.
2. You cannot make the payment of key money a prerequisite for taking someone’s application, initiating their lease or continuing it.

You do have the right to charge tenants a reasonable fee for the steps you go through while vetting them, and that may include attorney fees.

Staying on the right side of the law when you’re a commercial landlord can be trickier than it seems. Experienced legal guidance can help you avoid serious problems.

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As someone who runs a construction business or works as a contractor in the construction industry, your revenue largely depends on clients paying their invoices in a timely manner. If someone fails to pay you as they should, you have only a few options for pushing them into compliance.

One of the most powerful is a mechanic’s lien. You can take a property owner to court over unpaid services rendered or materials provided. You can then record the lien so that the property owner cannot transfer, refinance or sell the property without first paying your company what they owe it.

If you go through all the trouble of securing a mechanic’s lien against a property, you obviously have every intention of pushing that owner into paying you as they should. Can they go back to court and remove the lien without paying you?

TECHNICAL MISTAKES CAN LEAD TO LIEN REMOVAL

There are numerous scenarios in which California state law allows property owners to remove a lien previously granted by the civil courts. The first and most obvious would be when someone has paid the underlying debt but the business refuses to release the lien.

However, other technical errors on the part of the construction business could result in the courts removing the lien without the company receiving full payment. Failing to take the necessary action to enforce the lien after the initial judgment could provide a homeowner grounds to request the lien’s removal. There could also be a strong case for the removal of a lien in a case where the business initiated the claim later than the law allows but the courts granted the lien anyway.

UNDERSTANDING YOUR RIGHTS AND OBLIGATIONS LEADS TO BETTER OUTCOMES

Small mistakes in how you handle the process of obtaining or enforcing a mechanic’s lien on real property will determine whether your company can demand payment using that lien or not.

Rather than using some cut-rate, national service with one-size-fits-all options and risking mistakes that could lead to an unfavorable court ruling or an untimely removal of your lien from property records, it may be much better to get direct support for your construction company as you learn about and pursue a construction lean.

Making sense of the rules that influence the outcome of business disputes like unpaid construction invoices can help companies make better use of the laws that protect them.

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