Signing a commercial lease is a major commitment. The location you choose and the facilities available will dictate everything from customer traffic to your business to growth limitations if the company succeeds.

As with any other kind of business contract, it is important to adequately protect yourself before you make some kind of legal or financial commitment to a property. There are three ways to minimize the risk you incur by signing a commercial lease.

Have someone help you decode the language

Commercial leases often include more technical jargon than residential leases and could include pages of fine print. You should never assume that you understand the details of the lease without first reviewing it with a professional.

You may discover that the terms are different than what you expected. You may need to locate to a different rental space or counter the terms in the document with a solution that works for your business. 

Ask for the protections that matter to your business

Are you starting a company and recognize that there’s a risk? You might want to ask the landlord to deviate from the standard three-to-five-year commercial lease and allow you to sign only a one-year lease.

Do you worry about circumstances outside of your control, like a possible war in a country that supplies necessary materials for your business? Adding a force majeure clause could protect your company from needing to pay rent even after you have to cease operations due to circumstances beyond your control. Thinking about the risks your company has can make it easier for you to negotiate better terms in the lease.

Clarify maintenance responsibilities and expenses

Commercial landlords usually either pass the responsibility for maintenance to their tenants or the financial costs of all common areas, including bathrooms and parking lot. Sometimes, tenants don’t understand how much they may have to pay in fees or in upkeep for the facility.

Making sure that the lease explicitly includes information about who is responsible for various systems or maintenance requirements can help prevent conflict and additional, unpredictable expenses.

Negotiating before you sign a commercial lease can help protect your business during what could be a long-term financial commitment.

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Tenants and landlords can disagree on many different issues during a lease. Tenants may want to bring in pets or overnight guests that landlords won’t allow, for example. However, few matters lead to disputes as quickly as money.

The security deposit that someone pays to protect a landlord against damage to their unit or the non-payment of rent often leads to conflict at the end of a lease. Tenants want the money back, but landlords may want to keep the funds. 

When can a landlord in California retain a residential security deposit?

What state laws say about security deposits

California limits security deposits to two months’ rent for unfurnished units. That could represent thousands of dollars, which technically still belong to the tenant. The state limits when a landlord can retain part or all of a security deposit when a tenant moves out to specific situations.

A landlord can keep a security deposit If a tenant breaks the lease by leaving early and does not pay all of their rent. They can also keep the security deposit for documented lease infractions with fees assigned to them, like a daily fee for a pet brought into the unit in violation of the lease. 

Finally, if the landlord documents damage beyond reasonable wear and tear to the unit, they can retain as much of the security deposit as is necessary to make repairs. Typically, landlords have to provide a written notice to their tenants about their intention to keep the security deposit. Disagreements about the deposit or the condition of the unit could require litigation to resolve. 

Those dealing with a security deposit dispute can benefit from learning more about California rental laws. Whatever side of the dispute you are on, it helps to know your legal ground.

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Making sense of a commercial lease isn’t easy, particularly if you haven’t signed one before. There are many new terms to learn and many differences from residential leases.

For example, a commercial landlord can sometimes pass maintenance requirements on to their tenants. If your landlord does perform maintenance and provides certain amenities, they will likely pass those expenses on to you in the form of common area maintenance (CAM) fees.

What kinds of amenities will commercial landlords include in CAM fees, and how much will they cost you?

CAM fees pay for services that benefit the entire building

Perhaps you rent just the single retail storefronts in a small roadside mall. Maybe you occupy a small office space in a larger facility. Amenities in and outside of the building used by all of the tenants or their visitors may contribute to the fees you pay.

For example, centralized security services, shared bathroom facilities and parking lots can all be part of the common areas that your CAM fees help pay to maintain. Utilities in areas shared by all tenants or throughout the building may factor into CAM fees. The same is true of landscaping, sidewalk maintenance and even repairs to the building.

Generally, landlords can include most any reasonable maintenance expenses in the CAM fees they assess. However, you may be able to negotiate how much you pay, whether you ask for a reduced flat-rate fee for a lower percentage because you will have fewer customers or staff members making use of the space than other tenants in the building.

Understanding the fees charged in your commercial lease can help you better negotiate beneficial terms.

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Commercial leases sometimes include a build-to-suit provision that enables the business moving into the space to have it designed or remodeled in a specific manner. This gives them the option to have the building’s layout meet their needs in a very specific manner — without worrying about tying up their capital in any real estate before they are ready. 

But what if a business owner wants the option to purchase eventually? A purchase option that’s built into the lease can make that a real possibility and help keep plans for the future open.

Why is a purchase option beneficial in a build-to-suit lease?

Finding an ideal location for your business is sometimes difficult to do and building new construction is costly. When you find these via a build-to-suit lease, the last thing that you need to find out is that the building is being sold. 

When you have a purchase option put into the build-to-suit lease contract, you get the first chance to buy the property if the current owner puts it up for sale. There are usually terms in the contract that specify when and how this can be done, so be sure that you double-check those to ensure that they reflect what you discussed during the negotiations for your space. 

Review your purchase options carefully before you sign that contract

Anyone who’s considering a build-to-suit lease should ensure they review the contract in its entirety. This gives you a chance to verify that you understand all terms and conditions that may apply — and that prevents unpleasant surprises down the road. 

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Investing in real estate development requires large sums of money, so there is a high chance that you need to find one or more partners to raise the necessary funding.

A good partner can do much more than provide capital. They can provide skills, knowledge and experience in areas you lack, making your business a more formidable proposition than if you run it alone. However, whenever one or more people get together to make decisions, there is the potential for conflict. 

Planning is key to preventing partnership disputes

Assuming you are a match made in heaven is foolish. It is safer to presume that you and your business partner will eventually fall out. It may be over minor issues, or it may be over major ones, yet assuming you will not always agree allows you to provision for when you do not. Failing to plan and waiting until you have a partnership dispute will leave you in a weakened position if they do.

Here are a few things to consider when drafting your initial contract to work together:

• Ensure an uneven balance of power: When one of you holds a majority share, you avoid decision-making stalemates.
• Stipulate how disputes will be resolved: You could stipulate using arbitration to avoid unnecessary conflict and cost when you cannot resolve disputes alone.
• Have a plan for an ending: Things do not need to go wrong for a partnership to end; there are many reasons you may wish to terminate your relationship. Consider how you will calculate pricing and whether the remaining partner has the first right of refusal. 

Your partnership contract is the basis on which your success will depend. Take time to ensure it provides the protection you need.

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Part of establishing your investment group may include choosing a business structure type. Among the options available, you may strongly consider choosing to form as a partnership or as a limited liability company.

Understanding some of the advantages and downsides of structuring as a partnership or as an LLC may help your investment group choose the right formation type.

Structuring as a partnership

If your investment group has more than two members, you may choose to structure it as a partnership. According to the Small Business Administration, structuring as a partnership may benefit professional groups such as yours, as well as those who want to test their businesses before formally structuring. You may structure as a limited liability partnership, which protects you and other group members from debts against the partnership.

Alternatively, you may choose to structure as a limited partnership. In a limited partnership, a general partner has unlimited liability for the business’s debts, while the other partners have limited liability protection.

Structuring as an LLC

You may also consider forming an LLC for your investment group. With this structure type, you may not face corporate taxes. Rather, your group’s profits and losses pass through to your and the other members’ personal income. As a member, or owner, of an LLC, you have limited liability protection. Therefore, your personal assets remain separate from your business assets, and you may not risk losing personal property such as your home or vehicle in the event your LLC faces lawsuits or must file for bankruptcy.

Ultimately, you and the other members of your investment group must consider your current circumstances, as well as your future plans to choose the structure type most suited for your needs.

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Everybody dreads living near a person who makes lots of noise at all hours of the day and night on a regular basis. When you live in an apartment, there seems to be no way to escape this individual’s blaring music, parties that last until the wee hours or boisterous kids and their friends. You like to think of your home as a peaceful oasis, but all too often, being there is a nerve-wracking experience. Tuning out all the sounds that grate on you is simply impossible. Griping about it all the time doesn’t help, either.

If you are a landlord in California with a tenant like that, you know the frustration and even anger this person can cause for you and other, quieter tenants. In fact, according to the website The Balance Small Business,“Noise is one of the most common complaints a landlord will get from tenants.” You need to find out what reasonable means are available to you for dealing with this person and resolving the issue.

Noises tenants make that often result in complaints

This is a partial list of objectionable noises that tenants make:

• Shouting
• Large indoor or outdoor social gatherings
• Not controlling a barking dog
• Having the TV turned up far too loud
• Children running overhead, shrieking or crying loudly

What actions can a landlord take?

Landlords have options, as well as a responsibility to look into the troublesome situation. Here are some tips on what you can do:

• Find out more from the tenant who is complaining about the noise. Get as many details as possible.
• Discuss the situation with other tenants to see if they have anything to add.
• Talk to the noisy tenant. Issuing a warning may be enough to quiet the person down.
• Having a clause about excessive or repeated noise in tenants’ leases is a good idea. If the tenant is in violation of the terms of their lease by continuing to make noise, they can be evicted.

If you are a landlord facing this problem and you aren’t sure how to address it, get some legal advice.

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A business partnership is one of the most important professional relationships you may ever have. Unfortunately, many business partnerships go the way of romantic relationships and terminate in acrimonious, sometimes traumatic breakups.

Just like people don’t go into a marriage expecting to get divorced, people don’t start a business partnership with the expectation that they will have to dissolve the partnership. There are certain issues that you can try to avoid that might put unnecessary strain on your business partnership.

Disagreements about the responsibilities of each partner

Before either of you commit your time, money or other resources to a business, you need to have a written partnership contract. Your contract should outline what each of you will do or provide for the company.

If you don’t actually discuss and spell out the responsibilities and expectations of each partner, you could easily clash over unmet expectations and the resulting sense of disappointment they create. The more thorough and honest you are while drafting a partnership agreement, the easier it will be for you to know what to expect and how to resolve conflicts in the future.

One business partner engaging in fraud or breaching the contract

One of the most common reasons for people to get into contentious partnership disputes relates to the behavior of business partners after they sign an agreement. When one business partner doesn’t fulfill their obligations, resentment can grow to a point where it impedes the relationship.

It may also be possible that your business partner engages in some kind of fraud that affects you, the company or its customers. They may have lied to you about what they intended to contribute to the company or their employment history and skills. These actions could create serious legal risks.

Failing to talk about the end of the partnership at the start

If you only talk about the near future when discussing your business with your partner, you may eventually disagree about the necessary steps for your company.

For example, if you intend to retire by the age of 65 and will want to have your partner buy you out or to sell the company at that point, it’s important to disclose that expectation early in the relationship. Otherwise, you could wind up battling each other and depleting your company’s assets.

Partnership disputes can sometimes get resolved amicably. Other times, they may require the dissolution of the partnership or even the sale of the business. Planning ahead to avoid partnership disputes will protect the investment you make in your new company.

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When you make your living as a real estate developer, you soon learn to sniff out potential problems. Yet, if you are new to the game, there are plenty of pitfalls that could drain your finances and end your grand designs before you have started.

Every industry has people willing to take advantage of others’ naivety, yet the stakes are much higher in real estate investment because of the considerable money involved. Proceeding with calm is crucial to making your way in the industry.

Thorough research is vital before a real estate investment

Here are a few things that could catch you out:

• Zoning laws: Understanding what you can and cannot do in a particular area is crucial. Remember zoning may change in the near future if other developers have their plans approved. For instance, you want to develop a piece of land for industrial use, yet if a rival developer gets the go-ahead for residential housing in a nearby area, the council may change the zoning laws to stop industrial use for several miles.

• Weather: You need to think far ahead if you want your investment to last. Consider how the area you intend to buy will fare in the increasingly hot and dry climate. Will it have water or be at risk of a forest fire?

• Planned projects that do not go ahead: The local government announces plans for 500 new houses. You see the opportunity for a set of shops to serve them. Yet, if the housing gets canceled, you will have no market for the land you bought.

• Plans you are not aware of: It is impossible to know all the ideas in people’s heads. Yet, the wider you cast your research net, the more likely you are to find out.

It takes time and experience to do the research needed to ensure your first commercial real estate purchase does not become your last. Do not be afraid to ask for help.

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Three industrial warehouses were recently acquired in Colton, about an hour away from Los Angeles. The properties, which offer commercial leases, are adjacent and span more than 740,000 square feet. A real estate investment firm ended up buying the properties, which a large real estate investment trust owned.

One of the three properties quickly ended up being leased to the company Mattress Firm.  Meanwhile, the other properties were recently in lease negotiations. Multiple competitive bids on the properties were received from top-quality prospective tenants. The reason these properties have been in such high demand is that they are prime rental spaces. In fact, rental prices in the region in which these buildings are located have increased more than 7 percent during the past year.

The warehouses feature loading that is dock high, sprinkler systems and office space that is state of the art. In addition, the minimum clear heights at the properties range from a convenient 32 feet to 36 feet. The city of Colton is particularly desirable because it offers lower utility rates compared with surrounding areas. On top of that, the properties’ area is close to State Route 60, Interstate 10 and Interstate 215, thus offering easy access to other parts of the region.

Purchasing properties that feature commercial leases can be exciting due to the revenue-generating potential that comes with such properties. However, completing a commercial real estate deal can also be tricky and often overwhelming. Fortunately, a savvy Los Angeles attorney can provide the direction needed to complete a commercial real estate deal confidently and successfully.

Source: inlandempire.us, “743,000 Square-foot Industrial Sale in Colton California“, March 26, 2018

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