If you have a brilliant idea for a product or service, you are probably itching to get it to consumers. After all, running a business is a good way to achieve the American dream. If starting a business venture on your own seems out of reach, forming a successful partnership may be the solution. 

One of the more effective ways to increase the likelihood of partnership success is to have a well-written partnership agreement. This binding contract sets the terms of the partnership, including each partner’s duties and obligations. Of course, you can also learn from failed partnerships. Here are three common reasons business partnerships fail. 

1. Mismatched contributions

Partnerships make ideal business models because they allow each partner to contribute according to his or her own strengths. For example, one partner may oversee everyday operations, while another provides an influx of capital. If partners see contributions as being unequal, though, friction may arise. Accordingly, the partnership agreement should not only clearly define contributions, but it should also include a procedure for dealing with conflict. 

2. Divergent values

Even if partners generally agree about the function and direction of the partnership, they may have different business or personal values. Regrettably, if partners cannot decide which values are relevant to the partnership, the venture may be on the road to failure. This is particularly true if the partnership is not doing well financially. 

3. Inflated egos

While ordinary activities of a business partnership can certainly lead to disagreements among the partners, a human element may also be disastrous. That is, a partner’s ego may interfere with business growth. As such, it is vital that all partners understand the partnership agreement and respect its parameters. 

If you are thinking about opening a business, you want to build a solid foundation for it. Working with business partners may be the right approach. By understanding why partnerships often fail, you can boost your future partnership’s odds of success. 

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When your partnership or investment firm decides to dive into the commercial real estate market, it is essential to understand that not all types of commercial properties are strong investment prospects. Each individual property has its own unique advantages and challenges, but some kinds of commercial real estate generally make better targets for investors. 

While the most common types of commercial investment properties include apartment buildings and other types of multi-family housing, there are other strong options as well. 

Diverse housing options 

Forbes provides detailed information on the different types of commercial real estate that are generally good for investors. For example, most types of housing are low-risk investments. Apartment buildings, low-maintenance senior housing and mobile home parks are all solid investment options under most circumstances. 

Forbes recommends choosing properties that have well-established, efficient property management systems in place to avoid common problems such as issues with rent collection, property damage and unrealistic expectations from tenants. 

Co-working spaces and other modern choices 

Forbes states that self-storage complexes are also good investment options. They require low maintenance and generally have stable occupancy numbers. Another good possibility is a flex space. This term includes complexes that have a showroom and an office in each unit and are usually considered light industrial properties. 

You may be able to find good investment opportunities in some modern building concepts. Good candidates may include co-working spaces and micro-apartments in up-and-coming urban areas. 

High-risk commercial properties 

According to Forbes, there are some types of commercial developments that are risky for investors. In general, a single-use building that only allows one tenant is risky; if the tenant leaves, it may be hard to find another one. Generally, properties with space for multiple tenants offer more stability in terms of occupancy and income. 

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Most everybody in the real estate business is familiar with real estate investment trusts. If you are considering opening your venture to a wider selection of investors or minimizing tax impact on investment profits, this could be a good way to organize.

However, there are requirements you would have to meet and considerations you should probably make before you begin the process. Here is a very brief overview of what goes into forming an REIT.

A question of taxes

In a general sense, becoming an REIT is it as simple as meeting the requirements, filing with the California Secretary of State. As explained by the IRS, you would also elect to become an REIT and have the federal government tax you using form 1120. You would probably still file the California form 100 if you were doing so before.

Taxes could be one of the main reasons you and your partners are considering converting to or establishing an REIT. This is a difficult topic and it would depend on your exact situation, but it is true that this type of organizational structure could offer some unique tax benefits.

A matter of requirements

You may have noticed a reference to requirements above. As explained directly on the federal tax for return for REITs, you would need to meet some criteria, including:

• Having 100 investors or more
• Having transferable interests
• Not being closely held
• Your organization being a corporation, association or trust

An issue of timing

It is worth noting that you would not necessarily need to meet all these requirements immediately. As with many business formation and organization matters, there is a timeline involved. For example, you would not have to meet the requirements for minimum investors or non-closely-held status until your second year as an REIT.

These processes are complex and require planning. However, if you know that is the right time to form this type of organization, there is probably a way for you to begin the process sooner rather than later.

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A new law took effect in California on January first, which affects how much landlords are able to increase rent. The Housing Rights Center held a meeting recently to discuss the new housing and rent policies. 

While the meeting focused largely on the new tenant protections, there are important takeaways for landlords to be aware of. 

How the new legislation affects landlords 

According to The Signal, if you fall under AB 1482 you cannot raise rental prices more than 5% plus the inflation rate for the year. Since the current inflation rate is 3.3%, rental prices cannot increase by more than a total of 8.3% for the current year. 

In addition, you need to provide “just cause” to evict someone living in one of your properties if they have lived there for more than a year. If you happen to remodel your property, you will need to pay one month’s rent to cover your tenants’ relocation costs. 

This new law will continue throughout 2030 but does not apply to buildings built in the last 15 years or certain properties that are not owned by corporations, LLCs with at least one corporate member, or real estate investment trusts. 

What landlords should expect from their tenants 

The Housing Rights Center also called attention to important tenant responsibilities to take reasonable care of the unit they occupy. 

• Using plumbing, gas, and electrical appliances correctly 
• Keeping the dwelling clean 
• Disposing of waste properly 
• Leaving the structure intact 
• Notifying the landlord of broken or ineffective locks or security devices 

For landlords who have questions regarding how these new laws affect them, it may be a good idea to contact an experienced real estate attorney. 

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As the owner of rental property, you likely require each new tenant to post a security deposit before they move in. Under normal circumstances, you likely then return this amount to him or her when (s)he moves out at the end of the lease or other rental term.

Sometimes, however, you may need to keep a portion of that security deposit amount. The California Court System explains what amounts you can keep and when you can keep them.

Valid security deposit deductions

In general, you can use your tenant’s security deposit to pay for the following:

• The amount you must spend to repair property damage caused by the tenant
• The amount you must spend to clean the tenant’s unit when (s)he moves out so as to return it to the same condition it was in when (s)he moved in
• The amount of any unpaid rent (s)he owes you if (s)he moves out without giving you proper notice

Notice to tenant

When the tenant moves out, you have 21 days in which to do the following:

• Return his or her full security deposit OR
• Give him or her written notice of what amount you are keeping and why AND
• Return the balance of his or her security deposit to him or her

For your own protection, keep a written record, including receipts, of all the repair and/or clean-up costs you incur. Then give your former tenant a copy thereof.

Should you find it impossible to complete the repairs or clean-up within the 21-day period and therefore have incomplete actual receipts, you can give your former tenant the reasonable estimate of such costs on which you based your security deposit deductions. You then have 14 days from completion of the repairs and/or clean-up to send him or her the receipts and any security deposit balance you owe him or her.

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Starting a business is a huge undertaking. You have to wear many hats and cover a variety of business details to get things off the ground. Even if you feel as if you have everything in order, there are always unexpected issues that can come up. When a problem happens, it can delay your ability to open your business. This is why it is helpful to consider common concerns that people have when starting a business.

Knowing the common areas where business owners have issues allows you to better prepare and sidestep those issues yourself. Entrepreneur explains that it is disheartening when an issue occurs before you open the doors on your new business because it can halt your operations and potentially spell the end for your company if you do not figure out a solution. Here is a look at three issues that you may come across when getting your organization started:

1. Not hiring the right people

You need to arm yourself with a solid team of people. You want everyone you hire to be as committed to the success of your venture as you are. This may take time to find the right people, but it is very much worth it in the long run.

2. Running out of cash

When you first start getting everything in order for your business, you spend a lot of money. Anticipate unexpected expenses, as well. However, not having any cash flow in your company is a huge red flag. You should always have some capital on hand to cover emergencies or other expenses that come up. This requires careful financial planning before you ever open for business.

3. Not getting along with your partner

If you start your organization as a partnership, then you have to learn to get along with your partner. A good way to avoid issues is to draw up a partnership agreement that outlines your duties and responsibilities to the business. This can help to avoid issues later when it comes to who should be doing what.

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As a residential property owner in Los Angeles, your hope is that you will be able to maintain a good relationship with all of your tenants. Doing so ensures that you maintain a strong reputation (which can then also help guarantee that there will rarely be a shortage of demand for your properties). Yet despite your best efforts and wishes, there may be times where a tenant’s actions (or inaction) forces your hand and requires you to consider commencing eviction proceedings. Yet just as you hope to be known as a reasonable landlord, you also do not want to be known as one who evicts over every little discrepancy or disagreement. Being in too big of a hurry to get someone out of one of your units might come back to haunt you.

Thus, it is important to understand the circumstances in which you are within your rights to evict. According to information shared by the Judicial Branch of California, you can evict when:

• A tenant fails to meet rent payment deadlines
• A tenant damages your property
• A tenant makes themselves a serious nuisance to other residents of the same property
• A tenant engages in illegal activity on your property

Instances where a tenant violates the term of a lease agreement (e.g. bringing in a roommate without informing you when their rent rate is based on occupancy) can also be grounds for eviction. In some cases, it may be in your best interest to work with the tenant to resolve any violations before considering eviction. Yet where a first offense is egregious enough, you are likely justified in evicting.

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While negotiating California commercial real estate purchase, sale or lease contracts, the number of critical issues to address may seem endless. Not the least of these issues is often whether or not the public or private commercial property in question meets the Americans with Disabilities Act Standards for Accessible Design. We understand the importance of ADA compliance for both allowing universal access to all and avoiding wasted time and money with unnecessary lawsuits.

Unfortunately, ADA discrimination litigation in California is widespread. The Long Beach Press-Telegram reported that California led the nation with more than 2,000 new ADA lawsuits filed from January through June 2019. The reasons for this surge may be widespread, but one theory suggests that California’s promise of damages to the accuser could make even the smallest incidences of non-compliance attractive targets. This susceptibility emphasizes the need for commercial property investors to address any potential issues early in the process to avoid problems in the future.

Among other considerations is the significant expense that could be involved with retrofitting buildings to meet the standards set by the ADA. According to the Long Beach Press-Telegram, one southern California business would have to pay $45,000 to bring a single bathroom into compliance.

Finding all of the potential accessibility issues that need correction and assessing the cost should be a problem during contract negotiation, and not one you’re rushing to address after the fact. Competent representation with experience in ADA compliance can help prevent you from being blindsided with a lawsuit after you’ve signed the dotted line. Visit our webpage for more information on this topic.

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As former shopping center anchors like Sears drop out of business, the empty spaces could cause additional problems for California commercial real estate landlords if the outlying tenants begin to complain of dwindling sales revenue. Commercial leases often allow for co-tenancy provisions for smaller retailers, such as alternative or reduced rent scenarios, that can hurt a shopping center owner’s cash flow even further.

However, when those provisions involve 25-year-old use restrictions — that anchor retailers must be national credit tenants, for example — it can become increasingly difficult for landlords to fill those spaces with adequate replacements. It may be time to revisit commercial real estate leases and examine precisely what the requirements are for replacing an anchor tenant.

Many co-tenancy provisions already agree that replacement by a comparable anchor retailer is acceptable, now landlords and tenants need to decide on what the definition of “comparable” is. According to GlobeSt.com, co-tenancy agreements written decades in the past included use restrictions that would prevent a retailer like an athletic or entertainment venue from occupying a space that was not considered “brand-relevant” to existing tenants.

But that shopping center formula centered on nationally recognized retail anchor stores is no longer what consumers seem to want. Instead, some shopping center landlords are already stepping up to work with their retail tenants and increase foot traffic in more non-traditional ways by incorporating new tenants that revitalize the mall experience.

CBRE.com reports that the largest mall owner in the U.S. is beginning to broaden its definition of a viable tenant base by including fitness centers, hotels and even areas for office use. As the market demand for destinations like department stores declines, shopping center landlords should continue to see a rise in success with alternative retail development.

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If the owner of a property adjacent to yours builds a structure that intrudes on your land, or over it, this is an encroachment. It can be very frustrating to have another party encroach on your property, especially if you make money from the commercial use of it. Fortunately, according to FindLaw, there are many different possible remedies for encroachment. 

One option is to file a lawsuit against the other owner stating that he or she is making improper use of land that belongs to you. If you are successful in proving your case, the court can order the other owner to remove the structure. However, there are also disadvantages to this course of action. The court may decide in favor of the other owner and grant him or her the right to use the property on a limited basis. This is more likely if the misuse has been going on for some time. Even if the court does eventually decide in your favor, the process can be very lengthy. 

For these reasons, many property owners choose to litigate encroachment only as a last resort. Other options include selling the disputed land to the other property owner. Before taking this step, you should ensure the accuracy of all pertinent land records. You may also be able to negotiate an alternative arrangement with the other owner outside of court, saving you both on legal fees. 

If the encroachment is less bothersome to you than the prospect of a legal dispute with the adjacent property owner, another option is to do nothing. However, in this case, you have the responsibility to disclose the encroachment to potential buyers if you ever decide to sell. 

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