Shotgun Eviction – Bring the Police

Posted by Lee Sterling | Posted in Landlord-Tenant, Miscellaneous, Real Estate | Posted on 12-08-2013

  Here’s one way you shouldn’t evict a tenant.

Stan Pate owned a shopping center in Tuscaloosa, Alabama, and one of his tenants, Santa Fe Cattle Co. restaurant,    closed, and the parent company filed for bankruptcy protection. The lease was terminated on September 29, 2009,  and the next day employees of the company showed up at the restaurant in the Center with several police officers to  remove leased equipment. One of the employees alleged that Pate pointed a shotgun at him, which Pate denied. He  was charged with “menacing’ and convicted of a misdemeanor. He appealed the conviction, arguing that  he had lien  rights on the property being removed, and had the right to prevent others from removing the property. The appellate  decision indicated that it was inconclusive that Pate had a landlord lien on the contents of the restaurant, and the  conviction was upheld by the Alabama Court of Criminal Appeals.  Pate plans to appeal to the Alabama Supreme Court. Whether his conviction is overturned or not, this episode has cost him time and money and, undoubtedly, anguish. During his appeal the National Rifle Association Defense Fund filed a brief with the court arguing that “Pate had a right to protect his personal property because police had no duty to protect him or his property.”

The lesson for tenants in this episode is that if you’re going to enter property after your lease has been terminated BRING THE POLICE WITH YOU!

Force Majeure in San Diego Commercial Leases

Posted by Lee Sterling | Posted in Landlord-Tenant | Posted on 11-12-2012

Force Majeure?

 

 

Most commercial leases in Carlsbad and North County contain what is called a Force Majeure clause. It comes from the French meaning a “greater force,” and is invoked to excuse performance of an obligation because of an event uncontrollable by the party invoking the clause. Some of the events used to excuse performance are such things as flood, war, riot,  or act of God. In California, “Acts of God” in public contracts are defined as earthquakes greater than 3.5 on the Richter Scale and tidal waves. It’s important, in commercial real estate leases, to negotiate what will excuse performance in the case there is such an event or in the event of other specified events, such as labor strikes, inability to obtain necessary materials, unexpected soil conditions etc.

For landlords, recent experience around the country has indicated the need for more careful drafting. For example, does the term “act of war” include terrorist attacks or biological warfare agents? What kind of weather or fire event would excuse performance here in Southern California? What if the local economy were interrupted for a period of time, like in New York City after the hurricane? The issue most often comes up in leases when the tenant is unable to move into space when originally planned because construction of the building or the space has been delayed, and the landlord invokes the force majeure clause. The reason landlords are most concerned about the language of the clause is that they commonly draft the initial lease document, and courts usually interpret clauses in favor of the nondrafting party. The one exception is when the court finds that parties have equal bargaining power. Most of the leases I help negotiate are between major land-holding landlords and my clients, small business entities. The difference in bargaining power is evident. However, fortunately, my clients get the benefit of my experience as a real estate lawyer for 27 years, who negotiated leases on behalf of landlords and and developers with major tenants, like Walmart. In order to do so, I had to study and understand the impact of lease clauses.

A tenant should be concerned about the notice provision of the Clause. How soon after the claimed event should notice be given? How should the notice be given, and what kind of detail in the notice should be included? From a tenant’s standpoint, the effective date of the notice should be on receipt; from the landlord’s perspective notice should be effective when sent. What happens if the delivery of the notice is prevented by conditions resulting from the cause of the force majeure?

What happens to the rent due in the event of an interruption in occupancy as a result of a claimed force majeur? What if all or a portion of the leased premises is destroyed? Does the landlord have the obligation to rebuild? If so, how soon after the event will construction have to begin? As you can see, more attention should be paid to the force majeur clause by the tenant and the tenant’s representative. As always, it’s worthwhile to have your lease reviewed by your attorney.

Common Area Maintenance Charges (CAM) Explained

Posted by Lee Sterling | Posted in Carlsbad, Economics, Landlord-Tenant, Legal, Negotiation, North County, Office, Real Estate | Posted on 11-08-2012

 

This is a follow-up to a brief talk I gave to the Business Resource Committee of the Carlsbad Chamber of Commerce about the difference between Rentable Square Feet and the Usable Area of a building and the impact of the Load Factor on evaluating the cost of renting one commercial space compared to renting another  space in a different building.  Because of the Load Factor, the usable sq. ft. of the tenant’s space is lower than the rentable sq. ft. charged to the tenant.    I briefly mentioned the impact of CAM charges on that evaluation. This follow-up is so that I can point out some things that a tenant needs to keep in mind when evaluating CAM charges and the lease the tenant may be considering.

PRO RATA SHARE

This is another time that the Rentable Sq.Ft. and Usable Area are important for the tenant to evaluate. The ratio between the tenant’s Rentable Sq.Ft. and Usable Area results in the percentage of the CAM charges that are going to be paid by the tenant. If the Usable Area in a building is 100,000 sq. ft. and the tenant’s rentable sq. ft. is 10,000, the tenant would be charged with paying 10% of the CAM charges as the tenant’s pro rate share.

WHAT OPERATING EXPENSES

Unfortunately, some landlords have tried to use CAM charges as another profit center! It’s important for the tenant to review what is going to be included in the CAM charges. They should not include capital charges, upgrading to comply with laws, or repairs and maintenance,  which are topics we’ll cover in another blog post.  A good way to evaluate the CAM charges is to request the records for the last three years of the CAM charges. That will allow the tenant to see what kind of increases have been charged to existing tenants.

THE BASE YEAR

If a tenant enters into a gross lease (in which the landlord includes all expenses in the base rent for the first year) the tenant has to make sure that it is not charged for any expenses during that base year. In evaluating expenses, it’s also important to make sure that expenses are “grossed up,” which is another topic to be covered in a separate blog post.

COMPARISON TO OTHER PROVISIONS

The tenant should always check the CAM charge provision against the repairs and maintenance provision, the real property clause, and the compliance with laws provision to make sure that the landlord doesn’t try to include any of those costs in the CAM charges that the landlord may have agreed to pay in these other provisions.

WRAP UP

These are just a few hints on evaluating the CAM charges provision of a proposed lease. It’s important for the tenant to have a good broker helping to evaluate the lease, and to have the lease reviewed by a competent licensed real estate attorney.

 

Lee Sterling is a retired Colorado real estate attorney  and California real estate broker working with commercial tenants looking for space to buy or lease. He can be reached at 760-230-1492 and at lee@leesterling.com    

DRE Lic.# 01319489

 

 

 

 

 

 

 

Tenants – Who’s Fixture Is It? Check Your Lease!

Posted by Lee Sterling | Posted in Economics, Landlord-Tenant, Legal, Miscellaneous, Negotiation, Real Estate | Posted on 08-06-2012

Did your tenant representative  reminded you to review what happens to your fixtures at the end of the initial term        of your lease, and what happens if you renew the lease? And did your representative describe what might be a trade fixture and what might be a fixture? California has described fixtures as “a fixture is a thing that is so attached to realty as to be considered in law a part of the realty itself,” and a trade fixture as a “[fixtures] placed on leased premises for the purposes of trade.”  Absent specific language  in the lease, a tenant has no right to remove fixtures at the end of the lease term, but MAY remove trade fixtures during the term (and for a reasonable time after the end of the term) “if the removal can be effected without injury to the premises…”

 Another complication arises if you holdover, renew or extend your lease. California has determined that if you holdover, that means staying in the premises after the term of your lease has ended, absent specific language to the contrary, the fixtures AND the trade fixtures become the property of the landlord.  And if there’s nothing in the renewal of the lease that allows you to remove the fixtures or trade fixtures that were installed during the initial term you may have lost the right to remove them at the end of the renewal term.

What’s obvious is that a seemingly simple provision in a lease may be more complicated than the average tenant may understand.  That’s why you need to  make sure that you review your lease carefully, get good advice from your tenant representative, and have your lease reviewed by a competent California real estate attorney. There are lots more of these “gotcha” clauses in a typical “standard” lease.

 

Why Comply with the Architectural Committee (AC)

Posted by Lee Sterling | Posted in Economics, Legal, Negotiation, Real Estate | Posted on 15-04-2012

It is rare to find an architectural committee (AC) in commercial developments, which are often controlled by the original developer. However, architectural committees are often found in residential developments where homeowners want to maintain the overall look, feel, and value of the development in order protect their home investment. The provision for an AC is found in the  Covenants, Conditions & Restrictions (CC&Rs) filed with the Clerk and Recorder, which then controls the land described in the CC&Rs.

Some homeowners ignore the requirement to submit plans and get approval of the AC.  And, some, if they’re unhappy with the decision of the AC just go ahead and build what they want. A recent California case confirmed that it’s expensive when you don’t comply! The same principal would apply if there were a commercial AC.

The Stantons decided that they wanted new casement windows on the front of their home in a condo development controlled by CC&Rs. Those are normally included as part of your Homeowner Association (HOA) documents, or “docs.” You know that packet of 50-or so pages you receive just before you close on the purchase of your home. The boring and detailed material you have to read when you get home from work when you’d rather just relax for a while.

The CC&Rs often provide what kind and size of animals you can keep on your property, where you can park your car, and what you have to do if you want to make additions or changes to your property. Often (usually) there’s an architectural review committee (ARC) and specifications as to paint colors permitted for the exterior of your property. In the Stanton’ development, the ARC had a policy of maintaining a dark shade of brown on windows that generally faced the street of the development.

The Stantons applied to the ARC for approval to permit them to install two sandstone-colored casement windows on the front of their home, along with an application to make other exterior improvements. The ARC denied the Stantons the right to install the sandstone casement windows. Notwithstanding the denial, the Stantons went ahead and installed the sandstone-colored windows! The Association then filed suit asking for injunctive and declaratory relief requiring the Stantons to modify or replace their windows AND for the Association’s attorney’s fees.

You can see the type of brown windows the ARC liked, although not taken from the actual development involved in this dispute.

 

 

 

 

 

 

 

Here’s a sample of sandstone windows. Again, not taken from the actual development involved in the dispute. However, it does give you an idea of the difference between “brown” and “sandstone.”

 

 

 

 

 

 

 

 

 

So, who do you think won in the litigation, and how much were the attorney’s fees awarded to the winning party?

Of course, the Association won. The Association asked for $83,0227.50 in attorney’s fees and $4,298.72 in costs. The trial court approved the costs, but cut down the attorney’s fees to $59,122.50 plus the costs! And the Stantons had to replace the windows to comply!! That pales in comparison to the $ 318,293.50 awarded to the attorneys representing the Rancho Santa Fe Association in their dispute with a homeowner who refused to take down a fence she had put up without the appropriate approval, but that’s a story for another day.

So, don’t forget to apply to the Architectural Committee for approval of your changes, and don’t proceed without approval!

 

Lee Sterling is a retired Colorado real estate lawyer, who represents commercial tenants looking to buy or lease commercial space.

Thoughts On Our Health Care System

Posted by Lee Sterling | Posted in Economics, Miscellaneous, Uncategorized | Posted on 26-03-2012

Lost in all the hyperbole of the health care debate, I think, is the fact that our health care system is not very good when compared to the health care systems of other industrialized nations. Just a quick search on the Internet shows that we rank poorly on costs AND on quality of care. Here are two charts from Wikipedia. One that show how our costs compare to the costs in other nations in the industrialized world and the second one shows that our infant mortality rate is higher than that of other industrialized nations, all of whom provide some kind of universal health care system to their citizens.

 

File:Total health expenditure per capita, US Dollars PPP.png

 

And, if you really want to get perturbed, check out the analysis at the World Health Organization , which indicates that even China is doing a better job of health care than the U.S.

Whether you’re for or against RomneyCare or ObamaCare doesn’t matter. What does matter is that we need to find a way to improve our health care system and to contain costs as other countries have done while providing better care.

Employee Entitlements

Posted by Lee Sterling | Posted in Economics, Industrial, Legal, Miscellaneous, Negotiation, Office, Real Estate | Posted on 23-03-2012

Do you have employees? Have you discussed the issues described in the attached video? I got this from my friend, Bill Marvin, The Restuarant Doctor:

McArt Studio Opens in Carlsbad

Posted by Lee Sterling | Posted in Carlsbad, Landlord-Tenant, North County, Office, Real Estate | Posted on 03-03-2012

Amy McArthur has gone from being a British warrior in Helmand Province, Afghanistan, to a successful Art teacher-entrepreneur here in Carlsbad at 3183 Roosevelt Ave. I was fortunate to find her this great space right across the Boys & Girls Club of Carlsbad,. with plenty of free parking.

Amy has come up with some unique ways to teach people how to create their own canvasses, and how to make it a fun time. One of her promotions is “Creative Sips,” open for the whole family, where you can bring your own beverages to enjoy while you learn to paint. Another successful program involves teaching kids to paint and enjoy art through cooperation with schools. That has led some parents to organize birthday parties at the Studio, which, in turn, has led other parents to organize fund raisers combining charity and learning to paint!

Amy is not only a great teacher, but a wonderful artist in her own right. Make sure to ask her to show you some of her work! To get more information about how great programs and classes, you can reach Amy at 760-889-6904 or by email at:    contact@mcartstudio.com

Here’s Amy taking a well-deserved break during her tour in Afghanistan.

Great Carlsbad Office Opportunities

Posted by Lee Sterling | Posted in Carlsbad, Economics, Landlord-Tenant, North County, Office, Real Estate | Posted on 01-02-2011

One of the great buildings available today

I just received a special promotion on four great office buildings here in Carlsbad. If you know someone  looking for office space in North County now is a terrific time to be negotiating. Take a look at these four wonderful opportunities by clicking on this link:  Great Office Locations

Then have them give me a call to discuss their specific needs. For 27 years I represented landlords and developers in the leasing and sale of commercial property as a real estate lawyer. Today i just represent tenants and never landlords in the leasing of space!

An Amazing World Clock

Posted by Lee Sterling | Posted in Miscellaneous, Technology | Posted on 23-08-2010

World Clock Pix My friend, Hank Jordan, an author and writer of copy for businesses [ed. note: check out his website: JordanAssociates], sent me a link to an amazing world clock. It not only tells you the time in various cities and time zones, but it also has a running total of the national debt (currently $42,963 per person in the U.S., and $120,209 per taxpayer).

There are  8 main sections of the clock: World Time; Population; Death; Illness; Environment; US Crimes, Food; and a 9th called More.  Checking out the Population section makes one realize that of the 6.8 billion people in the world almost 36% live in China and India! You can discover that Cardiovascular diseases, so far in 2010, account for almost 11 Million deaths, approximately 29% of the total. A startling 34 million people are living with HIV. Take a look at the Environment section and see how much forest land were losing. It’s disheartening. According to the Energy section, we have 13,872 until our oil id depleted. I was startled to see that in 2010, so far, the identity of almost 61 million U.S. residents has been stolen.

Did you know that more ducks are slaughtered in the U.S. than beef? Can you guess what it the most slaughtered animal in the U.S. without checking the Food section?

Take a few moments and check out this interesting site, and pass this on to your friends: world clock.

If you live in a home subject to a Homeowners Association (HOA) you may be interested in checking out my recent article on what happened to some owners when they tried to defy their HOA architectural control provisions: www.carlsbadrealtynews.com