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.

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.

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.

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:

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.

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!

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

Costco's Polish Sausage

I sitting alone at a table at Costco in Carlsbad, eating my Polish Sausage lunch (with soft drink, $1.63) the other day, and a nicely dressed gentleman asked if he could join me. There was plenty of room,  so I said “of course.” He sat down, and his cell phone rang. Obviously, I couldn’t help but overhear his conversation, although I tried to avoid eavesdropping. He mentioned a fired employee, who had wiped out her hard drive, and they were now in process of having to retrieve and rebuild the hard drive information.

I mentioned to him that I had overheard his comment, and we discussed the need to do backups of computer hard drives every day. Not just because hard drives are going to crash (we’ve had it happen twice in the past 8 years), but because there might be that disgruntled employee who wants to disrupt your business. It can cost thousands of dollars to rebuild seemingly lost information. In our case, we not only physically lost a hard drive, but our in-house back-up system also crashed at the same time!

Now we use an in-house back-up system, and we use an off site backup system called Mozy.. Just go to Google and type in “back-up systems,” and you’ll be taken to lots of information. As a commercial tenant, you want to be sure not to lose your valuable computer data because of a hard drive crash OR because of a disgruntled employee!

The Common Area Maintenance (CAM) charges paragraph of a lease is always important. It should detail what charges are included, and, by implication, what charges are not included.

In a recent New York case *, the lease CAM paragraph didn’t define all the charges, but did indicate that they included annual property taxes. After paying CAM charges for two years, including the tenant’s proportionate share of insurance on the property, the tenant realized that, perhaps, it wasn’t liable for insurance under the terms of its lease. The tenant sued to be reimbursed for the insurance portion of the CAM charges it had paid.

The court noted that the lease didn’t define the CAM charges, other than that it included the property taxes, and that the lease did have an insurance clause obligating the landlord to maintain insurance. That insurance clause did not mention a tenant’s obligation to pay its share of those costs.

Based on the lack of definition in the CAM clause, and the lack of requirement for the tenant to pay a proportionate share in the insurance clause, the court determined that the landlord would have to reimburse the tenant for its payment of those insurance charges.

What this points out, once again, is the need to have good counsel review your proposed lease to make sure you understand your obligations as a tenant. A well-qualified Tenant Representative and your real estate attorney should be able to tell you exactly what your obligations will be under your lease.

*I review the Commercial Tenant’s lease Insider, a monthly newsletter I receive, and this case was mentioned in the February issue.  The shopping center photo is from the Merriam-Webster Visual Dictionary Online.

You have leased space in a Carlsbad office/warehouse building, and your lease provides that you are responsible for interior maintenance of the premises and the landlord is responsible for the roof, exterior walls etc.

The Accident

Last year a customer walked into your office, and slipped in a puddle of water caused by a roof leak that you had complained about to the landlord, which had not been repaired at the time of the accident. The customer suffered a broken back, had major medical bills, loss of work, and possible long-term disability.

The lawsuit

Guess who gets sued!  Right, both you and the landlord. Fortunately, your insurance company settles with the accident victim, and your insurance company proceeds with the claim against the landlord. It becomes a battle between your insurance company and his insurance company. Your insurance company is claiming that the landlord should pay your insurance company for the money it paid out to the accident victim to settle the matter.

The landlord argues that the lease required you to obtain insurance, which you did, and that the Indemnification clause of the lease meant that you had to cover any damages resulting from an injury in your leased premises.

The Indemnification

So you look at your lease, and you find the indemnification clause that reads: “Tenant hereby indemnifies and agrees to save harmless landlord from and against all claims, unless such claims are caused solely (my emphasis added) by the acts or omissions of landlord, which either: (1) arise from or are in connection with the possession, use, occupation, management, repair, maintenance, or control of the Premises or any portion thereof; (2) arises from or are in connection with any act or omission of Tenant’s or Tenant’s agents; or (3) result from any default, breach, violation or non-performance of this lease or any provision of this lease by tenant.

Your insurance company’s attorney argues that the puddle on the floor was caused by the roof leak that had not been repaired after your reported the problem, and that the landlord was liable.  The landlord’s attorney argues that there was a roof leak, but you failed to maintain the premises properly and that you should have dried up the puddle so the landlord was not solely responsible for the accident.

Who wins?

You be the judge. The lesson is that one word, out of the thousands, in the lease can dramatically affect your rights and obligations. Be sure you have a knowledgeable real estate agent helping guide you, and have your lease reviewed by your real estate attorney before signing it!

World Trade Center Site

The New York Times reported recently that Larry Silverstein, who leased the trade center complex six weeks before it was destroyed in the 2001 terrorist attack, and the Port Authority of New York and New Jersey just received the results of an arbitration hearing, with both of them claiming victory. Silverstein complained that he had been delayed in the construction of three new office towers by the actions of the Port Authority, and the Port Authority claimed that Silverstein had to begin construction immediately or he would lose the right to the lease. Silverstein lost on his claim of delay asking for damages, and the Port Authority lost on the demand that Silverstein commence construction. The parties were ordered to work out a reasonable construction schedule.

The reason I raise this issue is that the standard lease used by many commercial brokers in Southern California is the AIR COMMERCIAL REAL ESTATE ASSOCIATION standard Industrial/Commercial, Multi-tenant Lease, which gives the parties the choice of including or not including mediation and arbitration as part of the lease. If chosen, an Addendum pertaining to those clauses has to be attached to the lease.

As a tenant, you have to determine whether or not you want to provide for Mediation and Arbitration. This important decision is often dealt without much thought. YOU SHOULD DISCUSS THIS WITH YOUR COUNSEL.

Arbitration was once thought to be less expensive than litigation, but today as much expensive discovery and pre-arbitration work is involved as in litigation. You need to evaluate, with the help of counsel, whether mediation and arbitration will resolve matters more quickly, or be less expensive. Arbitration is usually private as opposed to public trial. Is that a consideration?

There are many other issues to be concerned with if you choose mediation and arbitration. Don’t agree to mediation and arbitration without careful consideration of the many issues that your counsel should review. If you’d like to discuss what issues you might want to raise with your counsel, I’m available at 760-230-1492 or at Lee@LeeSterling.com.