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!

Do You Have to Pay CAM Insurance Charges?

Posted by Lee Sterling | Posted in Landlord-Tenant, Legal, Negotiation | Posted on 25-03-2010

A Typical ShoppingCenterThe 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.

Negotiating Persistence

Posted by Lee Sterling | Posted in Economics, Landlord-Tenant, Negotiation, Real Estate, San Marcos | Posted on 12-07-2009

Keys to My Life TeesOn Friday, July 10, 2009, we celebrated the opening of the new location for My Life Tees, Silk-Screen and Embroided Apparel, owned by Stacie and Paul Marotta. We helped them find the location and then negotiated the lease on favorable terms by being persistent despite the landlord’s reluctance. That’s Paul, Stacie, and me in the picture to the left. We’re having a delayed celebration of my turning the keys over to them for their new production and display facility.

When we first looked at the space, it was dreary, the toilet had a sign that we shouldn’t try to use it, and the warehouse ceiling cover had holes taped with duct tape. But, the location fronted on a busy street at 310 Via Vera Cruz in San Marcos, and we felt the price could be advantageous. However, despite the significant vacancy factor in the complex and the area, the landlord REFUSED to respond to our first Letter of Intent. The Property Manager explained that the landlord had owned the complex for years, and had never had to lower rents to the level we were offering. The Property Manager indicated a lease rate which she thought the landlord would accept. That was still too high in our estimation, and in our client’s budget. We prepared another letter outlining the reason for our revised offer that was still lower than the landlord indicated he was willing to accept. Finally, the landlord realized that we would “walk” from the location, and accepted our revised offer. You have to know your market, know your strength, and be prepared to walk away from unreasonable situations.

We were delighted to work with Stacie and Paul. We met Stacie as an active member of the Carlsbad Chamber of Commerce, and as organizer of TheMeetMarket, a networking group of entrepreneurs. Paul is a civilian radar expert for the U.S. Navy. Both of them recognized that they wanted to be entrepreneurs, and purchased My Life Tees, a great source fro sikl-screen and embroided apparel. Since buying the business they’ve had great success in expanding the business by concentrating on North County sports teams and expanding to develop Rhinestone embroidery for beautiful feminine t-shirts and blouses.

Stacie and Paul have done a wonderful job of redecorating and fixing up the space to show off their products and to efficiently produce their beautiful t-shirts and embroided apparel. Click here to go to their website where you can order on line. My Life Tees Opening

Tenant Protection When Landlord’s Property Is Foreclosed!

Posted by Lee Sterling | Posted in Landlord-Tenant, Legal | Posted on 20-05-2009

evictionnotice
I’ve mentioned the SNDA in previous posts (Subordination, Non-Disturbance, and Attornment). The ND portion refers to non-disturbance of the tenant’s right to have its lease recognized as valid in the event of the foreclosure of a senior trust deed. The S refers to the Subordination clause and the A refers to the Attornment clause. I’ll discuss the Subordination and Attornment clauses in separate blog posts. From the Tenant’s standpoint, the non-disturbance clause (“ND”) is most important.

The use of the Non-Disturbance Agreement depends on the timing of the recording of the trust deed and the recording date of the lease (or the recording of a Short Form Notice of Lease) ,collectively “Notice”. Usually neither the Tenant nor the Landlord want the whole lease recorded. The lease may or may not provide for the recording of a Short Form Notice of Lease. As a Tenant you may want a Notice recorded. Check with your attorney for advice.

California follows the race-notice theory of recording. The first legitimate document recorded has priority over subsequently recorded documents. If a trust deed is signed on January 2, but not immediately recorded, and the lease is signed on January 10 and its Notice is recorded on January 11, while the trust deed has not yet been recorded , the lease would have priority over the trust deed. If the trust deed were subsequently foreclosed, it would NOT have the right to evict the Tenant so long as the Tenant was not in default under the terms of the lease.

However, if the trust deed were RECORDED first the lease would be subject to the priority of the trust deed. If the trust deed were foreclosed, the foreclosing party could evict the Tenant! The reason most Tenants want the ND is that they usually have spent quite a bit of money on leasehold improvements, moving costs would adversely impact their bottom line, they may have spent substantial amounts branding their location, and they may be out of business while moving to a new location. A Non-Disturbance agreement should protect the Tenant in those circumstances.

Before entering into a lease, or when renegotiating a lease, the Tenant should determine whether or not there is a recorded trust deed encumbering the property. If there is, the Tenant should make it a condition of the lease that the Landlord provides a Non-Disturbance agreement signed by the lender. Obtaining a Non-Disturbance Agreement often depends on the negotiating position of the parties. A tenant leasing 1,000 square feet of retail space in a mall probably won’t be able to obtain the lender’s consent to a Non-Disturbance agreement. However, a major Tenant in a development should insist on an ND agreement. Merely having the ND clause in the lease will not protect the Tenant if the lender has not provided the signed agreement. The ND clause may provide that the Landlord will use its best efforts to obtain the lender’s Non-Disturbance Agreement. In the standard lease used by commercial brokers in Carlsbad and the rest of San Diego, the lease ND clause provides that if the landlord doesn’t obtain the ND agreement within 60 days, the Tenant may go directly to the lender to try to obtain the Agreement. Without the lender’s signed agreement, the Tenant is at risk. There are various forms of ND clauses and agreements. Be sure to have the language reviewed by your attorney if you want to protect your rights to retain your lease rights in the event of foreclosure.

If you have general questions about commercial leases, please send us a note at Lee@leesterling.com

What To Do When Your Landlord Goes Bankrupt

Posted by Lee Sterling | Posted in Economics, Landlord-Tenant, Legal, Miscellaneous, Real Estate | Posted on 23-04-2009

bankruptcyGeneral Growth, the owner or manager of more than 200 malls in 44 states, which also owns office buildings and is involved in the management and development of master planned communities, filed the LARGEST real estate bankruptcy in U.S. history. So, what happens to its thousands of tenants in those malls and office buildings?

The bankruptcy code (Code) allows the debtor-in-possession (the landlord, for example) or the trustee of the bankrupt estate (hereinafter we’ll use Trustee to indicate either) to accept or reject executory contracts and unexpired leases (Sec. 365). As a result, the Trustee will usually affirm leases that are at or above market rent and reject those that are below market rent. Of course, the lessee of a below market rent would like to make sure it continues to have the right to occupy that space, and the lessee may want to retain the space even if it’s at market rent because of significant improvements the lessee may have made or the cost of moving may be prohibitive. Fortunately, if the lease is rejected, Section 365 provides that the lessee’s possessory rights are protected. However, the Trustee may be relieved of other provisions of the lease, such as the duty to provide services to the lessee.

What if the Trustee wants to sell the property that you have leased? Section 363 of the Code allows the Trustee to sell the real property “free and clear” of any “interest,” in the property, and a lease has been held to be an “interest.” One case, in the Seventh Judicial Circuit, with its particular facts, has held that the right of the Trustee to sell the property free and clear of the lease under 363 of the Code trumps the rights under section 365 of the Code that gives the lessee the continued right to possession. The lessee, for some reason, had not objected to the sale; perhaps counting on the provisions of Section 365. The lessee lost the possessory rights to a warehouse they had built on the bankrupt’s property. In the First Circuit, in a different case, where the lessee had objected to the sale, the Court held that the lessee’s right to retain possession was not trumped by Section 363! If you’d like more information, an interesting discussion of the cases can be found at: http://is.gd/u8Sm and http://is.gd/u8qA

As soon as you hear that your landlord has filed bankruptcy or is contemplating filing bankruptcy, immediately contact competent bankruptcy counsel to protect your rights!