Published on:

Purchasing commercial real estate for a start-up business is one of the most exciting steps an entrepreneur takes toward achieving his or her goals. While this stage of the process can certainly be a rush of emotion, it is critical that buyers consider potential roadblocks. One of the most critical components to buying real estate, and especially commercial real estate, is ensuring that the property does not have an environmental claim. It is important for buyers to understand what environmental claims are and how they impact the value of a property.

What are Environmental Claims?

There is a broad scope of potential environmental claims that can range in severity. It is important for people to realize that although a building may appear to be in good condition, environmental impacts may not be readily visible and could have occurred many years ago. In fact, sellers may not even be aware that their building is in violation of environmental laws. Some of the most common environmental claims buyers encounter are:

Published on:

A provision commonly utilized in commercial real estate contracts is a liquidated damages clause. This clause is utilized as an incentive so all parties involved in the transaction perform as stipulated under the contract. If they fail to do so, the harmed party can pursue restitution through the liquidated damages clause.

You must be careful when drafting the language of the clause because in California a liquidated damages provision is presumed to be enforceable, but could be voided if it is viewed as a penalty by a court.

In the 1970s, California adopted a policy of presumptive validity for liquidated damages clauses in commercial contracts, including real estate contracts. This means that a clause in a contract liquidating damages for a breach is valid unless the party challenging the provision can show that the provision was unreasonable under the circumstances when the contract was formed, or is so draconian that it is essentially a penalty.

Published on:

Effective January 2016, California lenders will be able to work more easily with limited liability companies (LLCs). These new changes, referred to as Assembly Bill 506, come in response to the existing Revised Uniform Limited Partnership Act. The amendments simplify the lending process as well as the specifics of mergers in order to make each step run much more smoothly while simultaneously protecting the lenders.

While the amendments appear to greatly benefit lenders, likewise LLCs will benefit as well. For brand new businesses, this could certainly change the game for loan approval and for existing businesses it can impact how certain business is conducted. It is important that new and veteran LLCs alike take a look at the new amendments in order to better understand how certain aspects of their business will be influenced.

What are the Changes?

Published on:

Commercial real estate lenders need to be ready for a myriad of new regulations set forth by the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC). These new regulations impose more stringent capital requirements on “high volatility commercial real estate” (i.e. HVCRE) exposures.

The FDIC, OCC, and Federal Reserve approved these rules in an effort to comply with the Basel III Capital Accords, which are international banking standards, along with new risk-based and leverage capital requirements for financial institutions under Dodd-Frank.

What Exactly is an HVCRE Exposure?

Published on:

Choosing to rent a commercial space for a start-up business is usually the most economic decision during the early years of the company. It is critical to the future of the business that buyers understand the ins and outs of leasing commercial real estate as well as the best way to negotiate terms that could greatly impact profit and future success. Having the appropriate facts will not only reduce the normal stresses associated with taking the leap into a brand new business, but will also protect your business for years to come.

What is a Commercial Lease?

A commercial lease differs from a residential lease in many ways. A commercial lease is used for people who will be serving the public and not used as a residential dwelling. Because a commercial lease is used for something completely different, many of the familiar terms associated with residential leases do not apply. Such as:

Published on:

Who says the economy is stagnant? California’s commercial construction industry shows the highest level of activity since 2001, and further growth is expected over the next three years, according to an article published in L.A. Biz.

This promising news originated in a study conducted by Allen Matkins, a California law firm, and UCLA’s Anderson School of Management. The study examined seven of California’s major markets for indicators of future commercial construction. More easily accessible financing and low cap rates, along with increased demand from technology, advertising, media and information companies has helped spur the commercial construction growth.

With Commercial Construction Growth Comes Increased Risk of Litigation

Published on:

You decide to rent your condo in Sacramento. You think you found the perfect tenant. However, after three months, your tenant stops sending you the rent. They are in breach of the lease. What do you do?

This unfortunate scenario occurs quite often and is one of the risks associated with renting property as a landlord. What do you do when your tenant violates the express terms of the lease? If the tenant fails to pay you the rent, you are looking not only at a loss of income, but the additional expense of taking legal action.

Your decision of whether to sue your tenant to recover the lost rent (or the cost of repair if the tenant damaged your rental property) may depend on whether you can recover costs and attorney’s fees. So, you are probably asking, “What is the applicable law for recovery of attorney’s fees in California?”

Published on:

Even when a project benefits the public, there are interest groups that will work tirelessly to stifle progress and business development. Unfortunately, the California Court of Appeal for the First District sided with such an interest group when the court held that an exchange agreement initiated by the California State Lands Commission regarding the 8 Washington Street development project in San Francisco was not statutorily exempt from the California Environmental Quality Act (“CEQA”).

Background on the Decision

The case, Defend Our Waterfront v. California State Lands Commission (Sept. 17, 2015) Cal.App.4th, Case Nos. A141696 & A141697, involves the 8 Washington Street project, which is a proposed mixed use development along the San Francisco waterfront near the San Francisco Ferry Building, according to JD Supra. The proposed development site includes a parcel known as Seawall Lot 351 consisting of filled tidelands managed by the City of San Francisco through the Port of San Francisco.

Published on:

When you make a quid pro quo deal and you are in the real estate business, watch out. You may be violating the Real Estate Settlement Procedures Act (RESPA).

The Ninth Circuit Court of Appeals decided that a title insurer’s “equity investments” in title agencies in exchange for agreements that the agencies would refer customers to the insurer violated the anti-kickback provisions of the RESPA, according to an article published on Lexology.

The case, Edwards v. First Am. Corp., 2015 WL 4999329 (9th Cir. Aug. 24, 2015) featured borrowers who filed a putative class-action lawsuit against the title insurer alleging that the company violated Section eight of RESPA. This section prohibits payments for the referral of settlement service business.

Published on:

The Ninth Circuit Court of Appeals held that the interpretation offered by the Consumer Financial Protection Bureau (CFPB) of 12 U.S.C. § 2607(c)(2) of the Real Estate Settlement Procedures Act (RESPA) was not entitled to “Chevron deference.” The case at issue is Edwards v. The First Am. Corp., No. 13-55542. Before analyzing the decision, let us explore an important contextual issue:

What the Heck is Chevron Deference?

This is a key principle in administrative law established by the U.S. Supreme Court in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The case raised the issue of how courts should treat federal agency interpretations of statutes that mandated an agency take some action. The Supreme Court held that courts should defer to agency interpretations of such statutes unless those interpretations are unreasonable.