Articles Tagged with “real estate law”

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When people consider leasing commercial spaces for their office or business needs, sometimes they do not consider the potential complications that can occur during the negotiation process. While not all commercial leases are complicated and may only require one or two points of negotiation, some may have several points to be discussed. That is why it is critical to contact a real estate attorney to help you through the process. The following are a few examples of common issues associated with commercial leases and how they can potentially impact your business.

Subleasing

Many tenants want the opportunity to sublease their building in case there are big changes in their business. Sometimes financial changes may require that the business take a step back from the space in order to save money, or if the business is doing well, the company may need to move to a different location. However, many landlords see subleasing as a potential risk because the person who subleases the space may not be financially responsible and this could mean a monetary loss for the landlord. This is certainly a situation in which give and take must be considered so that both parties are accepting of the terms of the lease.

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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.

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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?

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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?”

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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.

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The Consumer Financial Protection Bureau (CFPB) issued a final rule postponing the effective date for all provisions of the TILA-RESPA Final Rule and Amendments to October 3, 2015. “TILA” stands for Truth in Lending Act and “RESPA” stands for Real Estate Settlement Procedures Act. This new regulation promulgated by the CFPB is often described as the “Know Before You Owe” mortgage disclosure rule, also known as TRID (an amalgam of TILA and RESPA). TRID is aimed toward making mortgages more transparent and easier to understand for consumers, but there will definitely be a learning curve for consumers and professionals in the real estate industry.

In addition to notifying the industry of the delay in the full effect date, the CFPB made two technical changes to the TILA-RESPA Final Rule that were not in the proposed rule. Specifically, the final rule amends § 1026.38(i)(8)(ii) and (iii)(A) to include, in the amount disclosed as “Final” for Adjustments and Other Credits, the amount disclosed under § 1026.38(j)(1)(iii) for certain personal property sales in order to conform the calculation of Adjustments and Other Credits on the Closing Disclosure and Loan Estimate, according to an article published by Marc Patterson on JDSupra. The final rule also attempts to conform the disclosure of a borrower’s cash to close by amending § 1026.38(j)(1)(iv) to include, in the amount disclosed as Closing Costs Paid at Closing, lender credits disclosed under § 1026.38(h)(3).

Richard Cordray, Director of the CFPB, stated that the additional time provided by the new October 3, 2015 effective date will help consumers and providers whose families are likely busy with the transition to the new school year. Director Cordray also stated that the CFPB did not want to unduly burden creditors who had limited time to fully test all of their systems and system components to ensure that each system works with the others in an effective manner due to some technical errors discovered by the CFPB.