Month: April 2022

Tips for Negotiating a Commercial Real Estate Lease

Two people shaking hands across a desk | Tips For Negotiating a Commercial Lease

Leasing commercial space is quite different from renting an apartment or house. Commercial renters’ needs vary greatly from one business to the next, so commercial leases tend to be much more customizable. Parties to commercial rental agreements are also assumed to be on equal footing, so the legal protections that apply to residential leases do not always apply in the commercial context. When negotiating a commercial lease, these tips can help you navigate the process.

Get Professional Help

Commercial real estate leases have many moving parts, and you’ll be better off consulting with a real estate attorney throughout the negotiation. First, a lawyer can help you understand the lease and the implications of all of its clauses, so at the very least, you know what you’re getting into. Just as importantly, a lawyer can propose alternatives that you might not know and help you put together a counter-offer that is more advantageous to your business.

Identify Your Business’s Real Estate Needs

It may sound obvious, but knowing in advance what your business requires in a physical location is immensely helpful for finding the right space and negotiating specific components of the lease. Ask yourself, what zoning requirements apply to your business? Do you need parking spaces for customers? Do you have any specialized utility requirements? Negotiating Specific Items in the Lease

Keep some of these key concepts in mind as you evaluate the lease.

  • Duration – Landlords typically (but not always) favor longer leases and are willing to give you a discount for adding time to the lease. This may work in your favor, for instance, to help you lock down a prime retail location. However, if your business grows quickly, you may be stuck in an inadequate space.
  • Additional Costs – Does the monthly rent cover everything, or will you be responsible for other costs? These can include common-area maintenance, property taxes, insurance, and more.
  • Building Improvements – You may want to make changes to the premises to accommodate your business. You should identify what is permitted and who will pay for the work.
  • Competitor Clause – If you are leasing space in a shopping center, can the landlord rent one of the other spaces to a competitor?
  • Subleasing – If you want to leave the space before the end of the lease, can you sublease the space to another tenant?
  • Termination Clause – Under what conditions may you or the landlord terminate the agreement? Can they kick you out for missing just one payment? If you leave early, are you required to pay the remaining time on the lease? 

Real Estate Expertise

With the future of your business on the line, the best course of action is to hire an attorney to help you negotiate your commercial lease. Our real estate team has years of experience in this field and is ready to advise you from start to finish. Contact us today to schedule a meeting.

Who Regulates Escrow Laws in California?

Person reviewing legal documents | Who Regulates Escrow Laws in California?

A home sale or purchase may be the largest financial transaction we will ever make. With all the work it takes to find the right home, negotiate the price, and procure a mortgage (or find a buyer if selling your home), the actual transfer of funds and title seems like a mundane affair. The orderly exchange of property and large amounts of money cannot be taken for granted, however, especially between two parties who barely know each other. Escrow services exist to make this transfer more secure, but who regulates escrow laws in California?

What Is Escrow?

You may have heard of escrow before without giving it much thought, but if you plan to buy or sell a home, you should familiarize yourself with the term. The legal definition of “escrow” is a transaction in which the buyer and seller transfer funds, evidence of title, or other items of value to a third party until the happening of a specified event or performance of a prescribed condition. At this point, the property is transferred to the respective parties as agreed. What does that mean? Let’s take a common example:

A buyer makes an offer on a house, which the seller accepts. Since the title transfer process is not instantaneous or free, the seller requires “earnest money” from the buyer to ensure they are serious. Similarly, the buyer wants to be sure the title transfer is legitimate and does not want to simply hand over a check to the seller. So, they agree to use an escrow service.

The escrow service holds the earnest money and the written instruments needed to transfer the title to the buyer. Once the various requirements have been completed (the title has been verified, the buyer’s mortgage lender has provided the remaining funds, etc.), the escrow service transfers the money to the seller and registers the property title in the buyer’s name. The transaction is finished, and both parties walk away.

Escrow works as a specialized form of trust in which the escrow agent acts as a trustee of the parties’ property for the duration of a complex transaction.

Licensing of Escrow Agents

Because of their critical role in real estate transactions and because they routinely hold large amounts of other people’s money, escrow agents must usually be licensed by the state. In California, the Department of Financial Protection and Innovation (DFPI) handles the licensing and regulation of escrow agents. While the applications for an escrow license are complex and involve extensive documentation, here are some of the main requirements:

  • Only a corporation may receive an escrow license, not an individual
  • At the main office, there must be at least one person with a minimum of five years of escrow experience and at each branch office, a person with at least four years of escrow experience
  • The corporation must deposit a surety bond with the state of up to $50,000, depending on its financial obligations
  • It must maintain a tangible net worth of at least $50,000, including at least $25,000 in liquid assets

While “independent” escrow agents must be licensed in this way, there are numerous other persons and institutions who may perform escrow services without a license. The reasoning is that so-called “non-independent” escrow agents are already regulated in other ways. The four categories of non-independent escrow agents are:

  • Banks, trust companies, building and loan or savings and loan associations, credit unions, or insurance companies doing business under California or federal law
  • A licensed attorney who has a bona fide client relationship with one of the principal parties and who is not engaged in the business of an escrow agent
  • Any person whose principal business is preparing abstracts or making searches of titles that are used as a basis for the issuance of a title insurance policy
  • Any broker licensed by the Real Estate Commissioner working as an agent or party to the transaction and performing work that requires a real estate license

Real Estate Law Experts

If you are buying or selling real estate and plan to use an escrow service (which is recommended), be sure to use only a qualified escrow agent, such as a licensed attorney. Our escrow lawyers have years of experience facilitating real estate transactions, helping to resolve disputes, and making sure the process goes as smoothly as possible. Contact us today to schedule a consultation.