Category: Commercial Real Estate

For most people, selling and buying real estate will be their most complicated experience with contracts. There are many moving parts: home loans, escrow, title transfers, easements, and more. 

Thankfully, the process is so common that for most people, it will go relatively smoothly (even if it is frustrating at the moment), and the buyer and seller can part ways amicably and with no need for future interaction. 

That is not always the case, however. Sometimes the deal breaks down or if it does go through, one party believes the other was dishonest about key aspects. In these cases, there may have been a breach of contract, and if so, the injured party likely has legal remedies.

Breach of Contract in Real Estate

A breach of contract occurs when one or more parties fail to fulfill their obligations under the agreement. 

Here are some of the most common types of breach of contract in real estate transactions.

The Buyer Backs Out

It’s not uncommon for a buyer to back out of the deal. 

Often it’s because they could not obtain financing for the purchase, or the deal was contingent on the sale of their old home, and they were unable to sell it in time. 

Other times the buyer simply changes their mind and walks away. Depending on the terms of the agreement and timeline of events, any of these may constitute a breach.

The Seller Backs Out

Less common is when the seller backs out of the deal. Typically, this happens when the seller has decided against selling the home or received a better offer from another buyer.

Failure to Disclose Facts or Defects

The seller has a contractual and legal duty to disclose any material facts that affect the property’s value. This can be anything from mold to electrical problems. The information must be something the seller knows or should have known about but that would not have been evident to the buyer.

Remedies for Breach of Contract in Real Estate Deals

Where a contract has been breached, the injured party may have a legal remedy. Here are the three most common remedies for breach of contract in a real estate deal.

Retaining Earnest Money

Earnest money is a deposit (typically 5-10% of the purchase price) put down by the buyer to show they are serious and to get the seller to take the property off the market. 

If the buyer simply changes their mind about the purchase, the seller will generally be able to keep this earnest money. However, if the buyer backs out because they cannot secure a loan, it will depend on the contract terms and whether they provided notice in time.

Monetary Damages

The most common remedy for any breach of contract is monetary damages. The purpose of monetary damages is not to punish the party who breached the contract but to put the injured party in the same position they would be in had the contract gone through properly. 

For example, if a buyer agrees to purchase a home for $200,000 but backs out of the deal and the seller is only able to sell later for $170,000, the seller may be entitled to the $30,000 difference in price plus other expenses incurred.

Specific Performance

Specific performance is a less common remedy where one party is ordered by the court to perform the terms of the contract. This might occur when a seller backs out of the deal and tries to sell to someone else at a higher price. 

The court may order the seller to complete the sale to the first buyer because the property is unique and monetary damages are insufficient to compensate the buyer.

Discuss Your Options With a Lawyer

If you’re involved in a real estate transaction and believe the other party has breached the contract, your first step should be to speak to an attorney. 

Our team has years of experience in these matters; we can evaluate your situation and develop a comprehensive plan for resolving the matter efficiently in your favor. 

Contact our office to schedule your consultation.

When you are renting a commercial property, of course, you want everything to go as smoothly as possible. Operating a business takes all of your attention, and any disruption can be costly. However, as with any contractual relationship, disputes arise between tenants and their landlords. But don’t lose hope! With a little bit of help, resolving commercial property lease disputes without litigation or vacating the property can be possible.

Common Types of Commercial Lease Disputes

Commercial property leases can be complicated, and a wide variety of issues can arise, but here are the kinds of disputes you are most likely to encounter.

Failure to Pay Rent

It should come as no surprise that the relationship between landlord and tenant is ultimately about money. Therefore, the most likely point of contention between them is the tenant’s refusal to pay rent. It may be that the tenant doesn’t have the funds, or they are withholding rent over a larger dispute. Whatever the case, not paying rent will quickly escalate the situation.

Maintenance Issues

Maintenance issues generally fit into one of two categories. Either the renter and landlord can’t agree on who is responsible for certain types of maintenance (if a water pipe breaks, for example), or the parties fail to their responsibilities. Even seemingly small maintenance issues can balloon out of control if left unresolved.

Improvements/Modifications to the Property

It is often the case that a business owner will want to change a property to accommodate their business. These changes can range from painting the walls to installing heavy machinery. Disputes may arise over the tenant’s right to make these changes and who is responsible for paying for them.

Early Termination/Subleasing

If a tenant wants to vacate the property before the lease term is finished, it can lead to serious conflict with the landlord. For example, it may be that each side disputes how much money is owed to the landlord in that situation, or the tenant may wish to sublease someone else, and the landlord disputes their right to do so.

Resolving Commercial Property Lease Disputes

Most of the time, when it comes to resolving commercial property lease disputes, both landlord and tenant are keen to avoid litigation. However, the path to resolution can vary greatly depending on the situation. For instance, the landlord may want to take advantage of increased rental prices in the area, or it maybe the global pandemic has caused economic problems for both parties, and they are just trying to keep their heads above water. Whatever the situation, here are some general tips to minimize the fallout.

First, don’t say anything you’ll regret. It’s a lot easier to escalate than to de-escalate a situation. Once emotions come into play, people are less inclined to compromise. Also, you may have an ongoing relationship with the other party for years to come, which can be awkward if you’ve personally offended them.

Having taken a breath, your next step should be to consult an attorney. You need to understand your legal position before negotiating a fair resolution, and you need to be sure you aren’t missing any critical deadlines. Also, an experienced real estate attorney will typically better understand what options are available in a given situation. If you are a business owner strapped for cash, it may sound counter-intuitive to hire a lawyer, but you are much more likely to have a better outcome with professional help.

Southern California Real Estate Experts

If you are a commercial landlord or tenant having a dispute over your property lease, don’t let the problem snowball. Rely on our experienced real estate attorneys to help resolve your commercial property lease dispute. Contact us today to schedule a consultation.

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.

With a pandemic-induced recession still looming large in the United States, reports such as the Allen Matkins and UCLA Anderson Forecast provide valuable insight into the current state of commercial real estate. Here are some takeaways:

Office Space Markets

The survey looked into trends surrounding working from home and how this impacts office space demand. Will an increase in work from home setups decrease demand for office spaces? It appears that the answer is not as straightforward. Factors such as what industries are currently hiring (tech and finance) and which ones will ramp up hiring in the future (health care) need to be considered. The survey also notes that:

“Although half of the Bay Area and Southern California panelists said their plans for the coming 12 months were unaffected by the pandemic, one-third are ramping back development by more than 15 percent from their previous plans. Overall, 75 percent of panelists expressed some stress with current tenant leases. For the one-third that will engage in some new development, the panelists in each market believed that land, building materials, and labor costs would be more favorable.”

Developments are projected to be on the rise beginning in late 2021.

Retail Space Markets

One of the hardest hit industries during the pandemic has been retail. Workers could not come in, there was loss of income so consumers have little to spend, and consumers in general have increasingly been turning to online shopping thus affecting brick-and-mortar stores. Here’s what the survey says regarding retail space markets:

“In the Bay Area and Southern California, two-thirds of panelists will not develop any new properties in the coming 12 months. Approximately the same percentage expect difficulty with current leases and expect plummeting property values.”

New retail development projects are still happening but there is a significant decline.

Industrial Space Markets

While panelists from the survey are generally pessimistic about the retail markets, they believe that the demand for warehouse spaces will still see steady growth. 

“Sixty percent of the panelists in Southern California and 43 percent in Northern California are planning at least one new development in the next 12 months, and 39 percent and 29 percent are planning multiple projects respectively.”

However, “[i]f If the demand for warehouse space and the stock of warehouses are increasing at about the same rate as projected, then 2023 will see a mild erosion of rental rates when adjusted for inflation, and there remains the possibility of some erosion in occupancy.” The outlook for industrial spaces leans towards a more balanced one. 

Multi-Family Housing Markets

In a previous UCLA Anderson study, there was a contrast between Southern California and Bay Area development growth rates. Panelists predict that with economic recovery and growth, multi-family housing demands in both Southern California and the Bay Area will increase with it. 

“Though the UCLA Anderson Forecast is looking at a 30-month recovery in the state, and there remains a great deal of uncertainty with regard to the current public health crisis, the market for multi-family housing remaining robust seems likely. Indeed, in spite of the turn-around in sentiment from each of the six panels, almost three-fourths of the Southern California panelists and two-thirds of the Bay Area panelists stated that the pandemic had either not changed their plans for future activity or increased it.”

The survey concludes with a hopeful take. Jerry Nickelsburg, UCLA Anderson Forecast Director & Senior Economist, notes that “this survey is not what is going on now, but what is going to go on three years from now in 2023. Across these spaces, with the exception of retail, there is certainly some optimism about opportunities that may exist.”

Your Southern California Real Estate Attorneys

If you or your business need legal counsel regarding your commercial space, our real estate law firm can help. Hoffman & Forde’s real estate attorneys have years of experience handling commercial real estate cases and advising business owners about their rights and responsibilities. Schedule a complimentary consultation today and tell us how we can help.

Nobody should be kicked out of their storefronts in the midst of a public health crisis. During these unprecedented times, it’s important to find every way to cut down on expenses and still keep your gym, restaurant, salon, or other commercial space. Thankfully, local governments have recognized this and issued moratoriums to halt evictions. With rent being one of the biggest expenses for business owners, now is the time to renegotiate your lease to help keep your business afloat.

In places like San Diego, county officials have approved a resolution that creates a moratorium on “all evictions of residential and commercial renters in the unincorporated areas who have seen their income reduced or been otherwise substantially economically harmed by the COVID-19 pandemic.” The moratorium will last through May 31. Los Angeles county announced their moratorium on evictions also lasting to May 31 and in the city of LA, tenants have 12 months after the moratorium is lifted to pay back rent. Several Orange County cities have also approved their own moratorium for both residential and commercial tenants.

When should I renegotiate?

The short answer? Now is the time. With the law on halting evictions in place for Southern California businesses, legal counsel will ease the negotiation process in a way that is mutually beneficial to you, your lender, and your landlord. Business struggles, market changes, or impending lease expiry are typical situations in which business owners seek to adjust their lease terms. The pandemic hits all of these factors and it would be wise to renegotiate before you are even further behind on payments.

Does renegotiating mean I don’t have to pay rent?

During this time you must be able to provide documentation of financial hardship due to COVID-19, and tenants are not exempt from payment. Different counties will have payback options once the moratoriums are lifted for missed payments. At the end of the 60-day moratorium (which may or may not be broadened), you are still at risk of eviction. Preparing to modify your lease terms now could impact your repayment as you and business recover.

We want to help protect your business.

At Hoffman & Forde, our lease negotiation attorneys are experts at real estate law and policies. Negotiation is an art and we have mastered it, yielding fruitful results for our clients. Our commercial loan modification program has helped our clients keep their properties and meet the cost of operations in the past, and we can do so even now. Leave the tedious, exhausting and potentially confusing commercial real estate negotiations to us and put your mind at ease.

We’ll put together a solid game plan to make sure you get a fair negotiation that will impact your business not just now, but also beyond the pandemic. Call us today to see how we can help.