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Tenant’s Concerns Prior to Signing a Lease-Material Disclosures

A tenant should always perform his or her due diligence in gathering the facts on any material defects seen or unseen in a building they plan to lease.  The facts may not be disclosed by the owner’s broker or by the owner. 

The concealment of material facts may cause further serious damage to the property that the tenant may inherit after signing a lease.  A business owner investigating property for future decades of residency should have his/her broker inquire to the broker or the owner regarding unforeseen material facts.  Simply ask, if there are any possible material defects that may cause the company concerns in the future.

Zoning or deed restrictions may prevent the tenants use or future use of the property.  As a result, the prospective tenant should always research the history of the property’s zoning laws.  The restrictions could eventually cause government authorities to order a cease and desist of the business.

The landlord may not be aware of any deed restrictions on the property. Consequently, a new title report can always be obtained from the title company.  In addition, a tenant planning on making changes to the property must always consult th...

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Homeless Population Affects Commercial Real Estate, Vigilant Property Management is a Necessity

 

Investors are spending tens of millions of dollars in commercial real estate in West Los Angeles.  A person driving through Santa Monica, Playa Vista, Venice and Westwood will see buildings under construction and cranes everywhere.  In addition, they can also see homeless people everywhere.

The increase in the homeless population is becoming a serious security issue to these properties converted into office and retail space.  Further, property management companies are finding it difficult to remove the homeless people from the property.

For example on July 5th, a security guard asked two homeless men to purchase food or leave McDonalds on Colorado and 2nd Street in Santa Monica.  The two men were sleeping in the restaurant at about 4:30 am.  They started hitting the guard and it turned into a fist fight.  Santa Monica’s homeless population jumped 26% this year compared to 2016.  There are about 1,000 people living on their city streets.

The Los Angeles County homeless population increased 23% this year compared to 2016. About 60,000 homeless people live in Los Angeles County, according to the Los Angeles Homeless Services Authority (LAHSA).  The LAH...

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Landlord's Recommended Role to Mitigate Damages for Leases

Once a 3-day notice to pay or quit that is for past due rent is served to a tenant, the landlord may anticipate a vacancy.  In some cases the default of the lease is corrected and the lease goes on.  However, the vacancy will most likely be imminent if the tenant does not answer the complaint or pay the back rent.

The list below is my expert recommendation to landlords, as a result of a default notice to pay or quit.  This list is to provide the necessary steps to release the premises in the shortest time possible and reduce the damages in a potential lawsuit.

1.    Inspect the premises as soon as possible to assess any damages to the property.

2.    Contact contractors and obtain at least two bids for each service to cleanup if access is gained into the building.

3.    Make the place suitable for showing to prospective tenants.

4.    Find the real estate agent who is most familiar with the market area.  It is essential that the agent is a specialist in the area.  Don’t make a mistake and employ a friend who is a broker unfamiliar with the local market.

5.    The commercial real estate agent must create a written marketin...

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AIR Rebrands Itself to AIR CRE

AIR Commercial Real Estate Association has rebranded itself after 57 years in business.  The member-owned platform now branded AIR CRE provides commercial real estate professionals in Southern California with the critical tools they need to be successful.  Their members have access to a system of market research, listings services, contracts and legal resources, networking and education.

The new branding and logo doesn’t change their sterling reputation.  The commercial real estate network has Multiple Listings that serve seven countries.  It sells thousands of its commercial real estate contracts nationwide.

Every two years AIR CRE has a Contracts Seminar to unveil all of its forms including:

•    Purchase and Sale Agreements
•    Purchase related forms
•    Detailed discussion and comparison of Lease Forms
•    Listing Agreements
•    All related addenda

The sold out seminar on May 19, 2017 was led by AIR’s legal editor, Bryan Marshian and Broker John Pagliassotti.  They modify these forms continually in order to provide the best possible contracts in the industry.  These contracts serve the industrial, office and retail commerci...

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California Assembly Bill 1059 Dual Agency Brokerage for Commercial Real Estate Transactions –Dual Agents Beware!

AB-1059 is a new bill introduced to the California State Assembly this year.  It was written by California Representative Lorena Gonzalez Fletcher D – San Diego.  The bill aims to outlaw dual agency brokerage representation in California commercial real estate transactions.  This bill was written in a response to the recent California Supreme Court ruling on the residential real estate case Horike v. Coldwell Banker where the Supreme Court stated that dual agents have an inherent conflict of interest.

This bill is being opposed by the AIR Commercial Real Estate Association which is a non-profit representation of all parties, and I am a former president of the organization.  Tim Hayes is the AIR Executive Director leading the fight for the opposition with a petition on the MoveOn.org website.  He states in the petition that AB-1059 will negatively impact the overall economy, especially small business owners who lease or buy real estate.  

According to Hayes, the bill may increase fees paid to the brokerage industry for small business owners.  The tenant/buyers will no longer be able to work with any broker they choose.  The tenant buying commercial real estate will...

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The Timing For The Industrial Effective Breach of Contract Is Now!

The industrial real estate industry is on fire with no signs of slowing down.  The vacancy rates in Los Angeles are in the low single digits with high rental rates.  This is due partly to the shift from retail to ecommerce and the demand for warehouse space.  As a result, breach of lease litigation cases have dropped compared to the recession era in 2009.

In the 4th quarter of 2010 Los Angeles vacancy rates were about 6%. Landlords had extreme difficulty finding a tenant to fill a space then.  As a result, the landlord lost several months of rent when a tenant breached a lease.  Litigation costs were extremely high for landlords trying to recoup rents from tenants.  In contrast, Industrial vacancy rates today are at a historic low around 1%.

The landlord must mitigate the damages and continue to collect rent as it comes due under the law section 1951.4 if a tenant breaches the lease for abandonment or nonpayment. The first plan of attack is to simply file a 3 day notice and then a lawsuit. 

The landlord always...

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Industrial Real Estate Rental Rates Remain High in 2017

Industrial and warehouse rental rates increased over 33 percent in 2016 compared to 2014 in Los Angeles.  These high rental rates will maintain at current levels or increase in 2017, a consequence of low industrial construction development in 2016 and the continuing trend of industrial to creative office conversion.

Bulk warehouse construction occurred in the South Bay to accommodate large users of space in 2016. However, new construction for buildings the size of 5,000 to 100,000 square-feet was absent.  In addition, there are a limited amount of construction projects for industrial buildings underway in 2017.  As a result, vacancies are in the very low single digit range.  In the Westside LAX and El Segundo the vacancy rates are less than 1 percent.

Most vacant buildings are only available for lease. The few buildings that are for sale have an even lower vacancy rate; as a result, they are selling at record high prices.  Businesses looking to purchase an industrial property in Los Angeles could wait years before finding something; in addition, they may realize the price is out of their price range if they locate a building.  

One creative way f...

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Will the Next Administration End the Dodd-Frank Act In 2017?

The Dodd-Frank Wall Street Reform and Consumer Protection Act signed into federal law in 2010 by President Obama passed as a response to the recession of 2008. It brought the most significant changes to financial regulation in the United States changing almost all federal financial regulatory agencies.

Dodd-Frank was created to protect consumers and prevent another financial crisis; however, president-elect Donald Trump and his nominee for Treasury Secretary Steven Mnuchin say it is far too much regulation.  The new administration would like to see it repealed.

The Dodd-Frank Act is an intricately complex governmental oversight act that represents the most comprehensive financial regulatory reform measures taken since the great depression, according to Morrison & Foerester Law Firm. 

In January 2010 the Volcker Rule provisions were added to the Dodd-Frank Act that imposes even more stringent regulatory capital requirements on financial institutions and prohibits most proprietary trading by US banks and their affiliates.

Part of the Volcker Provision requires that the Financial Stability Oversight Council make recommendations to the Federal Re...

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Commercial Real Estate Property Tax Increase From Proposition HHH

Los Angeles City commercial real estate property owners will feel a small bump in property taxes as a result of Proposition HHH passing in the election on November 8, 2016.

A .01 percent increase on all taxable properties in the city of Los Angeles will be added on top of the property owner’s annual property taxes, Doug Smith Senior Writer at the Los Angeles Times said.

The city will issue bonds to borrow up to $1.2 billion to build 10,000 units of supportive housing (apartments that include counseling services) in the next 10 years for the chronically homeless in Los Angeles City.

Rachel Brashier Policy Director at City Councilmember Marqueece Harris-Dawson’s Office said the bonds from Proposition HHH will be paid back through a tax based on the assessed value of properties within the City, loosely estimated at $9.64 annually per $100,000 of assessed value for 29 years.

A commercial property owner who owns a 355,000-square-foot office building valued at $120 millio...

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Are The Brick And Mortar Retail Stores A Thing Of The Past?

E-commerce and the high cost of real estate are hitting the brick and mortar retail industry hard this year with several retail chains like Sport Chalet and Sports Authority closing its doors.  In addition, Macy’s announced it is closing 100 stores out of 728 Full-line stores.

The high value of commercial real estate is increasing the cost to lease retail space in California.  In addition, the online stores like Amazon have been detrimental to brick and mortar retail.  During the Great Recession there were many retail vacancies and rents were low; however, those spaces have been leased and new construction began.   

Land is more expensive in Los Angeles due to the lack of available open space to build, and construction prices are higher.  As a result, rental and sales prices for commercial real estate are much higher than before.  This compounded with online retail competition in California makes it more difficult for the consumers to go into the department stores.

As a result, many chain stores are closing loca...

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“Not only was I impressed with the breadth of Lee Segal’s qualifications as a commercial real estate expert but when we met, his personality and credibility earned my respect right away. His many years of experience in the field of commercial real estate set him apart from other experts.”  
Stephen Webb, Law Office of Stephen P. Webb, P.C.