Commercial Property Archives

SB 939 alters the terms of commercial leases. California’s Senate Judiciary Committee passed SB 939 following a 5-1 vote on May 22, 2020. Democratic State Senators Scott Wieners and Lena Gonzales introduced Senate Bill 939 (SB 939) in response to the stay-at-home orders and other regulations related to COVID-19 negatively affecting businesses operating under a commercial lease. SB 939 proposes to add §1951.9 to the Civil Code, with two different sections. Each section seeks to assist commercial lessees that have been impacted by COVID-19 restrictions. SB 939’s key features are:

It limits a commercial landlord’s right to evict certain defaulting commercial tenants during California’s State of Emergency until December 31, 2021 or 90 days after the State of Emergency ends (whichever is later), adds new penalties and puts a notice burden on the landlord;
It voids all evictions for non-payment attempted since March 4, 2020 but before the effective date of the bill;
For Section 1 Commercial Tenants (defined below) it requires commercial landlords to defer qualified commercial tenants’ rent and other economic obligations for at least one year and takes away commercial landlord’s ability to collect late fees or apply already collected security deposits as rent;
For Section 2 Commercial Tenants (defined below) it establishes a procedure for qualified commercial tenants to renegotiate the lease terms and if the lease negotiations fail, it provides a procedure for the qualified commercial tenant to terminate valid leases with a cap on the qualified commercial tenant’s liability regardless of the remaining duration of the qualified commercial tenant’s lease.

Who is a “Section 1 Commercial Tenant” under SB 939 (proposed CCC 1951.9)?

For the purposes of Section 1, an eligible Covid-19 impacted commercial tenant is a commercial tenant that operates primarily in California, occupies commercial real property pursuant to a lease, and meets one of the following:

Has experienced a decline of 20% or more in average monthly revenue over the two most recent calendar months when compared to one of the following:
- Its average monthly revenue for the two calendar months before a state or local government shelter-in-place order took effect; or
- its average monthly revenue for the same calendar months in 2019.
Was prevented from opening or required to delay opening its business because of the state of emergency.
Has suffered a decline of 15% or more in capacity due to compliance with an official public health order or occupational health and safety guideline for preventing the spread of COVID-19.

Section 1 requires landlords to send notice of the bill’s provisions to all tenants within 30 days of it going into effect. Commercial tenants then have the opportunity to send notice to their landlords, under penalty or perjury, that they are eligible COVID-19 impacted commercial tenants as defined by Section 1 of §1951.9 to be fully protected by the Section 1’s provisions, which are substantial.

Under the provisions of Section 1, during the state of emergency – landlords are prohibited from terminating the tenancy of an eligible COVID-19 impacted commercial tenant, serving notice of termination of tenancy, using lockout or utility shutoff actions to effectively terminate tenancy, or engaging in any other effort to evict these eligible tenants, if the tenant is being evicted for non-payment of rent, unless the eligible tenant poses a threat to the property, other tenants, or other persons, business, or entities.

Section 1 goes on to make any of the above actions, as well as harassment, mistreatment, or retaliation against an eligible tenant punishable by a fine between $250 and $2,000 per action/occurrence. Additionally, it makes it an act of unfair competition and unfair business practice with separate cumulative legal remedies and penalties under Section 17200 to violate any of its proposed provisions. Any eviction made in violation of the bill’s provisions that occurred since March 4, 2020 will be void, against public policy, and unenforceable. Prevailing tenants in any litigation related to this provision will be awarded actual damages and reasonable attorney’s fees.

Finally, Section 1 of §1951.9 automatically defers the sum total of all non-paid rent due in any months occurring during the state of emergency twelve months after the state of emergency ends, unless the eligible commercial tenant and landlord agree for that sum total to be paid at an even later date. No late fees may be imposed on this rent, regardless of any lease provision to the contrary, and security deposits may not be applied to cover the balance of any outstanding rent.

Who is a Section 2 Commercial Tenant under SB 939 (proposed CCC 1951.9)?

Under the language of the SB 939 as of its May 20^th Senate Judiciary Committee hearing, an “eligible COVID-19 impacted commercial tenant” under Section 2 means a commercial tenant that operates primarily in California, that occupies commercial real property pursuant to a lease, and that meets one of the following criteria:

It is an eating or drinking establishment, a place of entertainment, or a performance venue that has experienced a decline of 40% or more of average monthly revenue over the two most recent calendar months when compared to one or both of the following:
- Its average monthly revenue for the two calendar months before a state of local government shelter-in-place order took effect; or
- Its average monthly revenue the same calendar months in 2019.
It is an eating or drinking establishment, a place of entertainment, or a performance venue that was prevented from opening or required to delay opening its business because of the state of emergency.
It is an eating or drinking establishment, a place of entertainment, or a performance venue that has suffered a decline of 25% or more in capacity due to compliance with an official public health order or occupational health and safety guideline for preventing the spread of COVID-19.

Section 2 does not apply to any publicly traded company or any company owned by or affiliated with a publicly traded company.

Section 2 permits good faith negotiations between eligible commercial tenants and landlords to modify any rent or economic requirements of the lease, regardless of the term remaining on the lease. In order to initiate these renegotiations, commercial tenants must serve written notice on the landlord, affirming under penalty of perjury, that the tenant is an eligible COVID-19 impacted commercial tenant under Section 2. The notice must also include the lease modifications the tenant seeks to obtain and be sent in accordance with the notice provisions of the lease, and if the lease contains no such provisions, through any other manner where actual receipt occurs to the landlord or the landlord’s designated agent.

The goal of Section 2 is for landlord and commercial tenants to come to new terms that are more appropriate in light of the pandemic and the changes it will impact of the economy. Ideally, landlords and commercial tenants come to a mutually satisfactory agreement and continue to go about business in accordance with those terms.

However, if a commercial tenant and landlord do not reach a mutually satisfactory agreement within 30 days of the date the Landlord received the negotiation notice then, within 10 days thereafter, the commercial tenant may terminate the lease without liability for future rents, fees, or costs that otherwise would have accrued under the lease. Instead, the law creates a new damage calculation. Lease termination by the commercial tenant only requires that the tenant send a termination notice under the same procedures followed to send a renegotiation notice. Upon the landlord’s receipt of the commercial notice, the tenant has 14 days to vacate. If the tenant vacates, then the lease, any liability for costs that shall accrue under the lease, and any third-party guaranties associated with the lease terminates and is no longer enforceable.

The tenant is not entirely off the hook though, and regardless of terminating vacancy, commercial tenants are still liable for past due rent in an amount no greater than the sum of the following:

A maximum of three months’ worth of past due rent incurred during the state of emergency and regulations related to COVID-19; and
All rent incurred and unpaid during a time unrelated to COVID-19 through the date of the termination notice.

Section 2 commercial tenants must make this payment to their landlords within 12 months of the date of the termination notice before becoming liable for its late payment.

As of this writing SB 939 is not law. It is possible that the draft will continue to change as it makes its way through the legislature. It is also possible that it may not become law.

If you are a landlord seeking help with your commercial properties, or a tenant seeking help with your commercial lease, call the expert real estate attorneys at Adishian Law Group. We can be reached at the phone numbers listed above.

EL SEGUNDO, CA (March 7, 2013)—Adishian Law Group Plays A Key Role In Reshaping El Segundo as Part of Largest Vertical Land Development Project West of Sepulveda Blvd (PCH) in the South Bay of Los Angeles during 2012-2013

Adishian Law Group in El Segundo, CA announces the closing of a real property transaction that will be among the most beneficial to the City of El Segundo in recent history. It is believed that this project is the largest vertical land development west of Sepulveda/PCH in the entire South Bay of Los Angeles during the last two years. The leaders of the project, known as the “222 Kansas Street Specific Plan,” are SMPO Lab, LLC (www.smpo.com) of Memphis, Tennessee and local developer Mar Ventures, Inc. (www.marventures.com) of Torrance, California. The approximately 4.7 acre parcel in El Segundo had fallen into disuse after International Rectifier (NYSE:IRF) shuttered its computer chip manufacturing facility that had occupied most of the property for many years.

Prior to SMPO acquiring the property, another developer had attempted to develop the site, but was unable to complete its plans. Once SMPO acquired the entire parcel, it entered in a contract to sell approximately 1.6 acres to Mar Ventures. SMPO had plans to build new industrial and laboratory space to house the USDA’s Animal and Plant Health Inspection Service unit that serves Los Angeles International Airport and the Port of Long Beach. Mar Ventures’ plan was to build a 20-unit modern, brick and glass office condo complex fronting Kansas and Grand (www.grandkansas.com). There was only one small detail—Adishian Law Group’s clients owned an existing parcel that was positioned in such a manner as to require their cooperation for the project to go forward as envisioned. Adishian Law Group represented its clients in negotiations with Mar Ventures.

Adishian’s directive was to reach a fair-minded resolution that would protect its clients’ interests, allow the project to go forward, and result in a win for everyone. Had Mar Ventures and SMPO not arrived at a mutually beneficial agreement with Adishian’s clients, the project may not have gone forward all, and certainly would have been delayed and reconfigured.

“All parties wanted the transaction to go forward,” says Adishian Law Group President, Chris Adishian. “Although simple in concept, this deal ultimately required a carefully orchestrated series of transactions that subdivided the original parcel, and then allowed the Mar Ventures’ parcel to be further subdivided into new lots in order to fulfill its ultimate intended use of the land. These transactions included a Lot Line Adjustment, a Letter of Intent, a custom Multi-Party Agreement, a Declaration and Grant of Restrictive Covenants, Conditions and Restrictions, as well as Easements, Grant Deeds, a Conveyance Agreement and an Option Agreement.” Adishian continues, “Like many long range projects of such scale and complexity, this project was a long time in coming. It required the sustained efforts of SMPO, Mar Ventures, the City of El Segundo, Southern California Edison, architects, engineers and some diligent lawyering to steer this project to a successful completion. The SMPO and Mar Ventures teams were first rate, and our friends at Obelisk architects and Denn Engineering also made very valuable contributions.”

The City of El Segundo will benefit in several significant ways. The project transforms land within the city limits that was lying fallow into productive use. The tax base of the city has now improved, and the Grand Avenue corridor has become more aesthetically pleasing. Of course, more employees working within the project will help local El Segundo businesses. Such success in the real estate arena requires a law firm with experience, creativity, credibility and the ability to work cooperatively with a diverse range of parties and interests in order to accomplish the end goal. This successful transaction illustrates why the Adishian Law Group deserves its reputation as a fair-minded, knowledgeable and effective closer of even the most complex real estate transactions.

About Adishian Law Group, P.C.

Adishian Law Group is a California law firm with a statewide practice in the areas of Corporate law, Employment law, Real Estate law and Mediation Services. Adishianlaw.com is one of the oldest continually operating law firm websites on the Internet. The firm serves its clientele via three offices located in the major business hubs of El Segundo, Palo Alto and San Francisco. As of March 2013, Adishian Law Group, P.C. has represented individual and corporate clients located across 20 California counties, 4 States outside of California and 9 foreign countries — in over 340 legal matters.

For more information about this topic or to speak with Chris Adishian:

EL SEGUNDO, CA (May 11, 2018)—Adishian Law Group Advises Malaga Bank on Real Estate Purchase.

Adishian Law Group in El Segundo, California is pleased to announce that Malaga Bank, a wholly owned subsidiary of Malaga Financial Corporation, (OTC: MLGF) acquired its headquarter’s office building. Malaga Bank is a full service community bank headquartered on the Palos Verdes Peninsula. It has branch offices on the Peninsula, Torrance and San Pedro. Since 1985, Malaga Bank has been delivering competitive bank services to residents, businesses and community organizations of the South Bay. The building, commonly known as 1 Malaga Cove Plaza, is part of the iconic Malaga Cove Plaza.

“Every transaction has a story” said Adishian Law Group President, Chris Adishian. “As we learned in the course of the transaction, the vision for Malaga Cove Plaza’s creation dates back to the very formation of Palos Verdes Estates, when the tract map was recorded by…..Bank of America, in late 1923! That’s right Bank of America owned much of the land in this area of Palos Verdes Estates. For perspective, in late 1923, WWI had been over by nearly 5 years, and the Great Depression was about 6 years away. In between, the template was set for this section of Palos Verdes Estates.”

On behalf of our client, Adishian Law Group led the legal work on the transaction from initial exercise of Malaga Bank’s option through Closing. Our services included negotiating, draft or reviewing the following documents: Operative lease with all amendments; Notice of Exercise of Right to Purchase; Purchase and Sale Agreement, along with associated Addendums, Reviewing Title reports, Tract Maps, Chain of Title Documents, Easement Grants and Purchaser’s Closing Instructions.

About Adishian Law Group, P.C.

Adishian Law Group is a California law firm with a statewide practice in the areas of Corporate law, Employment law and Real Estate law. Adishianlaw.com is one of the oldest continually operating law firm websites on the Internet. The firm serves its clientele via three offices located in the major business hubs of El Segundo, Palo Alto and San Francisco.

For more information about this transaction, contact Chris Adishian:

EL SEGUNDO, CA (September 30, 2017)—Adishian Law Group Advises Welcome Group on New Real Estate Construction and Sale to Moose Toys

Adishian Law Group in El Segundo, CA announces the Closing of a 22,607 gross square real estate construction and sale transaction between our client and Moose Toys. Our client (“Seller”) built and delivered 2 free-standing shell office buildings with each building comprised of 2 condominium units. In addition, Seller built and delivered a companion parking structure totaling approximately 345 parking spaces, some of which are licensed to Moose Toys. This project is located within Campus El Segundo development. El Segundo remains a very attractive real estate destination for companies or investors around the world.

On behalf of our client, our firm led the legal work on the transaction from PSA through Closing. Our work included negotiating, drafting or reviewing the following documents: Purchase and Sale Agreement; Temporary Access Agreement; Contracts for Construction; Assignment of Purchase Agreement; Short Form Deed of Trust; Escrow Instructions and Amendments; Parking License Agreement; Reciprocal Access Agreement; Notice of Completion; Owner’s Affidavit; Grant Deeds; HOA deeds and 1031 Exchange related documents.

About Adishian Law Group, P.C.

For more information about this transaction, contact Chris Adishian:

Attorney’s Fees do NOT Count Towards the Jurisdictional Limit in Limited Jurisdiction Cases In California.

This article discusses attorney’s fees in one of the rare cases where we would, and have, represented a Plaintiff in a limited jurisdiction case.

As every lawyer knows, and most non-lawyers, the California Superior State Court system is divided largely into three level based on the “amount in controversy.” Amounts in controversy totaling $10,000 are directed to Small Claims Court, where the parties represent themselves without attorneys. Amounts in controversy greater than $25,000 are directed to the Superior Courts of “Unlimited Jurisdiction.” Amounts in controversy GREATER than $10,000 but less than $25,000 are directed to Superior Courts of “Limited Jurisdiction.”

In Unlimited Jurisdiction, there is no cap on jurisdiction, so there is no theoretical cap on attorney’s fees submitted or awarded provided there is a legal basis for the attorney’s fees, which are adequately supported and approved by the Court. That would seem obvious.

Less obvious though, is what happens to attorney’s fees in limited jurisdiction. For example: Plaintiff has a $10,000 breach of contract claim, and the contract has an attorneys’ fee provision. Defendant may believe that his worst outcome in this case is a $25,000 judgment against him plus his own attorneys’ fees (i.e. $10,000 plus $15,000 in plaintiff’s attorney’s fees, thereby totaling the jurisdictional limit of $25,000). Defendant would be wrong, and it could be an expensive lesson.

California’s Code of Civil Procedure Section 85(a) provides that: “The amount in controversy does not exceed twenty-five thousand dollars ($25,000). As used in this section, “amount in controversy” means the the amount of the demand, or the recovery sought, or the value of the property, or the amount of the lien, that is in controversy in the action, exclusive of attorneys’ fees, interest, and costs.

We’ve seen this arise in the context of commercial security deposits, where commercial leases almost always have attorney’s fee provisions.

The lesson of course is to not only do the right thing, but also in assessing your cost-benefit of litigation, understand that on “either side” a $10,000 dispute in limited jurisdiction court, could result in a liability 5-20x the amount in controversy to the losing party if litigated through trial and attorneys fees are awarded.

About Adishian Law Group, P.C.

For more information about this topic or to speak with Chris Adishian:

EL SEGUNDO, CA (March 7, 2013)—Adishian Law Group Plays A Key Role In Reshaping El Segundo as Part of Largest Vertical Land Development Project West of Sepulveda Blvd (PCH) in the South Bay of Los Angeles during 2012-2013

About Adishian Law Group, P.C.

For more information about this topic or to speak with Chris Adishian:

What is a §1031 Exchange?

Section 1031 provides for “Nonrecognition of gain or loss from exchanges solely in kind: (1) In general. No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.” In short, this means that if you want to sell an investment property now worth $3,000,000, that you originally purchased for $1,000,000, Section 1031 will allow you to rollover the entire $3,000,000 (including the roughly $2,000,000 in gain calculated as $3,000,000 minus $1,000,000, leaving depreciation out for the sake of simplicity) tax free!

Some Rules

In order to qualify for tax free treatment under Section 1031, the Seller must (1) use a Qualified Intermediary; (2) Identify the replacement property within 45 days; (3) The replacement property must be “like-kind” and (4) The replacement property transaction must close within 180 days of the closing of the relinquised property. As may be obvious, this area of real estate law is “jargon-heavy.”

About Adishian Law Group, P.C.

For more information about this topic or to speak with Chris Adishian:

Telephone: 310.726.0888 | 650.955.0888 | 415.955.0888

Email: askalg@adishianlaw.com

Social Media: @algpc | LinkedIn | Facebook | YouTube

In the current recession, commercial landlord’s are just beginning to feel the pressure from tenants seeking rent concession or the outright elimination of their rent obligation. See Wall Street Journal, “Struggling Retailers Press Struggling Landlords on Rent”, January 2009. There is also a rapidly shrinking pool of high-quality “anchor” as major retail chains file bankruptcy seemingly one after the other. As a commercial property owner, what should you do to protect your interest?

Surrender or Termination or Both.

A lessee cannot effect a surrender and termination of a lease unilaterally. The landlord must accept the offer of termination for it to be in effect. Under California law, an abandonment of the premises by the tenant is merely an offer to surrender their lease. See Miller & Starr, 3rd. Ed., Vol 7, Sec. 19.

Upon receiving an offer of termination from a tenant, a commercial landlord must make an election of his remedy: (1) Ignore the offer to terminate, treat the lease as continuing and sue to recover rent as it becomes due provided that the lease permits the lessee to sublease or assign its interest; or (2) Accept the offer to terminate, and pursue remedies under CCC §1951.2.

How well companies and individuals managing real estate assets through an economic downturn is critical to long term success in real estate.

About Adishian Law Group, P.C.

buy viagra online without prescription canada

via three offices located in the major business hubs of El Segundo, Palo Alto and San Francisco. As of March 2013, Adishian Law Group, P.C. has represented individual and corporate clients located across 20 California counties, 4 States outside of California and 9 foreign countries — in over 340 legal matters.

For more information about this topic or to speak with Chris Adishian: