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LEASES FOR MALL KIOSKS AND POP-UPS

On behalf of Michael Brooks of Law Offices of Michael A. Brooks posted in commercial real estate on Thursday, April 26, 2018.

There are two times of the year that mall kiosks and pop-ups seem to thrive: right before the holidays in December and in the middle of summer. A lot of people hit the malls to relax while they beat the heat.

A kiosk or pop-up can be very profitable for many small businesses, especially if they’re trying to make themselves known and reach out to new customers. However, there are some things about the temporary commercial leases that owners need to keep in mind — so that the whole thing doesn’t backfire on them and end up costing money.

Everything is negotiable

Unlike residential leases, commercial landlords know that they are going to have to bargain with prospective tenants. The lease they offer will be written to primarily benefit the landlord and is his or her “ideal” lease. It isn’t your ideal lease, however.

You absolutely have the power to negotiate a better deal. Malls need all the extra help they can get bringing people through the doors. Your kiosk or pop-up helps drive up interest in the mall in general. If you fail to negotiate a better deal for yourself, you’re losing money.

Stores may not want you there

Stores that inhabit the mall all year aren’t necessarily overjoyed to see a kiosk or pop-up store just outside their doors. They may feel that you’re driving potential customers away. If your kiosk or pop-up is particularly interesting, your customers might also end up blocking foot traffic outside a store.

Before you sign a lease with the mall’s owner, find out whether or not stores have a right to force you to move. If so, that could be a problem — your temporary store won’t do much business if it gets bounced from spot to spot and eventually has to set up shop in a half-empty corridor.

Never assume utilities and storage are part of a deal

Always remember that if a lease doesn’t specifically address an issue, that’s not likely to work in your favor. For example, if you need to use some of the mall’s storage space for your excess inventory, you could end up frustrated if the lease doesn’t directly permit that. Whatever you want, get it in writing.

Kiosk and pop-up leases are very similar to other commercial leases — which means you need to be just as cautious as always.

Source: FindLaw, “Negotiating a Lease for Commercial Real Estate,” accessed April 26, 2018

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BUYING COMMERCIAL PROPERTY? CONSIDER ALL USES

On behalf of Michael Brooks of Law Offices of Michael A. Brooks posted in blog on Tuesday, April 24, 2018.

If you are thinking about buying commercial property, you probably have a very specific plan in mind. You have your own business or want to have an investment that you know will pay good dividends.

Whatever your plans, however, commercial real estate is inherently more complex than buying a home. You have to consider all possible uses for the property now and in the future to decide if it is a good investment. For this and many other reasons, an expert in commercial real estate can give you a lot of advice to help you make the right decision before you buy.

Due diligence

There are many things to consider in a commercial property. What is the condition of the building? Is it up to code? What is the permitted zoning? Many of these considerations are going to be outside of your expertise to evaluate well.

The checklist of all the items that you need to understand is a part of your “due diligence,” or complete understanding of the property that you are considering. It often takes a team of experts, including construction and legal help to complete the checklist and be sure that you have looked at everything.

Types of buyers

You may have a specific plan in mind for a property that you have your eye on. If you have your own business, for example, you may be looking for a space that fits the business you already have operating or plan to open. Restaurants and many retail establishments prefer to own rather than rent space, for example, simply because of the investment required in fixtures and decoration.

The value of your property, both now and in the future, depends on its attractiveness to other kinds of buyers, however. There are three main types of buyers in commercial real estate:

  • Investors, who are buying a property for the purpose of being a landlord and collecting the rent on it
  • End users, who want to put their own business into the property
  • Developers, who are more interested in the location and its potential re-use

All of these potential approaches have an influence on the value of a property. Before making an investment, you have to consider each of them as ways that your property can gain value. This is true even if only one of them interests you at this particular moment.

Expertise is critical

No matter what you might be considering, the other potential uses are going to be important. For example, it may not seem to matter to you that a property is zoned in a highly restrictive way if your potential business meets the requirements. But it does mean that redevelopment potential is limited, and that limits your potential gain further down the road.

As part of your due diligence, a thorough review of the entire potential value of the real estate is essential. It takes an expert in commercial real estate to walk through all of these scenarios and arrive at a good understanding of the potential value of your planned investment before you buy.

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HOW DOES THE ADVERSE POSSESSION OF REAL ESTATE WORK?

On behalf of Michael Brooks of Law Offices of Michael A. Brooks posted in commercial real estate acquisitions & dispositions on Friday, April 20, 2018.

Adverse possession is an unusual quirk of property law. Essentially designed to help settle boundary disputes or to give property owners their rights back when the documentation of ownership was haphazard, adverse possession laws have the ability to turn squatters into owners.

For example, imagine that you own a large tract of wooded land. A man decides to move into an old hunting shack out there and make it his own. You’re aware of his presence, but decide to not to make him leave. There’s a possibility, depending on what he does, that he could end up the owner of the shack, the property it sits on and whatever part of the land he maintains for his use.

In California, in order for the squatter to gain title to the shack and any of your land around it, he would have to:

  • Either enclose the land he’s claiming inside a fence, cultivate the land or somehow improve the property
  • Do so openly for five continuous years
  • Pay the taxes on the land he has claimed

In addition, you would have to fail to take any action to stop him or assert your right to the property — including paying the taxes yourself.

It doesn’t particularly matter if the man living on the land believed the property was his from the start or knew that it really belonged to you — his claim of ownership is hostile to yours.

Adverse possession can be a real problem for absent landowners. If you hold title to some undeveloped property, an empty lot in a city or an empty house somewhere, it’s very possible that someone else could claim it if you aren’t paying attention.

To prevent the problem of adverse possession:

  • Pay your property taxes in a timely manner
  • Visit your property at least once a year in person
  • Document your visit, preferably with photos, to show that the property is uninhabited
  • Get legal advice if you find out that someone else has paid taxes on your property
  • Begin eviction proceedings against anyone you find living on or using your property
  • Consider encroachments — the use or claiming of a small part of your property on its boundaries by someone else — a serious issue

Remember, in real estate law, you can never be too careful — a relaxed attitude toward possession can end up being very costly.

Source: lawshelf.com, “Acquisition by Adverse Possession,” accessed April 20, 2018

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HOW TO SAVE MONEY ON A COMMERCIAL LEASE

On behalf of Michael Brooks of Law Offices of Michael A. Brooks posted in commercial real estate on Wednesday, April 18, 2018.

A commercial property lease can be the single biggest expense a business has every month — which directly affects a company’s bottom line. For many budding entrepreneurs, the cost of the lease will spiral out of control simply because they don’t know how to look for ways to cut costs.

Here are some areas of any commercial lease that bear reviewing:

Property taxes

Make sure that you’re paying, at most, only your share of the total taxes and that your obligation doesn’t extend beyond the lease. That can happen, for example, if the landlord has the taxes on an installment plan and the next installment becomes due at the end of the lease. You could otherwise be stuck covering taxes for years you aren’t even in residence.

Disability requirements

Compliance demands and consumer lawsuits regarding the Americans with Disabilities Act (ADA) has become a hot-button issue for many commercial tenants. If your lease doesn’t put the obligation for renovations to ensure compliance on the landlord, you could be hit with fines and forced to make the changes yourself.

Maintenance and repairs

Pay a lot of attention to clauses in your lease regarding this issue. You don’t want to assume responsibility for all maintenance issues, including plumbing, electrical and structural problems. Make sure that your obligation is limited to cosmetic or surface conditions only.

Operating expenses

Also known as common area expenses or maintenance, this is the No. 1 thing that can drive up a tenant’s monthly costs unnecessarily. Review exactly what your landlord provides and determine exactly how much of the building’s common areas represent your share. You can negotiate for a number of standard exclusions — but only if you ask for them! No landlord is going to voluntarily reduce his or her profits unless prompted.

The key to a successful commercial lease is to remember that — unlike residential leases — virtually everything is negotiable. Just make sure you do the negotiations before you sign!

Source: The Space Place, ““Are You Losing Money?” 10 Common Pitfalls for Commercial Tenants to Avoid,” accessed April 12, 2018

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EXERCISE CAUTION WHEN BUYING A FARM FOR A MARIJUANA BUSINESS

On behalf of Michael Brooks of Law Offices of Michael A. Brooks posted in land use & zoning restrictions on Wednesday, April 4, 2018.

There are a lot of tricky issues when it comes to setting up a marijuana business — not the least of which is finding a location where the zoning isn’t a problem.

Some eager entrepreneurs are hoping that they can buy and convert a family farm to their needs. However, you need to exercise caution before rushing ahead with a purchase. These are some of the biggest questions you need to ask first:

Do you have a contingency plan if the local jurisdiction won’t play along?

Commercial agreements usually have a contingency clause that allows you to back out of the deal if the local governments won’t fit the marijuana business under the property’s zoning. The agreement to purchase a family farm, however, is much the same as the agreement to purchase any other home. Without adding a contingency clause to your contract, you could be stuck with a property that’s unsuitable for your needs.

You can’t rely on how the farm has been used in the past to predict how it can be used in the future — especially for marijuana businesses and/or farming.

Could federal laws be a problem?

Because marijuana is still illegal at the federal level, you could run into potential problems with civil forfeiture laws. You could lose your home in addition to the business if you plan on moving into the farmhouse. You can also run into problems with conservation easements. If the federal government is providing a local jurisdiction with extra funding tied to agricultural restrictions, allowing you to operate could endanger those funds. A jurisdiction could step in and stop your operation in order to protect its own finances.

How do the neighbors feel about the proposed business?

Nuisance laws generally don’t stop a farm from operating — except when it’s a marijuana business. The pungent odor of the plant is sometimes a problem for neighbors. In addition, there’s often a fear that a marijuana business will bring in “unsavory” characters seeking to make a quick buck by theft.

Marijuana businesses do have the potential to be quite profitable, but it takes some careful negotiations to make sure that you get off on the right foot with the land-use and zoning restrictions. If you’re unsure about the particulars, it’s usually wise to get some experienced legal assistance.

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