Month: March 2016

Good Faith Standard for Commercial Landlords in Considering Lease Assignments

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As with all California contracts, there is a standard of good faith required by all parties. This standard of good faith comes into play when commercial landlords are asked by their tenants to consider a lease assignments. Most form commercial lease contracts (such as the AIR form commercial leases) provide language regarding good faith in accepting or rejecting a potential assignee, starting with the notion that a landlord’s consent shall not be “unreasonably withheld.”

Landlords and tenants are free to further define what constitutes reasonable or unreasonable withholding of consent beyond the boilerplate language found in most form leases. Landlord and tenant may choose to include factors such as an assignee’s experience, character, reputation, credit history and net worth.

It is important to note for Landlords that the issue of whether consent was reasonably or unreasonably withheld will be a question of fact for a jury. Thus, in anticipation of litigation, a landlord should have fact based reasons for withholding consent and those fact based reasons should be carefully scrutinized.

Medical Marijuana Business Landlords – City Attorney Actions In Civil Court

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Our Firm currently represents a landlord who rented to a medical marijuana business for about a year. The landlord was named as a defendant in a lawsuit (one of several) currently pending in the Los Angeles County Superior Court. The City alleged violations of California’s Unfair Competition laws and also Prop D violations. Part of the City’s prosecution against the Landlord included the filing of a lis pendens.

Shortly after the City filed, our landlord evicted the medical marijuana tenant and has since rented to a non-marijuana business. Despite these facts, the City refused to remove the lis pendens. After filing a motion to expunge the lis pendens and oral arguments, the Court granted landlord’s petition and ordered that the lis pendens be expunged.

Case law supports the expungement wherein the offending or violating conduct has ceased. Despite the ruling, it is anticipated that the City will appeal the decision given the unfavorable precedence set by the trial court.

Landlords of marijuana businesses, be mindful about the potential for civil and criminal prosecutions by the City. Although this issue is both of political and social concern, the City Attorneys, at least in our case, are not sympathetic to a landlord, even when the landlord has fully complied and remains compliant. The City is currently aggressively seeking civil penalties despite the premises being marijuana free for several months and under a lease to a non-marijuana business for years to come.

If you are a commercial landlord and in need of a Commercial Lease Attorney, contact us for a free consultation and case evaluation.

Commercial Landlords – Security Deposits and Section 1950.7 Waivers

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Cal. Civ. Code § 1950.7 governs security deposits for commercial leases and the disposition thereof after the termination of tenancy whether voluntarily or by eviction. Section 1950.7 limits the manner with which a Landlord may apply the security deposit. However, California Courts will uphold a Section 1950.7 waiver should the landlord and tenant agree to the same. Thus, with a waiver, Landlord could effectively apply security deposit to future rent for example, even though 1950.7 would prohibit such an application. See 250 L.L.C. v. Photopoint Corp. (USA), (2005) 131 Cal. App. 4th 703, 718 (“That conclusion is consistent with cases holding that commercial tenants may waive their rights under the Civil Code …and with California’s public policy of ‘enable[ing] and facilitate[ing] freedom of contract by the parties to commercial real property leases.’ Since the Legislature has expressly prohibited waivers of section 1950.5’s protections for residential security deposits…its failure to do so with respect to commercial security deposits indicates that waivers are permissible as to those deposits.”) (Internal citations omitted.) (Emphasis added.)

If you are a Commercial Landlord in Los Angeles and have questions or concerns regarding your commercial lease, contact one of our Commercial Lease Attorneys for a free consultation and case evaluation.

HOA Disputes – Hardwood Floor Complaints

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We’ve recently had a string of hardwood floor complaints and are actively prosecuting CC&R violations stemming from illegal/improper hardwood floors for several homeowners in the Los Angeles area. Many HOAs have specific rules regarding hardwood floor installations in order to prevent circumstances causing a nuisance to homeowners in units below hardwood flooring. Unfortunately, sometimes the rules themselves are the problem. Often HOAs set minimum standards for hardwood flooring materials such as IIC ratings (Impact Insulation Class). However, an IIC rating for materials used don’t always translate to better sound attenuation because there are usually significant differences between the rating flooring materials achieve in the laboratory, which is controlled vs. in the field where floor/ceiling assemblies can vary from building to building and unit to unit.

Thus, if you are a homeowner contemplating installing hardwood floors in your condo, make sure you are first in compliance with the rules and second, maximizing the padding and sound insulation materials with your install so as to not subject yourself to a nuisance complaint or worse, being named as a defendant in a CC&R violation lawsuit. If you are a homeowner who is experiencing disturbances and nuisances stemming from hardwood floors from the unit above, contact one of our HOA Dispute Attorneys in Los Angeles for a free consultation and case evaluation.

Medical Marijuana Landlords – Prop D Prosecutions and Civil Penalties

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Landlords in Los Angeles who are leasing their properties to Medical Marijuana Business need to be mindful of the very real chance that the City Attorney will also name the Landlord as a defendant in Prop D civil complaints, as well as criminal prosecutions. Medical Marijuana Businesses are illegal pursuant to LAMC 45.19.6.2. However, certain immunities are available to Prop D compliant collectives/dispensaries. Of those Marijuana Businesses that are not Prop D complaint, the City Attorney is currently pursuing both criminal and civil prosecution. What this means to a Landlord renting to a Marijuana business not compliant with Prop D, is that the landlord could be also named as a defendant pursuant to LAMC 45.19.6.2 and subject to civil penalties (up to $2,500 per day) and also faced with injunctions and clouds on title from a lis pendens filed by the City.

If you are a Landlord in Los Angeles facing a civil matter stemming from your lease to a Marijuana Business, contact one of our Commercial Lease Attorneys for a free consultation and case evaluation.

Co-Ownership of Real Estate in California Does Not By Itself Create a Partnership

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Under well settled California law, “Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not by itself establish a partnership, even if the co-owners share profits made by the use of the property.” See Cal. Corp. Code § 16202(c)(1). “A person who receives a share of the profits of a business is presumed to be a partner in the business, unless the profits were received for any of the following reasons: (C) In payment of rent.” See Cal. Corp. Code § 16202(c)(3)(C). Thus, California’s Uniform Partnership Act would require something more than mere co-ownership to establish a partnership between two co-tenants. Furthermore, co ownership does not in and of itself create a joint venture unless the following is established: (1) the members must have joint control over the venture (even though they may delegate it), (2) they must share the profits of the undertaking, and (3) the members must each have an ownership interest in the enterprise. See Scottsdale Ins. Co v. Essex Ins. Co., (2002) 98 Cal. App. 4th 86, 91.

If you are a co-owner or co-tenant in real property and have questions or concerns regarding your rights as a co-owner, contact one of our Los Angeles Real Estate Attorneys today for a free consultation and case evaluation.

Upholding Declarations or CC&Rs as Equitable Servitudes

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Under California law, CC&Rs, and the restrictions upon the use of property, will be upheld as Equitable Servitudes. See California Supreme Court Case of Citizens for Covenant Compliance v. Anderson, (1995) 12 Cal. 4th 345. The rule that Citizens established, which the Citizens Court held applies equally to both land covenants and equitable servitudes is stated as follows:

“If a declaration establishing a common plan for the ownership of property in a subdivision and containing restrictions upon the use of the property as part of the common plan, is recorded before the execution of the contract of sale, describes the property it is to govern, and states that it is to bind all purchasers and their successors, subsequent purchasers who have constructive notice of the recorded declaration are deemed to intend and agree to be bound by, and to accept the benefits of, the common plan; the restrictions, therefore, are not unenforceable merely because they are not additionally cited in a deed or other document at the time of the sale.” Id. at 349.

The reasoning behind the Citizens Court ruling was stated by the California Supreme Court as follows:

“No longer is there any reason to believe that the average American buying into a residential development would ‘protest vigorously against being compelled to perform promises he has never made. Since financial viability of the community depends on continued covenant compliance by all, the average buyer is more likely to protest if others in the development are permitted to escape performance of the covenants made by their predecessors…Having a single set of recorded restrictions that apply to the entire subdivision would also no doubt fulfill the intent, expectations, and wishes of the parties and community as a whole.” Id. at 364.

If you are a homeowner subject to a CC&Rs and have enforcement issues, contact one of our Los Angeles HOA Dispute Attorneys today for a free consultation and case evaluation.

Land Use Restrictions – Equitable Servitudes Defined Under CA Law

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An equitable servitude arises where one or more of the requirements of a covenant running with the land are not met, but the following conditions are met: (1) the subsequent owner of the servient estate has notice of the covenant; (2) the holder of the servitude is seeking equitable relief only (as opposed to a remedy at law); and (3) it is inequitable to deny the enforcement of the servitude. See In re Snow, 201 B.R. 968, 973 (C.D. Cal. 1996). The In re Snow Court relied upon the California Supreme Court’s holding under Nahrstedt v. Lakeside Village Condominium Association, (1994) 8 Cal. 4th 361, when it defined an equitable servitude under California law.

The In re Snow Court went on to state that “The chief requirement for an equitable servitude is that a successor, against whom enforcement is sought, have notice of the equitable interest at the time that the successor obtains an interest in the property. See In re Snow supra at 973.

If you are a homeowner and have land use enforcement issues, contact one of our Los Angeles Real Estate Attorneys today for a free consultation and case evaluation.

Things To Know Prior To Recording A Lis Pendes

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The filing and recording of a lis pendens is often times a civil mechanism used in real property disputes. Before filing a lis pendens, a litigant should understand his/her burden of proof if and when the lis pendens is challenged by an opponent. Opponents to a lis pendens will file a Motion To Expunge the Lis Pendens and should they prevail, they may be entitled to attorney fees. Thus, the filing and recording of a lis pendens is not without consequence.

A court will not expunge a lis pendens if the filer can prove, by a preponderance of the evidence, the probable validity of their real property claim. See C.C.P. § 405.32. “Probable Validity” “with respect to a real property claim, means that it is more likely than not that the claimant will obtain a judgment against the defendant on the claim.” See C.C.P. § 405.3. Thus, a real property claim should be carefully scrutinized for its probable validity prior to the filing and recording of a lis pendens.

If you have questions regarding a real estate matter, contact one of our Los Angeles Real Estate Attorneys for a free consultation and case evaluation.

Security Deposits As Liquidated Damages

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Cal. Civ. Code § 1671 governs liquidated damages in a contract for real property (i.e., a residential or commercial lease) and states in pertinent part: “a provision in a contract liquidating damages for the breach of the contract is void except that the parties to such a contract may agree therein upon an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage.” (Emphasis added.) Cal. Civ. Code § 1950.5 governs security deposits and provides for the manner with which a landlord may apply a security deposit. A reasonable interpretation of both statutes would suggest that a liquidated damages provision may be added to a lease agreement in contemplation of potential damages or a breach wherein the scope and amount of resulting damage cannot be reasonably anticipated by the contracting parties. Thus, a liquidated damages provision triggered by a repair related breach may not be enforceable if the cost or amount of repair is readily anticipated by the contracting parties upon execution.

If you are a Landlord in Los Angeles and have a Residential or Commercial Lease inquiry, contact one of our Los Angeles Real Estate Attorneys today for a free consultation and case evaluation.