Tag: Commercial Lease Attorney Los Angeles; Los Angeles Commercial Lease Lawyer; Commercial Lease Landlord Attorney; Commercial Eviction Attorney Los Angeles

Commercial Landlords and Tenants in Los Angeles are often times faced with the issue of understanding their rights with respect to fixtures, personal property and the disposition thereof at the end of the lease term, or upon eviction or surrender. There is no bright line rule with respect to fixtures. Moreover, there has been 100 years of case law and precedence dealing with trade fixtures in California, which has shaped and framed the issues that Commercial Landlords and Tenants in Los Angeles must be mindful of when addressing the fixture issue in the commercial lease.

Landlords and Tenants must keep in mind that the law on trade fixtures provides an approach with respect dealing with trade fixtures but not to the exclusion of lease provisions that specifically deal with trade fixtures. As stated below, intent is the most prevalent factor in trade fixture issues. Accordingly, Commercial Landlords and Tenants would be best served with identifying trade fixtures and addressing the disposition of said fixtures at the end of the lease term, with lease provisions whether implemented at the start of the lease term or via lease addendum/amendment during the lease.

California Law regarding Trade Fixtures:

Fixtures are part of the land under California law. See Cal. Civ. Code § 658. A fixture is defined as the following:

“A thing is deemed to be affixed to land when it is attached to it by roots, as in the case of trees, vines, or shrubs; or imbedded in it, as in the case of walls; or permanently resting upon it, as in the case of buildings; or permanently attached to what is thus permanent, as by means of cement, plaster, nails, bolts, or screws; except that for the purposes of sale, emblements, industrial growing crops and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sale, shall be treated as goods and be governed by the provisions of the title of this code regulating the sales of goods.”

The statutory test for determining whether an item is a fixture is found in Cal. Civ. Code § 1013:

“When a person affixes his property to the land of another, without an agreement permitting him to remove it, the thing affixed, except as otherwise provided in this chapter, belongs to the owner of the land, unless he chooses to require the former to remove it or the former elects to exercise the right of removal provided for in Section 1013.5 of this chapter.” See Cal. Civ. Code § 1013

Right of removal; payment of damages. When any person, acting in good faith and erroneously believing because of a mistake either of law or fact that he has a right to do so, affixes improvements to the land of another, such person, or his successor in interest, shall have the right to remove such improvements upon payment, as their interests shall appear, to the owner of the land, and any other person having any interest therein who acquired such interest for value after the commencement of the work of improvement and in reliance thereon, of all their damages proximately resulting from the affixing and removal of such improvements. See Cal. Civ. Code 1013.5

See also Cal. Civ. Code § 1025 – “When things belonging to different owners have been united so as to form a single thing, and cannot be separated without injury, the whole belongs to the owner of the thing which forms the principal part; who must, however, reimburse the value of the residue to the other owner, or surrender the whole to him.”

California courts will look at other factors when determining what is a fixture including:

1. The manner in which the item is annexed to the underlying realty. See Rinaldi v. Goller, (1957) 48 Cal.2d 276, 280

2. Its adaptability to the use and purpose for which the realty is used. See Rinaldi v. Goller, (1957) 48 Cal.2d 276, 280

3. The intention of the party annexing the item. See Rinaldi v. Goller, (1957) 48 Cal.2d 276, 280

4. The difficulty of removal of the item. See Pajaro Val. Bank v. Santa Cruz County, (1962) 207 Cal. App. 2d 621, 628

5. The destruction caused to the realty by its removal. See Pajaro Val. Bank v. Santa Cruz County, (1962) 207 Cal. App. 2d 621, 628

6. The relationship between the parties. (Landlord and Tenant) See O.L. Shafter Estate Co. v. Alvord, (1906) 2 Cal. App. 602, 604 (“Whatever the rule may have been at common law the modern decisions, both in this country and in England, in regard to the removal of fixtures, as between landlord and tenant, most liberally construe the right in favor of the tenant.”) Thus, California law seems to suggest strong equities exist in favor of the tenant in preventing the forfeiture of property that he or she has acquired and affixed in order to operate and use the demised premises.

Trade Fixtures Doctrine

When there is no specific agreement between the landlord and the tenant regarding the tenant’s right to remove fixtures affixed to the leased premises, forfeiture of the tenant’s improvements is prevented in some cases by the application of the “trade fixture” doctrine. “A tenant may remove from the demised premises, any time during the continuance of his term anything affixed thereto for purposes of trade, manufacture, ornament, or domestic use, if the removal can be affected without injury to the premises, unless the thing has, by the manner in which it is affixed, become an integral part of the premises. See Cal. Civ. Code § 1019

The tenant cannot remove fixtures and/or improvements in cases where the damage to the premises caused by a fixture’s removal cannot be repaired or money damages would not compensate the landlord for the loss. See Gordon v. Cohn, (1934) 220 Cal. 193, 195-96

A right to remove fixtures annexed to demised premises must be exercised within a limited period of time, or it is lost. See United Pac. Ins. Co. v. CAnn, (1954) 129 Cal. App. 2d 272, 275 (“We may take it as settled in California that a tenant who is given the right to remove fixtures at the end of his occupancy must exercise this right within a reasonable time thereafter.”) If the tenant does not remove the improvements within the appropriate time, any interest in the improvements is forfeited and they become the property of the landlord. Id. at 277. A tenant or other person who wrongfully removes a fixture or other improvement to the premises is liable for damages and may be criminally liable for theft or embezzlement. See Cal. Penal Code §§ 495, 501, 602.

Because the landlord is entitled to possession of the demised premises in a usable condition at the end of the lease term, if the tenant does not have an agreement allowing the removal of fixtures, all fixtures removable by a tenant by operation of law must be removed before the end of the term of the lease. See Cal. Civ. Code § 1019.

The true factor (if any one factor is emphasized) is the intent of the parties with respect to the particular item being deemed a fixture or an item of personal property. See Seatrain Terminals of California, Inc., v. County of Alameda, (1978) 83 Cal. App. 3d 69, 75 (“In resolving whether an article placed on the premises constitutes a fixture or personal property, the aforelisted three elements do not play equal parts. In making the determination in a particular case the element of intent is regarded as a crucial and overriding factor, with the other two criteria being considered only as subsidiary ingredients relevant to the determination of the intent. “) Whether an item has lost its characteristic as personal property and has become a fixture, is a question of fact for the trier of fact. Id. at 79 (“It is, of course, axiomatic that whether the property has lost its character as personalty and has become a fixture is primarily a question of fact to be determined by the trier of fact whose findings must be upheld on appeal where, as here, they are supported by sufficient evidence.”)

If you are a commercial landlord or tenant in Los Angeles and faced with a trade fixture issue, contact one of our Commercial Lease Attorneys in Los Angeles for a free consultation and case evaluation.

Cal. Civ. Code § 660 defines a fixture as “A thing is deemed to be affixed to land when it is attached to it by roots, as in the case of trees, vines, or shrubs; or imbedded in it, as in the case of walls; or permanently resting upon it, as in the case of buildings; or permanently attached to what is thus permanent, as by means of cement, plaster, nails, bolts, or screws; except that for the purposes of sale, emblements, industrial growing crops and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sale, shall be treated as goods and be governed by the provisions of the title of this code regulating the sales of goods.”

If the landlord and tenant do not have an agreement regarding the removal of fixtures, then under Cal. Civ. Code § 1013, then the thing affixed, belongs to the owner of the land, unless he chooses to require the tenant to remove it or the tenant elects to exercise the right of removal pursuant to Cal. Civ. Code § 1013.5. Section 1013.5 says a tenant retains the right to remove such improvements or fixtures so long as the landlord is compensated for any damages proximately resulting from the removal of the fixture.

Landlords and tenants are best advised to enter into an agreement regarding fixtures, additions, removals and the disposition of fixtures after the tenancy is terminated.

If you are a commercial landlord in Los Angeles and have a commercial lease inquiry, contact one of our Commercial Lease Attorneys in Los Angeles today for a free consultation and case evaluation.

Starting with Cal. Civ. Code § 1995.010, California has codified the rules with respect to a tenant’s transfer of interest in a commercial lease, i.e., an assignment or sublease. For purposes of the rules regarding assignments and subleases of commercial property, a “lease” would include a lease or sublease of real property for other than residential purposes, and includes modifications and other agreements affecting a lease. A “tenant” includes a subtenant or assignee. A “transfer” of a tenant’s interest includes an assignment, sublease, or other voluntary or involuntary transfer or encumbrance of all or part of a tenant’s interest in the lease, and a “restriction on transfers includes a provision in a lease that restricts the right of transfer of the tenant’s interest in the lease. See Cal. Civ. Code § 1995.020. These rules apply to all commercial leases except to leases with restrictions on transfers executed before September 23, 1983 wherein the lease does not provide a standard for a landlord giving or withholding consent. See Cal. Civ. Code § 1995.270.

Legislative Findings and Declarations:

Until the case of Kendall v. Ernest Pestana, Inc., 40 Cal.3d 488 (1985), and its predecessor, Cohen v. Ratinoff, 147 Cal.App.3d 321 (1983), the parties to commercial real property leases could reasonably rely on the law of the state to provide that if a lease restriction requires the landlord’s consent for transfer of the tenant’s interest in the lease but provides no standard for giving or withholding consent, the landlord’s consent may be unreasonably withheld. (Emphasis added.)

The California Legislature found that the Kendall and Cohen decisions reversed the law on which parties to commercial real property leases executed before September 23, 1983, the date of the Cohen decision, could reasonably rely, thereby frustrating the expectations of the parties, with the result of impairing commerce and economic development.

Restrictions on Transfers in a Commercial Lease:

Most commercial leases contain restrictions on the tenant’s ability to freely transfer or assign his/her/its interest in the lease. If the lease does not include a restriction on the tenant’s ability to transfer, then the tenant retains an unrestricted right to transfer the interest in the lease. See Cal. Civ. Code § 1995.210. Any ambiguity in a restriction on transfer of a tenant’s interest in a lease shall be construed in favor of transferability. See Cal. Civ. Code § 1995.220. A landlord may restrict a tenant’s right to transfer by absolutely prohibiting transfers. See Cal. Civ. Code § 1995.230.

Standards, Conditions and Consent:

A restriction on transfer of a tenant’s interest in a lease may provide that the transfer is subject to any express standard or condition, including, but not limited to, a provision that the landlord is entitled to some or all of any consideration the tenant receives from a transferee in excess of the rent under the lease. See Cal. Civ. Code § 1995.240.

A restriction on transfer of a tenant’s interest in a lease may require the landlord’s consent for transfer subject to any express standard or condition for giving or withholding consent, including, but not limited to, either of the following: (a) The landlord’s consent may not be unreasonably withheld. (b) The landlord’s consent may be withheld subject to express standards or conditions. See Cal. Civ. Code § 1995.250.

Tenant’s Burden Of Proof For Unreasonably Withholding Consent:

If a restriction on transfer of the tenant’s interest in a lease requires the landlord’s consent for transfer but provides no standard for giving or withholding consent, the restriction on transfer shall be construed to include an implied standard that the landlord’s consent may not be unreasonably withheld. Whether the landlord’s consent has been unreasonably withheld in a particular case is a question of fact on which the tenant has the burden of proof. The tenant may satisfy the burden of proof by showing that, in response to the tenant’s written request for a statement of reasons for withholding consent, the landlord has failed, within a reasonable time, to state in writing a reasonable objection to the transfer. See Cal. Civ. Code § 1995.260.

Tenant Remedies For Unreasonable Withholding Of Consent:

Restrictions – A remedy provided by law for violation of the rights of the tenant or of the landlord concerning transfer of a tenant’s interest in a lease, including a remedy provided in this article, is (a) subject to an express provision in the lease that affects the remedy and (b) subject to any applicable defense, whether legal or equitable, including, but not limited to, waiver and estoppel. See Cal. Civ. Code § 1995.300.

Remedies – If a restriction on transfer of a tenant’s interest in a lease requires the landlord’s consent for transfer subject to an express or implied standard that the landlord’s consent may not be unreasonably withheld, and the landlord unreasonably withholds consent to a transfer in violation of the tenant’s rights under the lease, in addition to any other remedies provided by law for breach of a lease, the tenant has all the remedies provided for breach of contract, including, but not limited to, either or both of the following: (a) The right to contract damages caused by the landlord’s breach; and (b) The right to terminate the lease. See Cal. Civ. Code § 1995.310.

If you have questions regarding your Commercial Lease, contact one of our Los Angeles Commercial Lease Attorneys for a free consultation and case evaluation.

Landlords in Los Angeles renting units subject to LA’s Rent Stabilization Ordinance are required to pay interest on all security deposits held for at least one year. See L.A.M.C. § 151.06.02. Although state law does not require the payment of interest payments on security deposits, local rent ordinances do.

To determine the interest rate, landlords may simply refer to the Rent Adjustment Commission’s (RAC) established annual rate of interest which is published by LAHD. The interest rate set by the RAC for 2013 is 0.15%. During the tenancy, landlords may choose to pay out the interest either monthly or annually in the form of either a direct payment or a credit against rent. Landlords must notify the tenant in writing of their choice. Upon termination of the tenancy, payment must be made at the same time as required for the return of the security deposit pursuant to Cal. Civ. Code § 1950.5.

Keep in mind that only rental units subject to LA’s rent stabilization ordinance must pay interest on security deposits. Jurisdictions not subject to LA’s rent stabilization ordinance are not obligated to pay interest. See Korens v. R.W. Zukin Corp., (1989) 212 Cal.App.3d 1054 (There is no obligation implied by law for a landlord to pay interest on a tenant’s security deposit.)

If you have a question regarding your tenant’s security deposit, contact one of our Los Angeles Landlord/Tenant Attorneys for a free consultation and case evaluation.

Proposition D, which proposed to limit the number of “medical marijuana businesses” to no more than 135 that have operated since September 2007, passed and has been voted into law. What this means for numerous dispensaries in and around Los Angeles is that they are now presumably operating illegally and their commercial landlords may be contemplating terminating the lease and initiating evictions.

It’s common knowledge that marijuana is still an illegal drug as far as the Federal Government is concerned and the sale and/or distribution of marijuana is a federal crime. Additionally, most standard commercial leases (AIR Form and CAR form) contain language expressly stating that the tenant “accepts the Premises subject to all local, state and federal laws, regulations and ordinances” and that the tenant agrees not to us the Premises “for any unlawful purposes….”

However, when the use of the Premises is expressly stated as a “California Medical Marijuana Dispensary”, landlord and tenant may find themselves in a conflict between the intended purpose of the commercial lease and the lease’s boilerplate provisions regarding local, state and federal laws.

Furthermore, medical marijuana dispensary operators are seeing an increase in the enforcement activities by local and federal law enforcement. In the recent weeks, letters have gone out to dispensaries in Los Angeles requesting the immediate closure of medical marijuana dispensaries, putting a lot of pressure on commercial landlords.

The question for commercial landlords with medical marijuana dispensary tenants then becomes, what is the appropriate course of conduct in completing an eviction under these circumstances. C.C.P. § 1161(4) provides the authority for a landlord to terminate a tenancy wherein the premises is used for an “unlawful purpose.” Presumably, a medical marijuana dispensary, not one of the 135 contemplated by Proposition D, would fall under this category. The next question for the landlord is, how much of a notice period would the tenant be entitled to. (e.g., 3-day, 30-day, etc.)

A landlord may argue that a 3-day notice to cure or quit the premises is sufficient since there are clear violations of local, state and federal laws. However, if the commercial lease expressly states that the use is for a medical marijuana dispensary, a landlord will be hard pressed to argue that the eviction action is based on a breach of covenant as contemplated by C.C.P. § 1161(4). Moreover, a tenant may argue that the intended purpose of the landlord’s eviction action is simply to terminate the lease as all parties may have been aware of the legal issues with operating a dispensary.

Cal. Civ. Code § 1946 mandates a 30 day notice prior to the termination of a commercial lease if the termination is sought prior to the natural expiration of the contract. Even if the lease has not expired, a commercial landlord likely would prevail evicting his/her medical marijuana dispensary tenant upon a 30 day notice of termination given that Proposition D now makes illegal what federal law has always deemed illegal.

Thus, commercial landlords with medical marijuana dispensary tenants may consider initiating an eviction action pursuant to a 30 day notice of termination of tenancy under Cal. Civ. Code § 1946 in order to eliminate potential defenses claiming a defective notice.

If you are a commercial landlord or if you are a commercial tenant facing an eviction, contact one of our commercial lease attorneys today for a free consultation and case evaluation.

It is common place for tenants being evicted to seek legal help from the numerous organizations offering qualifying tenants with free legal representation in contesting or fighting their eviction.  Public Counsel, The Inner City Law Center and Legal Aid, are some of the organizations that offer tenanct eviction defense in Los Angeles.  Our Eviction Attorneys in Los Angeles have faced these tenant rights attorneys on numerous occasions.  When faced with a tenant’s rights attorney, landlords can typically expect the tenant to request and demand a jury trial.  Even though jury trials cost money, tenants may seek a jury fee waiver upon submitting a form and bypass the requirement to pay jury costs.  The net result is that a landlord now faces the prospect of putting on their case, as solid as may be, in front of a jury.  Thus, a landlord facing a jury trial for a Los Angeles eviction must prepare jury instructions, a trial brief, a statement of the case, a verdict form, a witness list and an exhibit list.  Without a jury trial, these documents are not required as a judge will hear your case without all the jury trial documents listed above.  As far as our eviction attorneys can tell, these jury trial demands are made to increase a tenant’s leverage in settling the case.  Landlords must be prepared however, to face a jury trial and be ready for a jury trial.

Commercial Landlords in Los Angeles who incorporate restrictions on a tenant’s ability to transfer or assign the commercial lease subject to the landlord’s consent wherein the standard that the landlord’s consent may not be unreasonably withheld, must be aware that a finding that consent was “unreasonably” withheld will give rise to the tenant’s right to bring an action against the landlord for contract damages or give the tenant the right to terminate the lease. See Cal. Civ. Code § 1995.310.

In addition to said contract damages for the unreasonable withholding of consent, a landlord may be faced with tort claims by a tenant such as tortious interference with prospective economic advantage or trespass. The reasonableness of withholding consent would necessarily be a question of fact for a fact finder to decide. Thus, commercial landlords are advised to objectively scrutinize their reasons for withholding consent on an assignment or sublease. If you are a commercial landlord and have a lease dispute, contact one of our Commercial Lease Attorneys in Los Angeles for a free consultation and case review.

Landlords, whether commercial or residential, should include in their written lease agreements, the covenant requiring a tenant or lessee to obtain a landlord’s express written consent before a sublease. Often times, this provision and operation is overlooked by landlords because the rent continues to be paid. However, without the express written consent of the landlord, a sublease would constitute a breach. See Boston Properties v. Pirelli Tire Corp., (1982) 134 Cal. App. 3d 985, 992. The question our Los Angeles Eviction Attorneys are often faced with is whether the landlord, with knowledge of the unauthorized sublease, but without written consent, would nevertheless be held to have waived the express covenant in the lease. Particularly, this issue may be problematic for landlords of residential leases subject to rent control rules which limit an eviction to “for cause” reasons (i.e., failure to pay rent.)

A waiver defense would be brought by the tenant subletting in an eviction trial and a factual finding could be made as to a waiver by the landlord with respect to the subletting tenant he/she had knowledge of. Subsequent unauthorized tenants would again need the express written consent of the landlord. Essentially, a landlord waiving his/her right to expressly approve a sublease once, does not discharge the express covenant in the lease going forward.

If you have a landlord tenant dispute, talk to one of our Los Angeles Eviction Attorneys today.

Commercial Landlords serving Notices to Pay or Quit on their commercial tenants that include portions of rent or payment demanded based on estimated numbers (i.e., property tax or CAM charges) must clearly identify those figures as “ESTIMATES.” Failure to do so may subject your notice to heightened judicial scrutiny at trial and risk losing a judgment to the tenant.

Cal. Civ. Code § 1161.1(a) states in pertinent part: “If the amount stated in the notice provided to the tenant pursuant to subdivision (2) of Section 1161 is clearly identified by the notice as an estimate and the amount claimed is not in fact correct, but it is determined upon the trial or other judicial determination that rent was owing, and the amount claimed in the notice was reasonably estimated, the tenant shall be subject to judgment for possession and the actual amount of rent and other sums found to be due.” Thus, any figure included in the Notice and Demand to Pay Rent or Quit that is an estimate must be clearly identified in the notice as an estimate. See also WDT-Winchester v. Nilsson, (1994) 27 Cal. App.4th 516, 526.

Under well settled California law, unlawful detainer statutes are to be strictly construed and relief not statutorily authorized may not be given due to the summary nature of the proceedings. See WDT supra at 526. In other words, if a landlord fails to comply with the notice provisions, for example, judgment may be given to the tenant on those technical grounds alone.

Commercial landlords who invoke the summary procedures of unlawful detainer must strictly comply with the notice requirements of the statute under which he/she elects to proceed.

Our Los Angeles Commercial Lease Attorneys were recently asked to analyze and determine whether portions of a commercial lease security deposit could be applied to future rent damages in the event of a breach of lease or eviction wherein the commercial tenancy is terminated prior to the running of the lease. California Civil Code § 1950.7 governs the disposition of commercial lease security deposits.

Section 1950.7(c) states that “The landlord may claim of the payment or deposit only those amounts as are reasonably necessary to remedy tenant defaults in the payment of rent, to repair damages to the premises caused by the tenant, or to clean the premises upon termination of the tenancy, if the payment or deposit is made for any or all of those specific purposes.” Sections 1950.7(c)(1)-(2) further limit the disposition of the security deposit in the event of a breach or default to one month’s rent plus an amount clearly described by the security deposit provision in the commercial lease as payment of the last month’s rent.

The security deposit, as governed by Section 1950.7, cannot be applied to future rent damages as a matter of California law. See 250 L.L.C. v. Photopoint Corp. (USA), (2005) 131 Cal. App. 4th 703, 728. The Photopoint Court held that application by the Landlord of the security deposit to future rent damages would enable a landlord to profit from its violation of Section 1950.7. Thus, California courts will not allow a commercial landlord to use a security deposit toward future rent damages.

If you have questions regarding these commercial lease issues, don’t hesitate to contact our Commercial Lease Attorneys for a free consultation. 888-693-5556.