Foreclosure Proceedings: Does the Fair Debt Collection Practices Act Apply?

The intent of the Fair Debt Collection Practices Act (“FDCPA”), enacted in 1978, is to protect consumers from unfair or abusive debt collection tactics. The Act sets forth clear standards which debt collectors must follow and establishes rights of the consumer with regard to these communications and procedures. However, as recently determined by the US Court of Appeals for the Ninth Circuit, the FDCPA does not apply to foreclosure proceedings.

In Barnes vs Routh Crabtree Olsen P.C., the borrower filed a complaint in federal court alleging that the mortgage loan owner, loan servicer, and attorneys violated the FDCPA by failing to make required disclosures and then proceeding with illegal foreclosure actions. The court ruled in the loan owner’s favor, and that ruling was later upheld in appeal.

The decision came down to definitions of “debt collection” and “debt collector.” The Ninth Circuit noted, “[t]he crux of the parties’ dispute is whether the defendants’ pursuit of judicial foreclosure was a form of debt collection.” It then explained that the FDCPA’s definition of “debt” boiled down to “a consumer’s obligation to ‘pay money.’”

With regard to the definition of a “debt collector,” the Court found that “since the FDCPA defines ‘debt collector’ as someone ‘who regularly collects or attempts to collect … debts owed or due or asserted to be owed or due another[,] … an entity that collects a debt owed itself—even a debt acquired after default—does not qualify under this definition.”

As the Court reminds us, the FDCPA is designed to regulate those whose principal business is debt collection with regard to money owed by a consumer to a third party. By contrast, the enforcement of a security interest – such as a mortgage – does not qualify as an attempt to collect money from a debtor.

The borrower argued that the loan owner “crossed the line into debt collection by including in its foreclosure complaint a request for a money award.” However, the Court rejected that reasoning, saying that the request “served simply to identify the amount of the debt secured by the property, which authorized a sheriff’s sale to discharge that liability in the same manner as for a typical judgment debtor.”

In conclusion, the Court affirmed that “[a] judicial foreclosure proceeding is not a form of debt collection when the proceeding does not include a request for a deficiency judgment or some other effort to recover the remaining debt.”

For more information on foreclosure proceedings, contact the real estate attorneys at Larson & Solecki LLP.

Sellers: Why Full Disclosure is Critical

A Seller’s Worst Nightmare

Once a seller has closed escrow and possession has been provided to the buyer, the last thing the seller wants to do is  revisit the sale. This might come some time later through a claim for damages by the buyer. In order to reduce the chance of claims from a buyer, the single most important action a seller can take during escrow is to properly disclose any issues with the home. A significant majority of transaction-related lawsuits are filed by buyers against sellers alleging that the sellers failed to disclose. For example, a buyer might say, “You did not tell us about the leak that you had in the master bathroom that flooded the downstairs.” The ounce of prevention that will avoid this situation is extremely simple – use the disclosure forms provided by your real estate agent to fully and properly disclose anything that might reasonably affect the value or desirability of your property. That last statement, by the way, is the legal standard that governs disclosures.

Why Sellers Do Not Like To Disclose

Typically, a failure to disclose lawsuit occurs because the seller did not advise the buyer of some facts that turn up later as expensive repair items for the buyer. Why does a seller not tell a buyer of the defects in their property? Usually it is because they believe that if they tell, the buyers will not purchase their property. That belief is simply wrong most of the time. Experience shows that most buyers will come to terms with a “defect” issue disclosed during escrow, especially if the matter is disclosed up front when they are most excited about their purchase. In those cases where the buyers do elect to cancel, the sellers should be thankful, not upset, because the buyers absolutely would have found out eventually, when money that they would have invested in new carpet, for example, instead goes to fix the defect. At that point the buyers’ disappointment turns to resentment against the sellers and they have no other recourse but to make a claim against the sellers. Given the costs that are typically necessary to defend a claim, the sellers’ proceeds from the sale are quickly swallowed up by mediation, arbitration and/or litigation costs, which quickly turn into many thousands of dollars – the legal process is designed to be expensive!

Disclosure: The Best Insurance against Future Claims
Full disclosure is, in reality, the cheapest form of lawsuit insurance for a seller as it costs nothing. Under California law, sellers are required to disclose anything that might reasonably be an issue affecting the value or desirability of the home. Sellers should not try to decide what is and isn’t important, because the standard is not what is important to them. Instead, a seller should disclose everything that the seller knows about the property. Sellers should think of each individual bit of disclosed information like a lawsuit inoculation against stressful and expensive litigation related to that disclosed fact. It is one less thing for buyers to later complain about. Sellers should be especially careful to disclose a condition even though they might believe it has been “fixed.” It is amazing how many problems that have been “fixed” end up breaking again a month or so after the close of escrow. Disclosure of an old “fixed” problem typically has absolutely no effect on the sale as it is usually viewed by the buyers as one less problem to be concerned with. If an undisclosed “fixed” problem is discovered after the fact, however, when the “fix” breaks, the buyers often believe that the sellers were intentionally hiding things and hard feelings and a dispute almost always result.

A Simple Rule
Sellers, ask yourselves the question, “Do I want to disclose this?” If the answer is no, you should disclose it. Think about it: why would you not want to disclose unless you believe that disclosure of the information would hurt the chance of a sale? Follow this simple rule – disclose, disclose, disclose – and you will have done everything possible to eliminate the chance that you will ever be a defendant in a lawsuit over the sale of your property.

Commercial Landlords and the Pandemic

As the pandemic hit, the government ordered businesses to close. Now, as businesses start to reopen, restrictions are in place. Tenants stopped paying rent under their leases due to the impacts of COVID-19. In many cases this caused financial hardship to landlords. While the tenants remain liable for the missed rental payments, it may be in everyone’s best interest to pursue a mutually acceptable agreement to ensure that the tenants can continue their business. It is important that commercial landlords do the following before entering into an agreement with the tenant.

Review of Lease. You should review the lease terms related to the payment of rent, force majeure, late charge, interest on late payments, continuous operations, inducement recapture, security deposits, and notice requirements.

Impact of Potential Vacancy. If rent relief is not provided and the tenant eventually goes out of business, how will the vacancy affect you, including the ability to pay any mortgage on the property? Will it be difficult to lease the property to a new tenant?

Verification of Tenant’s Financial Condition. Ask the tenant how the pandemic is affecting their business, including financial documentation (if available) to support the tenant’s claims. Most leases provide that the landlord can request financial information from the tenant, and tenants should be compliant with such a request.

Landlord Defaults. Finally, make sure that you, the landlord, have complied with all terms of the lease. A landlord default may provide the tenant with a basis for not paying the rent and/or terminating the lease.

Rent Relief Alternatives. Under the law you do not have to provide the tenant with rent credit or abatement. You only have to allow a deferral of the rent until a later time. But carefully consider the financial impact of losing the tenant. This includes having the property vacant and the cost of finding a replacement tenant. You may agree to defer some of the rent while at the same time, offer rent abatement or a short term rent reduction so that you can retain a tenant who up until the pandemic had been a good tenant.

Lease Modifications. If you do reach an agreement with your tenant, make sure that you confirm that agreement with a written lease amendment so that there are no future misunderstandings.
The bottom line is, an occupied property with a known tenant is always better than a vacant property, even if you have to give up a little financially. If you have questions, check with counsel to make sure that you fully understand your rights. Plus, document properly the results of any negotiations with a tenant.

Notarization in a COVID-19 World and in the State of California

Many documents require a notary. Trusts, powers of attorney, loan documents, and deeds are a few examples. But during a global pandemic, how does one safely get documents notarized? This question is being asked a lot lately. Unfortunately, there is a lot of misinformation out there regarding online notarization. And despite what you might have heard or seen, California still requires in-person notarization.

In the midst of the coronavirus and state-wide stay at home orders, companies, estate planners, lenders, and the general public are struggling to close transactions. A big roadblock is the difficulty and potential danger of getting documents notarized. As most know, notarization is the official fraud-deterrent process that assures the parties to a transaction that a document (or at least the signature on the document) is authentic and can be trusted. It is three-part process performed by a notary public, and includes vetting, certifying and record-keeping. In California, it requires an in-person meeting and close contact.

Currently, California law does not provide the authority for California notaries to perform a remote online notarization (RON). The personal appearance of the document signer is required before the notary public. Notaries in California are considered essential workers, and in-person notarization is still possible during the current state-wide stay at home order.

As of the end of March, 23 states have enacted RON laws, and 17 are currently in effect. In some states, RON services are currently permitted by an emergency guidance or executive order. In early April a coalition of trade associations led by the California Land Title Association sent a letter to Governor Newsom requesting the issuance of an executive order expressly providing or affirming that California law recognizes the validity of documents legally remotely notarized outside the state.

The letter notes that, by allowing Californians to utilize RON services, real estate transactions and projects such as refinances and home construction could be completed in compliance with state and county shelter-in-place orders. The letter also points out that the order would codify written guidance recently issued by the California Secretary of State in communications to the National Notary Association.

In addition to the current push to have Governor Newsom issue an emergency guidance or executive order, in January of 2019, well before the uncertainly and disruption caused by the coronavirus pandemic, AB-199 was introduced. AB-199, also known as the California Online Notary Act of 2019, would have authorized remote online notarization in California by permitting an online notary to conduct a notarial act using secure two-way interactive audio and video communication. If enacted, the online notary must be approved by the Secretary of State after undergoing specialized training and testing. The Secretary of State would be directed to draft regulations to implement the law and develop data and technology-neutral standards. Additionally, this technology will require the signer’s presentation of a photo ID, credential analysis, and identity proofing. Unfortunately, AB-199 is currently a dead bill, and as of February of 2020 the bill was filed with the Chief Clerk and is awaiting further action.

So, what is the best practice without RON services in California?

  • First, don’t be fooled by notaries offering online or skype notarization. California notaries are not authorized to offer RON services of any type. Further, out-of-state notaries performing RON services for California persons or documents governed by California law are not currently legally recognized as a valid notarization.
  • We recommend utilizing the services of a mobile or in-house notary who is practicing and utilizing social distancing as much as possible, uses single use pens, and wears gloves and a mask. Further, we recommend that you ask questions before making an appointment with a notary to ensure that all the necessary and reasonable precautions will be performed.
  • For a single document, we also recommend that you use the services of a local in-house notary at a bank or mail and packaging business, like a UPS Store or a Mailboxes, Etc. These business are already open, considered essential and generally have social distancing measure in place.
  • Finally, bring your own pen, wear a mask and gloves and do not have documents notarized if you or anyone in your home are showing the symptoms of illness.

Last but not least, be safe and stay well.

Selling a Home in the Time of COVID

If you think you can’t sell a home right now because of COVID-19, you should reconsider your thinking. Real estate is deemed an essential service. That means that people are still buying and selling real property in California. The reality is that transactions are still occurring. But the way the real estate business is conducted has radically changed, at least for the foreseeable future. Those familiar open house signs on the weekend are gone. A buyer can’t just go to a listed property. There are specific rules in place which must be adhered to. But, viewing and buying a home can still happen, and there are agents out there to help you with that process.

Realtors have adjusted to the new market by utilizing drones more often for photographs, holding virtual open houses, and making full use of virtual tours. Listing presentations can be emailed and viewed by the potential client in their own home at their leisure. This provides the client more time to consider the services that the realtor can provide. Realtors can get together with other Realtors for virtual caravans to showcase their listings and buyer needs. It is more likely you will get more people at an 8:00 am virtual meeting than you will an 8:00 am meeting in a public space. This might mean greater exposure of a property for the seller.

There are safeguards in place to protect buyers and sellers in this new environment.

1. Disclosures should be completed regarding anyone in the house or coming to the house who may have been exposed to COVID-19.

2. There will be assurances that the property has been cleaned and/or disinfected before and after any showings.

3. Persons entering a property should wear masks, gloves, and booties to assure that the property remains as clean as possible and dispose of them immediately.

4. Before a showing the seller or listing agent should open up interior doors so as to minimize the amount of contact that a potential buyer will have with the property.

Once you’ve received that perfect offer, you can open escrow virtually, use electronic signatures for most of the documents and mobile notaries for any other documents. Escrow and title companies are working to assure that you have a smooth and safe transaction while maintaining social distance.

While it may seem odd to sell a house without a lot of personal contact, it is possible. Further, it can actually be an enjoyable process because you are working within your own relaxing environment. Your realtor is only an email, text, or phone call away at any time to answer your questions.

San Diego is a strong real estate market. It may be even stronger when the economy bounces back. Think about exploring the opportunities now, while others may be too afraid or preoccupied to look for a home.

Written by Victoria Boynton

How Buyers and Sellers Should Approach Repairs During a Home Sale

Buyer’s Request for Repairs

You finally found the home to buy, are in escrow, and have completed your home inspection. The home inspection lists pages of items which may need repair and/or replacement. So now what?

As a buyer you may want to send the entire home inspection report to the seller and request that the seller fix everything. But before you do that, remember the following:

1. Houses in California are sold in “as-is” condition. That means that the buyer takes the property in the condition that it is in when the buyer makes the offer to purchase. A seller is under no obligation to fix anything (or technically even respond to your request), nor are repairs a contingency under the contract.

2. Home inspectors point out all the flaws in the property, some of which are an inexpensive quick fix or are just old and may require fixing in the future.

3. Most sellers are living in the home and aren’t bothered by some of the minor issues brought out in the home inspection report. They may be insulted by a large repair request, causing them to refuse to do any repairs.

So what do you do? Look carefully at the home inspection. Identify those items which are deal breakers for you. For example, if the kitchen faucet is old and drips but there is a hole in the roof, request that the roof be repaired, vs. the faucet. Keep your repair requests reasonable. That should not overwhelm the seller who will be more likely to agree to some if not all of your requests.

Real estate agents will often suggest requesting a lump sum of money as a credit instead of asking for a list of repairs. You get to oversee your own repairs instead of relying on someone who is about to vacate the home to repair them, and you may be able to stretch the repair dollars further. It is just an option to consider.

Remember, you are buying a home that is “used.” You should expect that there will be flaws. Make sure that you are aware of those flaws and can live with them.

Seller’s Response to Request for Repairs

Your family home is in escrow. You are looking forward to closing the sale. The buyer has done a home inspection. The buyer then sends you a copy of the inspection report requesting that you complete all of the recommended repairs.

Before you get angry and refuse to do any repairs, pointing out to your agent that the home was sold in “as-is” condition, take a breath. Look at what the buyer is requesting. While a seller is not obligated to make any repairs for the buyer, and it is not a contingency of the sale, going through the request for repairs is a wise thing to do. Then decide what, if any, repairs you are willing to make. This can help keep the transaction moving forward to close of escrow.

If you as the seller want to make repairs or hire someone to effectuate those repairs, you can. But often times the better route is to provide the buyer with a credit through escrow for those repairs. Why would you want to credit the buyer instead of making repairs? The answer is simple: if you don’t do the repairs or hire someone else to do the repairs, you have minimized your liability for the repairs should they not be completed to the satisfaction of the buyer. The buyer gets a credit for the repairs and takes on all of the responsibility for the repairs.

As the seller, you know your home and have lived with the flaws. But a buyer is not always willing to take on those issues. By keeping an open mind and working with the buyer, you can probably reach a mutually acceptable agreement for repairs — or credit — so that everyone is happy with the home.

This content is not to be construed as legal advice, and given that some information can become outdated, no representations are made that the content is error-free. The content and interpretation of the law addressed herein is subject to revision. We disclaim all liability in respect to actions taken or not taken based on any or all the contents of this site to the fullest extent permitted by law. Do not act or refrain from acting upon this information without seeking professional legal counsel.

Mortgage Relief for Homeowners in the Coronavirus World: Facts and Fiction

As we all grapple with the financial effects of the global coronavirus pandemic, many homeowners are reasonably concerned about their ability to pay monthly bills. The U.S. faces mass layoffs and business closures. For most Americans, their personal residence is their most valuable asset and largest liability. With so much uncertainty regarding how and when Americans can go back to their normal lives, we just don’t know what the lasting financial effect will be, both globally and individually. Below we set forth the current landscape as it relates to mortgage relief for homeowners in the coronavirus world.

Federal officials have imposed a nationwide halt to foreclosures and evictions for the more than 30 million Americans with home mortgages that are backed by the Federal Housing Administration (“FHA”), or the two government-controlled companies, Fannie Mae and Freddie Mac. The moratoriums will last until mid-May, but could be extended beyond that date.

However, not all home mortgages are covered by the federal moratoriums. In fact, more than five million homeowners currently have mortgages that are not backed by the government.

Federally Insured Mortgages

On March 27th President Donald Trump signed the CAREs Act, which among other things, provides mortgage relief options for homeowners with FHA insured mortgages who have been impacted by COVID-19. The U.S. Department of Housing and Urban Development (“HUD”) has provided that, effective immediately, mortgage servicers must extend deferred or reduced mortgage payment options for up to six months, and must also provide an additional six months of forbearance if requested by the borrower.

Under the new guidance, the FHA has also implemented the COVID-19 National Emergency Partial Claim, an option to be used by loan servicers when the COVID-19 forbearance period ends. This program will help eligible homeowners who have been granted a forbearance to reinstate their loans by allowing the servicers to advance funds on behalf of homeowners. The funds will be advanced through an interest-free “subordinated mortgage” that the borrower does not have to pay until their first mortgage is paid off.

The current HUD guidance and foreclosure moratorium applies to single-family homes backed by the FHA, Fannie Mae and Freddie Mac. There are currently about 8.1 million active FHA backed loans, and Fannie Mae and Freddie Mac cover about half of the country’s mortgages, or an estimated 28 million borrowers.

All claims for reduction, deferral or forbearance under FHA, Fannie Mae or Freddie Mac backed loans will be handled by the mortgage servicers. Servicers of these federally back loans have been ordered to provide relief.

While most servicers will allow borrowers to apply for relief online with a few clicks and little to no financial information, keep in mind that the loan servicing industry is dealing with the same issues as the rest of the country. Servicer employees are working from home with reduced staffs, and are practicing social distancing. Most relief programs are typically approved within 10 days. Our best advice is to start online, rather than calling your servicer.

Homeowners can determine whether their loan(s) are backed by either Fannie Mae or Freddie Mac on their websites, or by clicking on the links below.

Fannie Mae: https://www.knowyouroptions.com/loanlookup

Freddie Mac: https://ww3.freddiemac.com/loanlookup/

Non-Federally Insured Mortgages

For loans not backed federally the type of relief that is available to a homeowner depends on who owns the loan. California Governor Gavin Newsom recently announced that the nation’s largest banks, including JPMorgan Chase and Wells Fargo, have voluntarily agreed to temporarily suspend residential mortgage payments for people affected by the coronavirus in the state for 90 days.

However, not all banks have agreed to do the same. For example, Bank of America has declined to sign on with the other large banks, and instead will offer mortgage relief on a case-by-case, month-by-month basis.

For non-federally backed loans, mortgages servicers are expected to allow millions of borrowers affected by the crisis to skip some mortgage payments. Still, the money will have to be paid back. It’s important to think of a deferral or a forbearance as a new or second loan — not a gift.

While it is still unclear how, when, and in what form these “new” loans will need to be repaid, some borrowers will be required to repay the entire past due amount all at once, or over several months. Currently, there is a push by regulators to encourage banks to simply extend the length of the mortgage rather than requiring them to catch up in a short period of time.

All deferral and repayment arrangements must be made through your loan servicer. We have anecdotal evidence from the experiences of some borrowers that much like with federally backed loans, servicers will allow borrowers to apply for relief online with a few clicks and little to no financial information.

Finally, once you receive your forbearance or deferral agreement, read the fine print. Make sure you understand your obligations, the timing of repayment, and any follow up you must do to ensure your loan stays current, even if temporarily deferred.

We are open and our real estate attorneys are available to assist you with remote appointments to answer any questions or to review deferral agreements once received.

How to Refresh Your (Real Estate) Business When Times Are Slow: Tips for Real Estate Agents

When business is slow, such as during the current COVID-19 stand-down, it’s easy to fall into not working at all. However, in all honesty, you should be working harder, not taking it easy! It may be tempting to spend your days with a good book or binge watching your favorite show. But in realty there are productive things you could be doing. Use this slow time in the real estate market to complete things you might neglect when you are too busy. Here is a short list of things that can help your business be better prepared for the busy, up market times.

  1. Take a look at your stored files. Can they be shredded?  Are they outdated?  If you are holding on to educational materials or flyers from 2005, it might be time to throw them away. Make sure that any confidential information that you are disposing is shredded.  If you have transaction files, should you have them at all?  Transaction files today should all be held by the broker electronically; the day of home hard copies are long gone!
  2. Continuing Education. Now is the time to catch up on your continuing education.  Taking classes now will not only keep you up to date on issues in your industry, it will also avoid you having to take multiple classes at the last minute when you have to submit compliance for your license renewal.
  3. Clients. When was the last time you reached out to former clients?  Sending a thoughtful email or some useful information to former clients will help you stay top of mind. This should be done regularly, not just when you “have the time.”  And, what shape is your data base or CRM? Now is the time to cull and update.
  4. Colleagues. Reach out to colleagues to see how they are doing during these times. Who is your mentor?  With whom do you share best practices?  From whom do you learn new ways of boosting and bettering your business?
  5. Organize. Set up a system for your client information, files, notes etc.    Having everything organized helps keep you on track.
  6. Online presence. Look at your website and other social media platforms.  Do they contain current information?  Can you make them more visible or attractive to new clients?
  7. Relax. When you are busy you neglect yourself.  Now is the time to take care of yourself so that when you really are busy, you are ready and able to tackle all your work.

Choosing the Right Commercial Lease for Your Business

While we can’t possibly address every question you might have about a commercial lease in a single blog article, if we can impart one piece of wisdom, it is this: the laws regarding commercial leases differ significantly from those regulating residential leases.

Starting a new business can be exciting. Entering into a lease for that business may seem easy since you’ve rented residential property in the past. But commercial leases are most definitely not the same! If you don’t have the experience to determine what you need in your lease, you may end up entering into an agreement which is unfavorable.

For example, terms of residential leases tend to operate on an annual agreement. When you rent an apartment, you can often leave after only a year if you’ve decided it is not the right place for you. But commercial leases tend to have longer terms with very limited, if any, early termination rights. When considering a commercial lease, check the term and other tenant requirements such as insurance limits. Make sure that they are acceptable to you before you execute the lease. If the space turns out to be the wrong one for your business, you may still be obligated for a long time.

You cannot just get out of the lease if you change your mind. Commercial leases, since they involve business ventures and typically larger sums of money, are strictly enforced. Once you sign a commercial lease, you’re on the hook for those payments, whether or not your business succeeds. Additionally, and especially for smaller businesses, commercial landlords often require a personal guaranty, which will prevent the business owner from taking liability shelter behind the business entity if the business fails.  This means you will be personally responsible even if the business closes its doors.

For these reasons, carefully investigate all terms of the lease before you reach an agreement. Commercial leases are often lengthy and complex, sometimes including multiple addenda and terms that have a particular meaning in the industry. They do not make for simple, easy reading. Among other things, look for the following items:

Rent escalations – How are they computed and how much increase is allowed?

Insurance, property taxes, and maintenance costs – Does the landlord pay these, or will you be billed separately for them or as part of common area maintenance costs?

Conditions of the space – will modifications be needed and who will pay for them?

Specifications for signage – where can you hang your sign(s) and are there any restrictions? Is the lease renewable? – location is important to the success of your business. If you like the space, you will probably want to stay there indefinitely. Additionally, if the lease is renewable, what is the rent for the renewal period?

Under what conditions can the lease be terminated? Is there a terminate fee?

Even though it can be more difficult to get out of a commercial lease, they are often more flexible with regard to negotiations upfront. So, take your time, seek to fully understand each aspect of the lease, and make your needs and requirements known to the landlord. Most importantly, call us and speak with our real estate attorney if you have questions. It is critical that a commercial lease be reviewed by someone who understands what you will be facing as a tenant and can interpret the complex provisions often found in a commercial lease. It is better to be informed before making this decision rather than to find out later you have made a mistake.

4 Things for Landlords to Include (Among Others) in Every Commercial Lease

As if negotiating and drafting a commercial lease weren’t hard enough, landlords sometimes have to face situations in which a tenant defaults on the lease agreement. Loss of rent is just one area in which you can lose money; the cost of recovering that income and evicting a tenant can amount to much more.

Because so many legal complications can arise from commercial leasing disputes, you should always consult our real estate attorneys before drafting or executing a lease agreement. The following four issues should be carefully considered and included in your lease, in order to protect your interests.

Acceleration Clause. If a tenant does default on the lease, recovering rent payments can be an arduous and time-consuming process. In the event of such a default, an acceleration clause will allow you to immediately demand payment in full for the remaining term of the lease.

Personal Guarantees. If a corporation, partnership, or limited liability company defaults on its lease obligations, a judgment obtained can be difficult to recover because a business entity might not have assets. A personal guarantee signed by the owner of the company allows you to proceed with your claim against him or her personally in addition to the actual tenant.

Attorney fees. Unfortunately, in the event of a default you are at risk of losing not only rent money, but also the attorney’s fees and costs of taking the matter to court. Your lease should include a provision addressing attorney’s fees in the event of a dispute. If your lease does not specifically provide the right for the prevailing party to recover attorney’s fees, it is unlikely that you will be able to recoup the fees in court.

Assignment/Sublease. Sometimes a tenant will decide that the business is no longer viable and will try to assign or sublease the property to another tenant. As the landlord you want to be able to control what the tenant does with the lease by adding a clause providing for landlord’s approval and control of any potential tenant changes, including potentially the landlord’s ability to share in any rent premium, should there be one.

The above are just four items (again, among many others!) that should be included, or at least carefully considered, for every commercial lease. But because real estate law is so complicated, you should always consult with our real estate attorneys before drafting or signing any agreements with commercial tenants. We would be happy to review your current lease form and make suggestions for changes that will better protect your interests.

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