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Orange County Business Law Blog

What to know about renting commercial space

Business owners who decide to rent a commercial space will typically need to sign a lease. While landlords may have standard lease agreements, you do not have to accept boilerplate terms. Instead, it is generally a good idea to negotiate a custom agreement. The lease itself should state how much the tenant owes, how long the lease runs for and the rights and responsibilities of each party.

For example, the lease could state that the landlord is responsible for making improvements to the property by a certain date. Ideally, a tenant will not sign a lease that starts before he or she plans to start operating from that space. Otherwise, the tenant could be paying for a building that won't generate any money for the company. In some cases, a landlord may hold off on accepting the first rent check until a building is in use.

Evicting a commercial tenant in California

Commercial tenants do not have the same legal protections as residential tenants. Eviction might be worth looking into if you are a landlord and have a commercial tenant who is behind on their rent or has breached the terms of their lease agreement. However, attempting to evict a tenant can be a long and expensive process depending on the circumstances. There are also many things to consider before deciding to start the eviction process.

Entertainment giants battle over contract dispute

Two major names in the California entertainment industry are locked in an ongoing legal battle with one another. The case between Netflix and Fox centers around the question of employment contracts in the industry. Fox sued Netflix after the streaming firm recruited several top executives, and the ongoing case has brought up major issues about how contracts are formed for high-ranking business leaders. Netflix is arguing that Fox's employment contracts are illegal and invalid, and the streaming giant even compared them to slavery.

Lawyers representing Netflix said that Fox's contracts violated the 13th Amendment to the U.S. Constitution, one of the so-called "Civil War Amendments" that banned involuntary servitude and slavery. Because Fox's contracts bind employees to continue working for the company for a specified period of time, Netflix argues that these contracts should be thrown out. Earlier in the trial, a judge came down largely on Fox's side, dismissing Netflix's arguments that the contracts were disguised illegal non-compete clauses that violate California employment law. Netflix's amended pleadings, however, raise further concerns.

California landlord sues WeWork over construction noise

A California landlord has filed a breach of contract lawsuit against the troubled coworking company WeWork. In a lawsuit filed in San Francisco on Sept. 24, the landlord claims that WeWork frequently engages in noisy and disruptive construction activity during normal working hours in clear violation of its lease agreement. The lawsuit is another setback for a company that is having trouble filling office space and has seen its value plummet in the wake of a failed initial public offering.

WeWork signed a 10-year lease for 13 floors of a Sansone Street office building located in San Francisco's Financial District in November 2018. The company planned to have the space occupied by June, but the breach of contract lawsuit claims that it did not even start tenant improvement work until May. This became an issue when two of the building's other tenants made noise complaints.

Guidance toward evicting a commercial tenant

Your commercial property takes money to run and is meant to be profitable. One aspect of a smooth commercial operation is lawful, cooperative, and paying tenants. If a tenant isn't paying their rent or has violated other terms of their lease agreement, consider eviction. Due to the time consuming and expensive task of removing a tenant, it should never be the first step. That said, take the legal steps to resolve the situation before officially pursuing eviction.

First, consider the tenant's situation. Are they having money troubles that can be resolved over time? Has their violation been so egregious to warrant an eviction, or are you thinking irrationally? Do you have a replacement tenant available? Is the tenant likely to take you to court?

Funding secured for California office buildings purchase

The purchase of a pair of California office buildings looks set to proceed. Trade sources have reported that Oregon-based BPM Real Estate has secured $78 million in financing from Citigroup to buy a 111,000-square-foot office tower in Aliso Viejo and a 116,000-square-foot commercial property in San Jose. The loan is reportedly structured to be interest only for the entirety of its 10-year term. BPM has been active in the Oregon commercial real estate market for many years and already owns several office and hotel properties and an apartment complex.

The commercial loan will cover most of the $120 million BPM paid for the two properties, which are both fully leased. A tenant swap is scheduled to take place in early 2021 at the Aliso Viejo property. A semiconductor company has agreed to vacate the premises to allow a health care provider to take over the entire property. The San Jose building is occupied by a computer parts manufacturer that subleases the space from a semiconductor supplier.

What to consider before using a real estate loan

Individuals who are looking to invest in commercial real estate may be able to finance those investments in a variety of ways. For instance, it may be possible to use hard money or bridge loans. These are popular because they can close in a relatively short period of time. They are also popular because borrowers can obtain financing based on their rental income or history of generating income from real estate.

Generally speaking, hard money loans are made by private investors, which means that there may be some flexibility as it relates to the loan's terms. However, one downside to a hard money loan is that it will likely come with a higher interest rate. Borrowers may also need to make a larger down payment and deal with expensive closing costs. It is important to note that hard money and similar loans are generally not available to those who lack experience as a real estate investor.

Life isn’t fair, but your business should be

Business owners often face complex decisions. Each day, you might need to justify a product price increase, lay out a new marketing strategy or alter your manufacturing specifications to meet regulatory requirements.

And to stay in business long-term, you want to please consumers and build on their loyalty to your brand. However, no matter how hard you try to do what’s right by your customers, it is virtually impossible to please everyone.

Taxes from remote sellers may profit CA

California is known for being one of the states with the highest tax rates. Subsequently, many entrepreneurs choose to live in tax havens, such as Nevada or Texas, to avoid paying state income taxes and other obligations. However, California has found a new way to capitalize on sales taxes from businesses whether that business operates from within California’s borders or not.

In the spring of this year, California’s governor signed a new law on sales tax. It required platforms like eBay and Amazon to collect sales taxes from out-of-state sellers when they sold goods to California residents. The law follows the Supreme Court’s 2018 ruling allowing states to collect taxes from online sales.

Responding with control during a data breach

All companies in California maintain some type of data that is used for the development, operation and support of their organization. Often, a majority of a company's data is confidential and has to be securely stored to prevent it from getting into the wrong hands. This is especially the case if a company collects and records information about its customers. Appropriate implementation of thorough protocols for securing and accessing information is critical to a company's ability to protect its most important data. 

According to the Federal Trade Commission, two protective measures that businesses can utilize in keeping their data secure include requiring data users to authenticate their identity with multiple different factors. For example, once they input a secure password, they may be required to input a specialized code or username that is exclusive to their department or position within the company. Another consideration is for companies to encrypt their devices to make deciphering data not as readily accessible to just anyone. Encryption should not be limited to devices, but should also be applied to any type of cloud storage, external hard drives or backup discs. 

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