Business legal services in Silicon Valley

Legal Considerations Before Signing a Commercial Lease

business lawyer

Most entrepreneurs do not understand that in a commercial lease the leasing agreement is whatever the parties decide. There is considerably less legal protection for a business in a commercial lease than in common residential leases.

For example, in a commercial lease, the parties can opt out of many of the protections provided for by California’s commercial landlord and tenant laws, whereas in a residential lease, a tenant cannot. If a business enters a commercial lease waiving some of the statutory protections provided by these laws, a court called in to resolve a dispute between the parties, at a later date, may only consider the commercial lease as it is written and signed by the parties.

1.    Know which lease terms can be adjusted

Just as there are customs and practices in your trade or industry, there are also customs and practices in commercial real estate leasing that are hyper local or specific to the leasing agents or commercial property owners in your area. Make sure you understand which terms in a standard commercial lease can be adjusted before you start negotiating the terms of your own commercial lease.

2.    Be prepared to provide a personal guarantee or walk

Some landlords require new business owners or shareholders to personally guarantee the commercial lease. This typically eliminates the very legal protections obtained by creating a corporate entity in the first place. There is limited room to maneuver an alternative option. Be prepared to walk and continue your commercial space hunt if you’re not comfortable offering a personal guarantee of your business’ commercial lease.

3.    Build in an option to grow

Businesses are formed to make a profit. When businesses are successful, they grow. The initial commercial space needed to launch a business may be quite different from the commercial space needed to maintain and grow it. Make sure your commercial lease reserves the right to relocate if your commercial space no longer works for your business and contains an exit strategy that would allow you to amend or terminate a commercial lease early. However, it may be important to prevent the landlord from having the option of moving you from an ideal space to a less desirable location. Any relocation clause in the contract should provide flexibility but not give too much power to the landlord.

4.    Hire a business lawyer

Commercial property owners, real estate development companies, and leasing agents are very knowledgeable about the power they possess to demand terms from businesses that may not be in their best interest. Seek the advice and legal counsel of knowledgeable commercial real estate lawyers to help you negotiate your commercial space lease, before signing.

If you are a new business in Fremont, Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, or Santa Clara, CA venturing into your first commercial space lease you should be aware of the following before you sign your first commercial lease or renew their next one if saddled with unfavorable terms in their current lease.  Talk to The Law Firm of Lynnette Ariathurai when you are reviewing or preparing to sign a lease agreement, you will be glad you did.

business agreements, business lawyer, commercial leases, personal guarantees


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California Real Estate Company Expands With Business Merger

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Mergers & Acquisitions on Thursday, November 14, 2013.

There are a variety of methods that a company may utilize in order to expand its share of the market. Some of these may include marketing, advertising or strategic property purchases. However, many times the best way to do this is through a business merger. This is what one California real estate company has decided to do in its recent merger with another real estate company.

The company, TRI Pointe Homes, is in the middle of finalizing its merger with Weyerhauser Real Estate Co. The merger is estimated to be a $2.7 billion deal and will give TRI Pointe Homes a larger control of the nationwide real estate market. The deal will bring an additional 27,000 properties into the company’s real estate portfolio. Approximately 16,000 of these properties will be located in California, which will make the company a significant force in the state’s real estate industry.

The merger will give TRI Pointe Homes ownership of Weyerhaueser’s five brands: Quadrant Homes, Winchester Homes, Pardee Homes, Trendmaker Homes and Maracay Homes. Weyehaeuser’s shareholders would account for approximately 80.5 percent of ownership in the newly merged real estate company. The merger is predicted to be finalized by the third quarter of 2013.

However, in order for this business merger to be successful in California, all of the legal terms of the transaction must be properly detailed in necessary legal contracts between the parties involved. The contracts should be carefully drafted in order to minimize any misunderstandings that may lead to future lawsuits. Knowledge of applicable laws regarding contracts and business will be integral. Additionally, it is important to file the correct paperwork with the proper regulatory agencies.

Source: Los Angeles Times, Home builders TRI Pointe, Weyerhaeuser Real Estate to merge, Andrew Khouri, Nov. 4, 2013

business mergers, commercial real estate business law


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It Is Important to Diversify Commercial Real Estate in California

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Commercial Real Estate on Thursday, September 12, 2013.

Real estate is an important investment for most people. However, this type of investment is subject to the rise and fall of the economy. This is why many people want to diversify their commercial real estate portfolio so they can minimize risk. The founders of the California Family Fitness gym chain decided to diversify their real estate portfolio recently by selling $98.7 million worth of real property.

The founders sold the ten properties, which are currently leased to California Family Fitness, in order to reinvest in other properties which were not solely dependent on only one tenant. Although the one tenant, California Family Fitness, is a healthy and growing company, the founders still wanted to further diversify in order to have a more balanced real estate portfolio. The founders of the gym chain currently operate another company Fit Development which will be used to purchase commercial real estate across multiple Western states.

The two founders of the gym chain, who had sold the chain in 2006 while retaining ten percent each, are currently contracted to purchase 500,000 square feet of properties in four different states, including California. However, the purchase needs to be completed soon, in order to take advantage of Section 1031 of the U.S. Tax Code. The code section allows the founders to purchase the commercial properties without incurring tax liabilities on the sale of their former properties, however they must finalize the purchase of the new properties within six months.

As one may be able to see in this case in California, selling and buying commercial real estate can require some knowledge of applicable law in order to make the transaction financially successful. However, each person will have different goals when making a real estate transaction. Certain tax and real estate laws may only apply in specific circumstances, therefore one’s strategy will have to apply the law to one’s specific situation.

Source: Sacramento Business Journal, California Family Fitness founders sell nearly $99M of real estate portfolio to reinvest in other properties, Kelly Johnson, Aug. 30, 2013

1031, Commercial Real Estate, Purchase


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