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Do I need an attorney for my commercial real estate deal, or is my broker enough protection?

Does a seller or a buyer of commercial real estate really have to hire an attorney? The unmistakable answer is, "Yes!" A broker is a licensed professional who you hire to negotiate the sale or purchase of a real estate for a fee or a commission. However, they are typically not attorneys. Many of them will clearly state that real estate brokers are not providing legal advice. Real estate brokers don’t usually get paid unless they close the deal (or unless you are somehow obligated to pay a commission, for example, by withdrawing from a deal). Therefore, brokers are usually not going to take care of the legal details and may even try to push a deal to close as fast as possible. Be sure that separate legal advice from a good real estate lawyer is usually worth the additional cost. It's much more cost-effective to hire an attorney to get the deal done right than to get involved in an expensive lawsuit. A good attorney can also be crucial to getting a beneficial purchase. Also, keep in mind that it’s best to hire an actual commercial attorney who deals with this kind of transaction daily. It may cost a bit more than a general lawyer, but it’s well worth it. What does a real estate attorney actually do? The job of a real estate lawyer is to negotiate and make a transaction happen in a peaceful way that's amenable and fair to all parties. A real estate lawyer takes over after......
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You Signed A Lease; It’s A Contract.

  Every manager and leasing person has experienced the frustration when a new resident challenges a policy or clause in their lease. I didn’t know: The non-smoking policy would apply to my guests. I had to have management approval to have a pet. There would be a penalty if I moved out before my lease is over. Everyone in property management is well aware a lease is a legal binding contract.  Unfortunately, many residents want to overlook this minor detail. The Importance of the Lease The lack of respect for the lease as a legal document may start with the management team at the property.  The new resident rushes into the office to pick up their keys. The moving truck is right behind them, along with an entourage of families and friends to help move furniture.  “They don’t have time to sit down and review everything.  Afterall, they’ve signed leases before.  They’ve been working with our staff for weeks, surely if it’s important, we’ve probably already explained it to them, right? “. Sign here, initial, initial, sign and witness.  “Send me my copy by email, or I’ll pick it up later,” close out the lease signing appointment. Even if the leasing staff was able to point out a few key items in the lease, how much of the resident’s attention was focused on the explanation?  The new resident is thinking about where to place the furniture.  They are concerned if  the dining room table make the turn in the hallway.  And, of course, how......
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It's R-U-D-E to Pay Rent Late

Why do Residents consider it rude for a Manager to ask a Resident whose account is delinquent when to expect the rent to be paid? Do Residents think that paying rent is an option under the Lease Agreement? For the past several months, I think I may be laboring under the assumption that Management has no right to even ask or remind a Resident that rent has become past due. Chronic late payers need to be corrected in their thinking that paying rent late does not matter to the “Big Bad Management Company” who has all the money in the world. Even if they do have all the money in the world, that isn’t the point. Delinquent payers CAN cause a Management Company to delay payments to vendors, put off capital improvement projects, even scrap a plan to replace outdated appliances for the quarter when collecting rent is THE paramount goal for the onsite Office team. Recently, spurred by this topic, I suggested some “creative” ways for Residents to scrape up the money to make it through another month. While directing concerned residents to the obvious sources: United Way agencies, township offices, Trustee Offices, churches, and other local charitable organizations, I was also wondering if there are other ways worthy of consideration.  How about: 1.       Payday Loans (One manager I know has used this successfully at his property. I don’t know how that ultimately helps a resident in the long run, but it can keep a roof over one’s head for a month or ......
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How to Handle Existing Leases after Change of Property Ownership

Let’s imagine that you scoped out the perfect property investment.  Maybe it’s a property that will increase in value after refurbishment.  Or you just know that the neighborhood is in high demand because of the local amenities and you believe this demand is going to rise.  In most cases, the new landlord has some ideas on what they want to do differently with the property in order for it to increase its value.  Something to keep in mind when making this purchase decision is the tenants that already occupy the property.  This may delay some of your plans for the property. The New Landlord Must Honor the Current Lease Typically when a property gets a change of ownership everything is taken as is.  That means that the new landlord must honor the terms of the lease for those tenants that are currently residing in the property.  The landlord will not be able to raise rents, make major changes to the interior, or make other changes that conflict with the present lease.  The new landlord should be well read on the old lease.  Is the tenant permitted by the lease to a 2’ by 3’ garden space outside?  Then that re-landscaping project intended to increase property value will need to wait. What can the Landlord Change? Any exterior changes that the landlord would like to make that does not conflict with the lease can be made on the property.  The landlord will not be able to make upgrades to the interior unless you are given p......
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Top 7 Steps To A Successful Tenant Move In

Top 7 Steps To A Successful Tenant Move In
Imagine dealing with troublesome tenants who call your phone at 3am, consistently make late rent payments, and probably even do a bit of drug dealing on the side. If you successfully dodge your way out of dealing with such, you could probably even end up with others, who down the road, you ultimately realize were less of a fit than the former. In a country of over 110.5 million renters, there is a significant number of prospects who perfectly fit this description. And of course, no landlord or property manager would ever want to house them. But unfortunately, they’ll always end up somewhere…and that translates to a rather unhappy group of landlords. Most of the affected landlords are usually individuals who approach the process of tenant move-in like a “pregame” show- despite the fact that in reality, it’s actually the most significant part of the game. Your strategy here is what eventually counts in the landlord-tenant relationship. The most critical attributes through this process are precision, alertness and patience. Desperation, even when you’re eager to fill vacant houses, could eventually cost you an arm and leg when the tenant ultimately moves in. As a matter of fact, with the population of renters currently outnumbering landlords on a scale of 1:5, there’s no need for anxiety, especially when your property is priced competitively. So, now that we’ve established the attitude you should approach this with, what is the actual strategy to a successful tenant move-in? 1. Review Moving-Out Notice The first step, of course, is overseeing t......
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Getting the Lease Renewal

Getting the Lease Renewal

The best tenants? Most often they’re the ones that are already living on your property. You’ve already marketed to them, qualified them, and have a guaranteed stream of rent coming in from the unit they occupy. It is, as we all know, so much cheaper to keep existing tenants than to recruit new ones, as detailed in this blog, The Real Cost of Losing a Tenant.

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Managing Disputes Over Security Deposits

Managing Disputes Over Security Deposits
Money’s funny. It makes people do funny things. That’s why they say you should never do business with friends or family. It’s the reason contracts are such a good idea. And, for landlords, it quickly becomes the reason for disputes…especially when a security deposit is in question. The best thing property owners and managers can do is protect themselves from the time that will come when such a dispute occurs. That begins with knowledge and adequate preparation. Know your lease and agreements. This definitely goes in the ‘planning’ column. You need to know the laws of your state when it comes to security deposits, and you need to have an iron-clad, signed lease agreement with all tenants that includes details such as: Amount of deposit Any amount deemed non-refundable Amount of time before notice or refund will be received after lease termination Costs for which tenants could be held liable Respond within the appropriate amount of time. If you say in the agreement that you will provide notice to within 30 days of lease termination on partial or non-refund of deposit, and you wait until day 31, you’ve lost your footing. You now are mostly likely liable for refunding the entire portion of the deposit eligible for return. Make sure to investigate the unit promptly and provide notice quickly, including refunds when applicable. Document everything. With an iron-clad lease agreement in place, you’re more than half-way there. However, you need to document any and every issue you find when investing a unit after a move......
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Apartment Leases Resemble Commercial Leases?

A major factor contributing to the improved health of apartments is many apartment leases are becoming more like triple net commercial leases. Many if not all “utility” costs as well as well as governmental and quasi-governmental costs are being passed through to residents, however,  owners cannot pass on increases in property taxes, insurance, maintenance or standard on-site administrative costs in excess of a base year to residents. Somewhat surprisingly, residents haven’t balked en masse at the increases in charges, perhaps because many are former homeowners who are accustomed to paying them. As pointed out in the Winter 2012 issue of Texas Apartments by Wendy Wilson, the Texas Apartment Association General Counsel, developing lease provisions to meet the realities of the marketplace while conforming to the intricacies of the law is a top priority.  She has developed a new lease addendum allowing apartment owners to allocate a variety of governmental charges and fees to residents, such as “street repair/maintenance, emergency services, conservation districts, inspection and registration/licensing”. Owners and operators who also charge for services more akin to utilities such as central cable and satellite TV, stormwater/drainage, and trash pick-up/recycling fees, can include all such charges in one addendum. In some states, amortized capital improvements for stormwater/sewer facilities and school district expenditures, are also being passed through to residents regardless of whether such charges appear on utility bills or property tax bills. Ms. Wilson points to a variety of formulas for allocating such costs. No doubt, there is and will continue to be......
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We're Moving? Tips on the Transition

Whew! We’re now coming through another heavy leasing season for those of us in the multifamily industry, anyway. We’ve grabbed and garnered leases left and right. We’ve been able to hold onto a lot of current residents. We’ve gotten leasing bonuses and everyone is finishing up vacation time, even though we are secretly trying to harbor a couple of days to use at Thanksgiving for Black Friday or the holidays.   For me, I have noticed that the hardest “sells” have been those families with school age children. Honestly, it brought me back to the time when my husband was rapidly moving up the corporate ladder, which necessitated many different moves all across the country. I remembered that apparently my husband’s preferred method of informing his family that we were moving was to take us to a restaurant and make the announcement. It seemed his favorite restaurant to do this in was Pizza Hut. Probably because the kids loved the pizza there (and he did, too.) However, after the fourth time it happened, it kind of ruined the idea of going to Pizza Hut for me and the kids.   It has occurred to me that the actual moving experience does not have to be horrendous. It’s the fact that, if you are not the decision-maker, it can be very stressful. After all, if you’re the child, you really get very little input in the decision. Most of the time, your parents make the announcement and start discussing all kinds of......
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Risk: It’s Everywhere!

If there is one thing that property managers know, it’s that we are exposed to risk in all that we do. This “risk” comes in all shapes and forms; some are more evident than others. I am constantly reminding my employees to be careful of their actions as to not expose the property and our owners to possible litigation. Some of the greatest potential risks, as I have found, are in the very small details. Here’s a few that I wanted to point out. First, consider the “golden rule” of leasing—treat everyone consistently. Consistently being the key word.  I have often instructed my leasing agents to use caution when asking where people are from. Generally, in life this is a great conversation starter, but in the realm of fair housing when we open that door and are inquisitive on a prospects nationality this could be construed as discriminatory (if an allegation were to ever occur). The curiosity of national origin presents a very strong basis for a suit if one were ever made against the defendant (i.e. leasing agent). Think about it: why does it matter where they are from? You are trying to lease them an apartment—its best to stick to questions that qualify the prospect. As an alternative, the leasing agent might inquire about the prospects interests, hobbies, etc. While it may seem like a harmless, amiable way to personally get to know a prospect, its best to leave this question alone.   Secondly, the guest card. The guest......
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