Divorce, Mediation, and Dirt: 2012

Thursday, July 26, 2012

Buyer’s Rights in Purchasing Property

1. Did you know your real estate agent only gets paid if the transaction closes? Would you like to have the benefit of an attorney experienced in real estate transactions and law, whose fee is not dependent on whether you close the transaction?

2. Do you know how to determine what restrictions and easements will affect your property after you buy it?

3. Would you like to know where the easements are located on your property before you buy it?

4. Do you want to know the deadlines in the contract for inspections, financing, objecting to the condition of the property, obtaining and reviewing the title evidence, objecting to the status of the title?

5. Did you know that you should be getting title insurance to protect you from liens on the property, from fraudulent conveyances, from anyone who may claim an interest in your property, from encroachments or boundary line disputes, and from any other matters that may affect your title?

6. Will you be reviewing the Commitment to Insure Title and know how to evaluate it to see what matters will affect your title after you close when it is too late to complain?

7. How often have you reviewed a Settlement Statement to be comfortable with the correct allocation of expenses, prorations and pre-paid charges?

8. Have you obtained preliminary loan approval?

9. What conditions need to be satisfied before you purchase the property, e.g., appraisal, financing, environmental, building inspections, plans and permitting?

Michael S. Price, Esq. is a Florida Supreme Court Certified Circuit Civil Mediator, located at 1616 Jork Rd., Suite 102, Jacksonville, FL 32207; telephone (904) 396-4445; e-mail mprice@michaelpricelaw.com. Mr. Price focuses on tenant rights, leases, real estate, contracts, divorce, criminal law, and mediating disputes related to construction, leasing, foreclosure, property defects, binder deposits, probate, family owned property and disputes related to business, partnerships and shareholders.

Tenant's Rights

1. What is your experience in reviewing and negotiating leases?

2. Do you want to protect your personal assets from financial losses?

3. Do you know whether to form a corporation, limited liability company or other entity?

4. Do you want to generate only regular income from your business or also have the ability to sell your business for a multiple of your business’ income?

5. When you sell your business, do you want to continue to be personally liable for the new business owner’s financial obligations to the Landlord?

6. Do you want the ability to extend the lease term in case you want to continue or sell your business?

7. Do you want the Landlord to have the uncontrolled ability to charge expenses of the center to you?

Monday, July 23, 2012

Commercial Tenant Lease Rights

More and more small businesses are springing up. The businesses usually need to lease space. Existing businesses need to continue leasing. Commercial tenants are at a huge disadvantage and are at the Landlord’s mercy if the Tenants do not know their rights and options in negotiating a new lease or the terms of a lease extension.

Entity and Guarantee: A lease is a contract as well as a conveyance of the right to occupy a leased space (the “Premises”). The Tenant should not be the individual. The individual or individuals owning the business should create a corporation, limited liability company or other entity to be the Tenant. The individual business owner should consult an attorney or accounting consultant (preferably a CPA) as to which type of entity to use. The purpose of having an entity as the Tenant is to prevent the individual from having personal liability for personal injury at the Premises, personal liability for business obligations, and personal liability for failure of the business to pay the lease rent and other financial obligations of the lease.

Landlords typically require a personal guarantee for the lease rent and other financial obligations of the lease. By giving a personal guarantee, the individual gives up the protection and purpose of the corporate entity which was formed to be the Tenant. Do not agree to a personal guarantee.

If you just need to have a location where the personal guarantee is a deal breaker, at least try to limit the personal guarantee. Try to limit the dollar amount of the guarantee, or try to limit the term of the guarantee. For example, if the term of the lease is five years, try to limit the guarantee to one year, or the equivalent of one year’s rent.

Term: Many business owners overlook the potential value of their business. Most business owners are focused on creating recurring income to support themselves. But, the real potential income is selling the business. Businesses are valued on the stream of income the business generates. For example, if a business generates $25,000.00 after all expenses, and the market for that type of business will attract buyers wanting a 15% return on their investment, then the business could be worth $166,667.

If you want to preserve your ability to sell the business, the business needs to have the right to continue to occupy the Premises after the initial lease term. The lease should provide that the Tenant has the right or option to extend the lease term. The rent for the option term should be established in the initial lease, and not left to be determined later. The Tenant’s guarantee should not be extended into the option term, and should terminate if the business is sold. The Landlord reasonably can condition the assignment of the lease on obtaining a substitute guarantee from the individual(s) who own the entity buying the business and assuming the lease obligations.

Other considerations: Commercial leases typically are quite lengthy. To the untrained eye, it becomes a blur and confusing to read. In the budget for all businesses, there should be a line item for professional fees, such as legal and accounting. You can save a professional fee now, and pay dearly much more when a problem arises after you have signed a lease. An attorney experienced in these matters vastly increases the chances that the problem is detected and avoided in advance.

Monday, February 13, 2012

Septic

“Pay now or pay later.” That was a famous Midas Muffler commercial slogan. It also applies to real estate transactions.

            One home buyer (“Betsy”) was told by the real estate agent that the home had a septic system. Two (2) years after the purchase, the next door neighbor (“Fred”) was banging on Betsy’s front door demanding that Betsy pay Fred for half of the cost to repair the septic system. For the first time, Betsy found out that she did not have a septic system on her property. Fred then cut off Betsy’s use of the septic system, causing flooding of sewage into Betsy’s home, ruining her wood floors and causing Betsy plenty of grief.
            Betsy had a home inspection before buying. The home inspector probably just flushed the toilets for the extent of his sewerage inspection. Betsy should have obtained a separate septic tank inspection. Then the septic tank inspector would have looked for the septic tank and discovered it was not on Betsy’s property.
            After Betsy came to see me, I thought to look for an easement that may have given Betsy the right to use the septic system on the neighbor’s property. Betsy did not have her Owner’s Policy of Title Insurance, so I ordered the policy from the closing agent. There it was – a Declaration of Restrictions requiring the home owner and the neighbor to obtain a maintenance contract with a third party approved by the Department of Environmental Protection to regularly inspect the septic system.

Why did the closing agent, a law firm, not review with the home buyer the exception in the title policy for the Declaration of Restrictions so the new homeowner would then at least know she did not have her own septic system? That is why home buyers and buyers of commercial property need to understand the need for and the language in title policies. That is also why home buyers and buyers of commercial property need to have their own attorney knowledgeable in real estate transactions to review the (a) contract before signing it, (b) the title Commitment, and (c) the closing documents. For an explanation of a title Commitment, see my Article titled “Is the High Bid the Real Price” posted November 16, 2011.

Michael S. Price, Esq., Florida Supreme Court Certified Circuit Civil Mediator, 1616 Jork Rd., Suite 102, Jacksonville, FL 32207; telephone (904) 396-4445; e-mail mprice@michaelpricelaw.com. Michael S. Price focuses on disputes related to divorce, criminal law, real estate, contracts, construction, leasing, foreclosure, property defects, binder deposits, probate, family owned property and disputes related to business, partnerships and shareholders.

Tuesday, February 7, 2012

Does a Successful Relationship Require a Control Burn?

            "The first thing we do," said the character in Shakespeare's Henry VI, is "kill all the lawyers." How many times have we all heard people say they hate lawyers? Of course, they hate lawyers - until they need one. Divorce lawyers are plentiful, so apparently a lot of people need them. How can the supply of lawyers, particularly divorce lawyers be reduced? The simple answer is to reduce the demand for lawyers. So, how can the demand for divorce lawyers can be reduced by a reduction in divorces?
             One gentleman who has been married for 50 years said that his successful marriage was due to the disputes he and his wife had and that they talked through. Invariably, the wife was happy each time just at having had the the talk, even though it was a dispute. The husband was just happy that his wife was satisfied.
             This "confrontational communication" is a controlled conflict or “controlled burn”, which may lessen the incidents of uncontrolled conflict between spouses. This also applies to unmarried parties in a relationship. The controlled burn is like a controlled burn in a forest, which is designed to lessen the chances of a major fire. Deliberately setting organized, planned fires in a contained area of the forest to prevent an out-of-control fire with extensive damage may be a good metaphorical lesson for the success of a marital or other personal relationship.
           The gentleman's solution describes “strategic conflict” as the method of timing conflict in a personal relationship to release silent friction in the relationship. Friction is brewing below the surface most of the time - it is just a matter of degree. Once that degree reaches the boiling point, then the communication is uncontrolled, explosive and counter-productive, often leaving permanent resentment and scars. The scars can last through the current relationship, and even into future ones with a short fuse or preconceived ideas of the new love interest, such as lack of trust.

What are your thoughts about timing conflict, whether you need it or not?

Monday, February 6, 2012

Mediation 101

Mediation may be ordered by the court or voluntary. Court ordered mediation is described in Florida Statutes Chapter 44, titled “Mediation Alternatives to Judicial Action”. “Mediation” means a process whereby a neutral third person called a mediator acts to encourage and facilitate the resolution of a dispute between two or more parties. It is an informal and non-adversarial process with the objective of helping the disputing parties reach a mutually acceptable and voluntary agreement. In mediation, decision-making authority rests with the parties. The role of the mediator includes, but is not limited to, assisting the parties in identifying issues, fostering joint problem solving, and exploring settlement alternatives.” F.S. §44.1011 (2).

All mediation communications are confidential, with certain exceptions. F.S. §44.405. Some of the exceptions to the confidentiality include criminal activity, abuse, neglect or exploitation of children, disabled adults or the elderly, professional malpractice, and voiding or changing the settlement agreement. The specific circumstances and limitation of these exceptions are set out in F.S. §44.405(4)(a). A violation of the confidentiality rules can result in equitable relief, compensatory damages, and attorney’s fees and costs. F.S. § 44.406.

Mediation is an opportunity for the parties to self-determine an outcome and eliminate the risk that the court rules unfavorably for one of the parties. With crowded court dockets, mediation allows the parties to reach a settlement much sooner than waiting for a trial. Mediation reduces the economic fallout from attorney’s fees and court costs that no longer accrue after the case is settled. The cost of mediation is often split between the parties, thus making mediation a very cost-effective option to reach a resolution of the dispute so the parties can devote their mental energy and financial resources to more productive activities. Copyright 2010

For questions or comments on the use or selection of a Florida Mediator, contact Michael S. Price, Esq., Florida Supreme Court Certified Circuit Civil Mediator, 1616 Jork Rd., Suite 102, Jacksonville, FL 32207; telephone (904) 396-4445; e-mail mprice@michaelpricelaw.com. Michael Price focuses on disputes related to real estate, contracts, construction, leasing, foreclosure, property defects, binder deposits, probate, family owned property and disputes related to business, partnerships and shareholders.