Featured Articles

The use of the limited liability company (“LLC”) corporate structure has become very common in the real estate industry. It is the go to structure for the acquisition and development of properties by parties joining together behind a venture.  LLCs are governed by operating agreements among the members. These agreements are akin to the shareholder agreements among the shareholders of closely held corporations, and they govern many aspects of the operations of the venture.  One element in these operating agreements that bears close scrutiny by all of the members is the enforcement mechanisms that they put in place should any members fail to honor their obligations to fund future capital calls.

In truth, many LLC operating agreements contain inadequate payment enforcement provisions, making them potentially problematic and inequitable for the company itself and the members who honor their obligations and make future capital calls on a timely basis.  For example, if a member fails to meet their financial obligations, it is fairly common for these agreements to provide that the other members of the LLC may contribute the missing funds and treat them as a loan to the non-funding member.  Often times, the agreements provide that the loan will then be repaid to the funding members, with interest, once the LLC is in a position to make future distributions to its members, with no further enforcement methodology.

Such arrangements provide an unmerited level of flexibility to the non-funding member, as it enables them to weigh the pros and cons of making their required contributions or taking a loan from their partners to avoid any additional loss risk exposure in the endeavor.

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ETroesche-srhl-law-200x300ORivera2014By:  Oscar R. Rivera and Emily Troesch

For commercial real estate landlords, guaranty agreements requiring the principal owners of small businesses to personally guaranty the obligations of the corporate tenant are standard operating procedure. In addition, commercial landlords oftentimes also require the corporate guaranty of a parent or other affiliated company, if the creditworthiness of a corporate tenant or franchisee is questionable.  One question that is often posed is whether waivers of defenses by guarantors in such guaranty agreements are enforceable?  Fortunately, for property owners in Florida, if the waivers are properly drafted, the answer is yes.

The waiver of defenses paragraph helps property owners avoid costly and disruptive litigation if legal action becomes necessary to enforce a guaranty.  Guaranty agreements containing language that clearly and unambiguously waives defenses to the enforcement of the guaranty have been strictly construed and enforced by Florida courts.

A typical waiver provision reads as follows:

“Guarantor hereby expressly waives (a) notice of acceptance of this Guaranty; (b) presentment and demand for payment of any of the Liabilities of Tenant; (c) protest and notice of nonpayment, nonperformance, nonobservance or default to Guarantor or to any other party with respect to any of the Liabilities of Tenant; (d) all other notices to which Guarantor might otherwise be entitled; (e) any demand for payment under this Guaranty; and (f) any and all defenses relating to Landlord’s failure to perfect a security interest in Tenant’s property and/or seize or attach any other collateral.”

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ORivera2014For the third time this week, an article by one of our firm’s attorneys was featured as the “Board of Contributors” guest commentary column in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  Today’s article, which is authored by shareholder Oscar R. Rivera, is titled “Appellate Court Strictly Construes FAR-BAR ‘As Is’ Residential Sales Contract.”  It focuses on a recent appellate ruling that affirmed an $850,000 award for legal fees and costs in a dispute over a $2.85 million residential sale gone awry.  Oscar’s article reads:

The ruling by the Third District Court of Appeal in Diaz v. Kosch, is certainly drawing quite a bit of industry attention, and there are a number of important takeaways from it for buyers, sellers and the professionals who work on their behalf.

The case stems from the sale of a Coral Gables home in 2012 for $2.85 million. After the sales contract was executed and the initial $50,000 deposit had been made, the buyers, who are identified in the ruling as both being “attorneys with substantial experience with real estate transactions and title matters,” notified their broker on the penultimate day of the 10-day inspection period about potential permitting issues with the property. On the following day, the buyers sent an email to the sellers accusing them of “active misrepresentations” and threatening “legal fees and litigation.”

dbr-logo-1-300x57Nonetheless, on the same date, the buyers made the second deposit of $235,000, stating it was “with full rights reserved.” A week and a half later, they emailed a notice of termination to the sellers, who were amendable to it and responded by imposing no conditions on the return of the buyers’ full deposit. However, apparently due to demands for a release from legal liability by the buyers’ own broker (who also served as the escrow agent), the deposit was not returned by the escrow agent.

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For many businesses, finding the right location at the best possible lease rates and with the best terms is among their most pressing and impactful challenges for the future of the enterprise.  The business location and the costs of leasing the space can often be among the foremost determining factors in a company’s long-term success.  As such, the negotiation of the terms of commercial leases is typically of the upmost importance.

For tenants, the best way to start is for the principals to gather information on the neighborhoods and locations that hold the most promise.  In addition to turning to highly experienced and qualified commercial real estate brokers for guidance, they should do their own research and become educated.  Prior to any meetings with prospective landlords and their representatives, they should take the time to conduct a thorough SWOT analysis to identify the strengths,cre2-300x237 weaknesses, opportunities and threats related to every prospective property.

This exercise, which is also beneficial for landlords to employ when assessing their lease offers, will help to enable businesses and organizations to develop a list of the priorities that they seek for each and every location.  Both landlords and tenants can use this form of analysis to create an agenda for their discussions.

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ORivera-DBR-profile-11-17The firm’s Oscar R. Rivera was the subject of a profile article in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The article, which is titled “Real Estate Attorney Oscar Rivera Traces Career Roots to Shredding Carbon Paper,” chronicles Oscar’s career in the law, which began when he was still in high school in the 1970s.  It reads:

Oscar R. Rivera’s first job at a law firm required him to go through the office trash cans to find and shred the discarded carbon sheets used to make copies of legal documents.

That was in the 1970s, and Rivera was in high school and working at a Miami management-side labor law firm. His shredding was meant to prevent a pro-union law firm from dumpster-diving to read the flimsy purple sheets to gain insight into its opponent’s strategy, Rivera said.

“If you looked at the carbon paper against the light, you could read the letter,” he said.

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Co-tenancy clauses allow key retail tenants a reduction in rent if other key tenants or a certain number of other tenants leave a center.  While not common for smaller retailers, they are more common for anchor tenants.  Anchor stores and other key tenants draw significant traffic to centers, and they are often among the primary reasons other tenants select their location.

With all of the challenges plaguing some retailers, including store closings by such major national retailers as Macy’s, K-Mart, Sears, Sports Authority, Kohls and Toys-R-Us, landlords could face significant losses when their remaining tenants demand rent reductions based on their co-tenancy clauses.

leasesign2Typical ongoing co-tenancy clause requirements state that if one or more specified co-tenants are no longer open and operating, the landlord has a set timeframe (typically 90 to 180 days) during which it must secure one or more comparable replacement tenants.  If it fails to do so, the remaining tenants with ongoing co-tenancy clauses will pay alternate rent amounts until replacement tenants are operating.  Ultimately, if no replacements are found for periods typically ranging from 12 to 18 months, the remaining tenants may have the right to terminate their leases.

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sodessThe firm’s Susan C. Odess authored an article that appeared as a “My View” guest column in the Business Monday weekly supplement of today’s Miami Herald.  The article, which is titled “Clients Must Use Insurer’s Contractor or Face $10k Cap,” focuses on a new rule from Citizen’s Property Insurance that limits claim payouts to $10,000 unless policyholders agree to use the insurer’s preselected contractors.  The article reads:

Beginning in February, Citizens will be able to force commercial and residential property policyholders who file claims for all non-weather water losses to use the company’s preapproved contractor or agree to limit their total payout to $10,000. This arbitrary figure is artificially low, as many claims involving water losses often cost much more to repair.

It is no surprise that Citizens and other insurance carriers would seek to impose such a measure in order to keep their claim payouts as low as possible. By forcing policyholders to use carrier-preferred contractors, insurers would be able to negotiate deeply discounted rates from their selected vendors, which will always be incentivized to acquiesce to the insurance companies in order to maintain their preferred status.

Property owners with damages in excess of $10,000 will be unable to vet and select the contractor of their choice unless they are willing to pay the additional expenses. Those who have relationships with companies in the construction field will be unable to turn to their most trusted sources unless they agree to the $10,000 cap.

MHerald2015-300x72For the policyholders, the fact that the insurance company and the contractor’s goals for keeping costs as low as possible would be completely aligned will create a significant conflict of interest between them and the contractor. This naturally leads to issues involving shoddy work and construction, which could easily leave property owners with no other recourse but to resort to litigation.

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JCatalanoSRHL2-200x300Partner John Catalano, who joined the law firm earlier this summer, authored an article that appeared in today’s Miami Herald as a “My View” guest column in the newspaper’s “Business Monday” special section.  The article, which was titled “New Florida Law Helps Businesses Protect Against Frivolous ADA Lawsuits,” focuses on important legislative changes aimed at enabling Florida businesses to diminish their potential exposure to ADA barrier-to-access lawsuits.  John’s article reads:

Despite its net positive effect on the lives of millions of Floridians and visitors to the state, an unintended consequence [of the Americans with Disabilities Act] has been the proliferation of frivolous lawsuits aimed primarily at racking up attorney and expert-witness fees against Florida businesses and property owners.

These lawsuits are sometimes filed by lawyers who recruit clients to blanket entire city blocks of businesses with demand letters posing an ultimatum to either pay a quick settlement or face the threat of an ADA lawsuit. MHerald2015-300x72There are even allegations that some lawyers are using Google Earth to view sites without ever having a client actually visit them.

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Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel, P.A. achieved a significant milestone this year, celebrating 40 years of providing quality legal service to the South Florida, Florida and national communities. As we enter the fifth decade together, we are thankful for the relationships which we have built here in our backyard and beyond. It’s because of these relationships — and the trust we have earned—that we’ve continued to grow and flourish over the years. As we look back at where we have been, we are excited about where we are headed.

We take pride in the personalized professionalism we offer our clients. We will continue to mentor and expand our team to ensure we offer that same level of service as our younger attorneys transition into new leadership roles.  To commemorate our journey, we produced a short film explaining our plan to perpetuate our legacy throughout the 21st Century. Because we’ll still be here—you can trust us on that.

Senate Bill 1520 was signed by Governor Rick Scott on June 16, 2017. The following is a summary of the bill, which will take effect on July 1, 2017:

SB 1520 amends 718.117, Florida Statutes, regarding the optional termination of condominiums, making it more difficult for a Plan of Termination to be passed without full consent of the unit owners.  The changes to the law reduce the amount of unit owners required to reject a plan, postpone the time until another plan can be voted on, and requires that the plan be approved by the Division of Florida Condominiums, Timeshares, and Mobile Homes of the Department of Business and Professional Regulation (“Division”) based on factual and public policy reasons. Further, it guarantees that an optional termination will not result in a unit owner receiving less than his or her purchase price of the unit.

Changes to 718.117(1), (3) and addition of (21):

Applicability

  • The statute contains language indicating it is controlling over language in a condominium’s declaration and applies to all condominiums in the state in existence on or after July 1, 2007. The phrase: “Unless the declaration provides for a lower percentage” has been stricken indicating that the threshold established in the statute is the minimum vote required for optional termination.

Optional Termination

  • Prior to the effective date of the amendment, in order to approve a plan of termination, 80% of unit owners must approve the plan, and no more than 10% of unit owners can object. The changes to the statute now require an 80% unit owner vote approving a plan of termination; with less than 5% objecting. Additionally, the changes to the statute now provide that once the plan of termination passes a unit owner vote, it would then need to be approved by the Division.
  • The Division will have 45 days to review the Plan of Termination and notify the association of any deficiencies, or if it is rejected. If the Division does not respond within 45 days, the plan is deemed accepted.  Under the new law, plans of termination will now need to include factual circumstances that show that the plan complies with Section 718.117, Florida Statutes, and supports the public policies of the section, which are listed below.
  • If a plan of termination is rejected by 5% or more of the total voting interests of the condominium, then a new plan may not be considered for 24 months, as opposed to the current period of 18 months.
  • Under the current law, a condominium owner who purchased a unit from the developer must be made “whole” upon termination. In other words, the plan of termination could not provide for paying the unit owner less than the original purchase price. SB 1520 removes the language that restricts this requirement only to the original unit owner, meaning that an owner who purchased a resale condominium would also be entitled to receive a minimum of the purchase price upon optional termination. The bill applies this section to all unit owners, not just the ones who object to the plan.

Public Policy Reasons the DBPR Evaluates During Review for Optional Termination

  • Ensure continued maintenance, management, and repair of stormwater management systems, conservation areas, and conservation easements; or avoiding the costs and responsibilities of maintenance, management, and repair from falling on the shoulders of the taxpayers.
  • Prevent covenants from impairing the continued productive use of the property.
  • Protect state residents from health and safety hazards.
  • Provide fair treatment and just compensation for individuals, and preserve property values.
  • Protect homestead property and homestead property rights.

For a complete reading of the adopted legislation, please refer to the text of the bills available on the websites for the Florida Senate (www.flsenate.gov) and Florida House of Representatives (www.myfloridahouse.gov).