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With the growing popularity of Uber Eats, Grubhub, DoorDash and other food delivery services, many restaurants and other food service tenants (e.g., coffee shops) are now working diligently to increase their sales through delivery. Part of that process entails changes to their kitchen staffing and meal-preparation techniques, but another important element involves the use of dedicated parking spaces for takeout/delivery orders.

The online food-delivery apps are tapping into the public’s increasing aversion to cooking at home. For the first time ever in 2016, Americans spent more at eating and drinking establishments than on groceries, according to U.S. Census data. The delivery market grossed $30 billion in 2017, but Morgan Stanley estimates it could balloon to $220 billion within the next few years.

food-deliver-300x200The growth in food delivery has even led to the rise of virtual restaurants, which can only be accessed online. These establishments are discreetly nestled away in industrial parks, have no takeout window or signage, and their offerings can only be purchased via Grubhub and other delivery apps.

With the increased demand and competition in food takeout/delivery, savvy restaurateurs are now scrambling to make the necessary changes in order to take advantage of this fast-growing segment of the industry. The result of this changing dining landscape is creating the need for changes to the physical landscape of many malls and shopping centers, namely in the use of dedicated parking spaces for delivery/takeout visitors in order to enable them to make quick and easy stops.

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One of the retail sectors that is currently experiencing significant upheaval is the mattress industry.  Mattress Firm, the largest mattress retailer in the country, is closing hundreds of stores and scrambling to bolster its digital business as a result of significant sales declines.  Bed-in-a-box e-commerce mattress companies are sprouting up and beginning to expand to brick-and-mortar locations, but they are expected to continue to focus primarily on growing their online sales.

Analysts say overexpansion is at the heart of the industry’s troubles.  They point to the fact that there are now more mattress stores than McDonald’s restaurants in the U.S.  The end result is that the industry is in contraction, which comes at a difficult time for struggling malls and shopping centers while many other retailers are also flailing.

As landlords begin to receive rent reduction and concession requests from mattress store operators, they need to carefully consider and weigh their options.  This should begin with a thorough financial analysis of the value of the new lease rates that are being proposed, the long-term impact of the reduced lease payments on the property, the likelihood of leasing the space to a new tenant at comparable rates, and the costs and challenges that would stem from suing a tenant that may end up filing for bankruptcy. mat-store-300x200 This type of analysis can be very difficult to process, as it entails a clear-eyed look at the state of the market, the current vacancy and lease rates, and the marketing and commission costs that would be associated with securing a new tenant.

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Last week I was honored to serve as one of the co-leaders of a workshop titled “I Think That? Unconscious Bias: How to Spot It and Become an Inclusive Leader” at the International Council of Shopping Centers annual US Shopping Center Law Conference in Orlando, Fla.  The highly interactive workshop focused on biases that are automatically triggered and generate quick judgments about people and situations based on one’s background, cultural environment and experiences.

The presentation covered a number of studies and statistics about the prevalence of unconscious biases, and it concluded with helpful action plans and resources to identify and eliminate them in the workplace.

One of the studies discussed found that during the first seven seconds we meet someone, we make 11 judgments about them, including about their dress, the way they speak, the way they shake your hand, and their stare or lack of eye contact. icsclogo2015-300x300 We then naturally assign people to social categories based on stories, books, movies, media and culture, and we cherry-pick information that supports our opinions.  The end result is that we validate and reinforce our biases, making it that much harder to be neutral.

In the workplace, such unconscious biases can hinder recruiting, hiring and retention efforts, and they unwittingly shape how businesses evaluate and promote employees despite their talent and performance.

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Have you ever heard of this? If you are familiar with leases in the New York City area, you probably have.  But if you are not, you might be a bit surprised by it.  Like many legal issues that begin in either New York or California, the Good Guy Guaranty is now spreading beyond those borders, and if you are in the business of leasing space, you should become aware of it.

In essence, a Good Guy Guaranty is a pre-negotiated kick-out with the financial backing of a credit-worthy guarantor.  The guaranty is in place while the tenant is in possession, but if the tenant gives the landlord sufficient notice that it intends to vacate the premises and subsequently leaves the premises in good condition and as otherwise required by the lease, the tenant and the guarantor are both released.

shops-225x300The landlord benefits from it because it has a guarantor that backs the tenant and a tenant that surrenders possession when they vacate, thereby avoiding the need for the landlord to undertake eviction or abandonment litigation. The tenant benefits in that if it gives the landlord advance notice of its intent to vacate (usually anywhere from six to nine months) and is otherwise in compliance with the lease, it can close, be relieved of future liability and not be sued for damages.  And, the guarantor benefits in that if they make sure the tenant complies with the lease, the guarantor is never called upon to pay.

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Much has been written about the retail apocalypse, which began in 2010 and appears to have no end in sight with the recent bankruptcy filings by Sears and Toys R Us.  As the retail industry searches for ways to stem the tide of declining revenue, and online shopping continues to take its toll on traditional brick-and-mortar stores, one trend has emerged to bring mall owners a modicum of relief:  coworking in retail.

In shopping centers across the country, stores that have been left vacant by retailers are being converted into shared office space.  Coworking space inside of both enclosed and open-air malls is predicted to grow by an annual rate of 25 percent through 2023, according to a recent report from commercial real estate service provider Jones Lang LaSalle (JLL).  Shared office space is expected to reach approximately 3.4 million square feet of retail space by then, concluded JLL.

cowrk-in-mall-300x217Part of the attraction of these coworking spaces for mall owners is that such spaces often serve as incubators for new retail and even service companies that could eventually mature to operate their own stores in the future.  Mall and shopping center operators also like the fact that these coworking tenants bring added foot traffic to the property.  The business owners and employees who work in these spaces represent ideal target customers and prospects for all of the other stores, boutiques and restaurants at the property.

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ORivera2014The firm’s Oscar R. Rivera will co-lead a workshop titled “I Think That? Unconscious Bias: How to Spot It and Become an Inclusive Leader” at the International Council of Shopping Centers annual US Shopping Center Law Conference.

The event, which is taking place Oct. 24-27 at the JW Marriott Grande Lakes in Orlando, Fla., provides retail real estate legal professionals the opportunity to gain industry-specific knowledge and insight from leading authorities.  Attendees will be able to network with more than 1,500 industry peers at the conference, which offers presentations in four different formats with interaction strongly encouraged between panelists and attendees.

Together with his co-presenters, Oscar will help lead the session discussing biases that are automatically triggered and generate quick judgments about people and situations based on one’s background, cultural environment and experiences. icsclogo2015-300x300 He will review a number of studies and statistics about the prevalence of unconscious biases in the real estate industry, and the presentation will conclude with helpful action plans and resources to identify and eliminate them in the workplace.

Our firm salutes Oscar for helping to lead this upcoming workshop at the ICSC annual US law conference.  Click here for additional information and online registrations.

The creation of a viable tenant mix is a critical component for practically every shopping center, so retail leases often have a defined “use” clause that limits a tenant’s use of the premises.  In certain cases, they also contain “exclusives” giving one tenant the exclusive right to their particular use or to sell certain items, and prohibiting all other tenants from that use or from selling those items in the center.

These “exclusive use clauses” many times have carve-outs to allow another tenant to sell some of the product lines covered by the competitor’s exclusive.  This is very common in restaurant exclusive use clauses where, for example, a steakhouse might have an exclusive on “steakhouses” in the center, but its lease contains a carve-out allowing other restaurants to have a steak plate on their menu.  The idea here is that most people who want to have steak are going to go to the steakhouse as opposed to the Italian restaurant at the same center that happens to have one steak item on its menu of pastas, pizzas and salads.

shopping-center-2-300x200The remedies for violations of exclusives are generally rather severe.  The tenant whose exclusive is being violated may sue or pay a reduced rent, and oftentimes they will resort to cancelling their lease and vacating the space.  As a result, these clauses are always heavily negotiated and must be carefully drafted.

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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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