Articles Posted in Commercial Leasing

The firm’s latest Miami Herald column was authored by managing partner Oscar R. Rivera and appears in today’s edition of the newspaper. The article, which is titled “Real Estate Counselor: Ruling Finds Health Club On Hook for Lease Payments During COVID Closure,” focuses on the government-mandated COVID-19 business closures at the start of the pandemic in 2020. For LA Fitness and its parent company Fitness International, it equated to months of closed facilities that were generating no revenue but requiring monthly lease payments. Oscar’s article reads:

. . . There was a great deal of conjecture about whether the “force majeure” provisions in leases would shield businesses that were required to close due to governmentally issued mandates from their payment obligations under their leases. These clauses typically relieve parties from the performance of some or all contractual obligations, and from the consequences of failing to perform those obligations, where performance is rendered effectively impossible by circumstances beyond their control. Many thought the COVID closure fit the bill for the application of such provisions to a tee, and litigation would surely ensue.

Lawsuits were indeed filed, and one of the first cases over this exact question to reach conclusion by a state appellate court was decided recently in favor of the landlord for an LA Fitness location in Bradenton. The state’s Second District Court of Appeal affirmed the lower court’s summary judgment ruling and found the health club would not be entitled to a refund of its lease payments made during the mandated closure period.

The company made all rent payments required under the lease during the lockdown, which was from March 17 to June 12, 2020, but it eventually filed suit in August 2021 seeking a refund of those payments. It primarily based its claims on the lease’s force majeure clause, arguing that it was excused from paying rent during the closure period, and it also relied upon the common law doctrines of frustration of purpose, impossibility of performance, and impracticability of performance.

May 13, 2021

The Future of Parking Areas

In a world where ride services such as Uber and Lyft have become widespread, and electric cars are becoming extremely popular, many are asking themselves what that means for parking lots going into the future. In the past, office and retail tenants relied on serious negotiations and a series of analyses to figure out acceptable parking ratios for their stores and offices. But can we expect the same parking concerns from commercial real estate tenants in the future, or will their focus shift to other interests such as charging stations and drop-off/pick-up zones?

Parking ratios are generally established by local zoning codes. The parking ratio is a statistic commonly used to determine the number of parking spaces available for use by each commercial tenant. The total parking spaces available are divided by the property’s entire gross leasable area, with the ratio most commonly expressed per every 1,000 sq. ft. of property.

Most retail stores require four spaces per 1,000 sq. ft., while restaurants are typically allocated more parking spaces for every 1,000 sq. ft. These numbers can vary depending on the property type.

Besides ensuring that the correct number of parking spots are assigned, big box stores like Marshalls, Old Navy, Best Buy, and grocery stores such as Publix, serving as anchor stores, also require specific parking fields in front of their stores and demand certain parking ratio minimums. It is not uncommon for these tenants to designate protected parking areas, prohibiting landlords from ever changing, rearranging or reassigning their parking spaces, and to maintain architectural control over their parking areas.

November 10, 2020

Oscar Rivera Co-Authors Article for ABA Probate & Property Magazine: “Navigating Early Termination Clauses in Commercial Leases”

Probate & Property article

Firm co-managing partner Oscar R. Rivera co-authored the lead front cover article for the November-December issue of the American Bar Association’s Probate & Property magazine together with Travis D. Hughes of Atlanta-based Hughes Investment Partners. The article, which is titled “Navigating Early Termination Clauses in Commercial Leases,” focuses on the tolls that the COVID-19 pandemic and the Spring 2020 protests have taken on many businesses and commercial landlords. It discusses important early termination provisions and the need to anticipate likely and unlikely future calamities in commercial leases.

Our firm salutes Oscar for sharing his insights into these timely issues impacting commercial leases with the readers of the ABA’s Probate & Property. Click below to read the complete article.

June 30, 2020

House Bill 469 Becomes Effective on July 1, 2020

The Governor signed House Bill 469 on June 27, 2020, dealing with real estate conveyances. The bill removes the requirement under Section 689.01, Florida Statutes requiring a landlord to have two witnesses when signing a lease for a term of more than one year.

The requirement for witnesses was limited to a landlord’s signature only and was designed to protect the grantor of the estate in the land. House bill 469 provides that no subscribing witnesses are required for a lease of real property or any instrument pertaining to a lease of real property, eliminating the requirement that two subscribing witnesses be present when the lessor signs a lease with a term of more than one year.

The bill becomes effective on July 1, 2020.

April 20, 2020

Article by John Catalano in Today’s Miami Herald: “Owners of Retail Properties, As Well As Tenants, Will Feel Pandemic’s Bite”

An article authored by firm shareholder John Catalano is featured in the Business Monday section of today’s Miami Herald. The article, which is titled “Owners of Retail Properties, As Well As Tenants, Will Feel Pandemic’s Bite,” focuses on the prospects for rent deferrals and insurance claims for the owners of closed stores and the spaces they occupy. It reads:

. . . It has quickly become apparent that the outbreak of COVID-19 will take a massive toll not only on retail tenants, but also on the owners of retail properties. One of the first places that retailers will look for potential relief will be their lease agreements, which may include force majeure clauses and other provisions that are designed to cover business disruptions caused by catastrophes and acts of God.

These provisions will often list events such as floods, earthquakes, war, strikes, government regulations, civil disorder, etc., as triggers that would delay parties’ obligations under the contract. The applicability of the spread of COVID-19 as a force majeure triggering event may depend on the exact wording used in the lease. Some may generally stipulate “conditions beyond the parties’ control, including but not limited to Acts of God” as qualifying conditions, while others may specify circumstances such as “war, terrorist act, government regulation, disaster or strikes.” While leases widely differ in their form, modern leases for most major retail centers include a carve-out that the occurrence of a force majeure event does not permit late payment or nonpayment of rent by a tenant. Continue reading

March 31, 2020

Commercial Real Estate Lenders, Owners and Tenants Must Compromise to Avoid Collapse

By Oscar R. Rivera and John Catalano

Real estate billionaire Tom Barrack, the chairman and chief executive officer of Colony Capital, warned recently that the U.S. commercial real estate mortgage market is on the brink of collapse due to a predicted chain reaction of margin calls, mass foreclosures, evictions and bank failures resulting from the coronavirus pandemic.

“Loan repayment demands are likely to escalate on a systemic level, triggering a domino effect of borrower defaults that will swiftly and severely impact the broad range of stakeholders in the entire real estate market, including property and home owners, landlords, developers, hotel operators and their respective tenants and employees,” he wrote.

The longtime friend of President Donald Trump surmises that the impact could dwarf that of the Great Depression.

Indeed, the commercial property market is under severe strain domestically and abroad due to forced shutdowns of retail and hospitality businesses during the COVID-19 outbreak. The looming crisis in commercial real estate could eventually cause the Federal Reserve to relax some regulations, allow more forbearance on loans, and buy distressed assets directly by restarting the Troubled Asset Relief Program.

December 11, 2018

Popularity of Food Delivery Apps Prompt Need for Changes at Shopping Centers, Malls with Restaurant Tenants

by John Catalano

John Catalano

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.

The 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.

November 26, 2018

Turmoil in Mattress Store Sector Leads to Important Considerations for Property Owners

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. 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.

October 22, 2018

Good Guy Guaranty – What is It?