Acquiring Real Property

Acquiring Real Property

Buying commercial real estate can be a complicated process, but it does not have to be. Thorough research and hiring qualified professionals can help streamline an otherwise difficult transaction and protect against potential liability and hidden problems. Although there is always some level of risk associated with purchasing property, many common pitfalls can be avoided by considering the items listed below.

Location, Location, Location

For as much emphasis as we put on where we buy property, it is important to remember that the character of any area can change. Because of this, while an area may be hot at the moment, consider researching businesses that may be moving in or developing in the area, as well as those which may be planning to move in the future. Also check current or future municipal plans, such as pending proposals for re-zoning certain areas, or if there are plans for schools, parks, or special housing developments.

Liquidity Concerns for Businesses

Buying property for your business can save lots of money through control over overhead costs.  Also, by purchasing the property, your business or portfolio may also acquire an asset that will (ideally) appreciate over time. That said, if you are going to make this large investment it is critical to make sure you are not tying up too much of your business’ liquidity in real estate.

Plan on Investing Not Only Money, but Time

Not only will you need to spend a lot of time doing due diligence before buying property, but you will want to be or have to be hands-on after the purchase. Particularly if you are buying commercial property that will have to be let to other tenants, make sure to make frequent site visits and schedule routine inspections.

Team of Experts

In addition to an experienced real estate attorney who can help advise you and protect your interests, consider working with a knowledgeable real estate expert who can help you analyze real estate market trends and other pertinent issues, as well as a tax expert who can outline and help navigate the tax implications associated with owning commercial real estate.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with your business law concerns.

 

The California Unfair Business Practices Statute

Previously on our blog, we discussed the California statute that protects consumers and business competitors from unfair business practices. In today’s entry, we will further parse out what exactly constitutes an “unfair business practice.”

As mentioned before, section 17200 of the California Business and Professions Code states that “unfair competition” includes any unlawful, unfair or fraudulent business act or practice. The key to knowing whether you have a case under the statute is understanding what type of activity is unfair, unlawful, and/or fraudulent.

Unfair

In general, an unfair business practice is one that could potentially deceive the public.  Courts do not have a general license to review the fairness of contracts, but may enjoin deceptive or especially harsh business practices.  Whether or not a particular business practice is unfair will depend largely on the facts of the case.

Unlawful

An unlawful practice is one that violates a statute, rule, or regulation.  The statute, rule, or regulation can be anything from a violation of an obscure federal regulation to a violation of a local city ordinance. This means that even if a plaintiff lacks a private cause of action for a violation of the underlying business law, he/she/it can still bring an unfair competition claim.

Fraudulent

The standard for fraudulent conduct under section 17200 is lower than the traditional common law standard and requires only a showing that members of the public are likely to be deceived.  There does not need to be proof of actual deception, reasonable reliance, or actual damages.

Importantly, under California law a plaintiff does not need to prove all three prongs of the statute (unfair, unlawful, and fraudulent). Rather, the business practice only needs to meet any one of the three prongs in order for the plaintiff to be able to state a claim under section 17200.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law concerns.

California Unfair Business Practices

California law protects both consumers and business from unfair and illegal business practices.  Unfair and illegal business practices are major concerns of business competitors, especially with increased competition, and cost reduction measures.

California Law Preventing Unfair Business Practices

Section 17200 of the California Business and Professions Code states that “unfair competition” includes any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any other act prohibited by the Business and Professions Code. This is the most frequently used consumer protection statute, but is also used by business competitors in a wide range of other types of litigation.

The reach of section 17200 is broad and imposing.  For example, intent (which is typically a required part of a cause of action) is irrelevant under section 17200, meaning that a plaintiff is not required to show that the defendant actually intended to injure anyone with his/her/its unfair business actions or practices.

Similarly, section 17200 does not exempt specific industries, making it applicable to any “person,” which term is broadly defined as “all natural persons, corporations, firms, partnerships, joint stock companies, associations and other organizations of persons.”

Activities that are considered unfair business practices include price fixing between competitors, false advertising, monopolies, boycotting certain businesses, or violating other laws during the ordinary course of business. If your business has fallen victim to such  activities, an experienced business lawyer can defend your interests and help you bring an end to such conduct.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law concerns.

Enforceability of Non-compete Clauses in California

Employees and new businesses often must decide whether and how to handle non-compete agreements. If you are wondering whether a “non-compete” clause in an employment contract is enforceable, remember that you must consider both California statutes and case law on the subject.

What is a Non-compete Clause?

A non-compete clause, also referred to as a covenant not to compete, is a term in a contract in which one party agrees not to enter into or start a similar profession or trade in competition with the other party. Many contract disputes involve this clause, especially where the contract seeks to prevent an employee from working in a certain field or enterprise after leaving a particular employer in that particular field.

California Case Law and Non-compete Clauses

In California  there is a settled public policy favoring open competition.  Kelton v. Stravinski, 138 Cal. App. 4th 941, 946 (2006).  This means that courts will be guided by a policy that favors employees being able to seek employment after leaving their job to encourage competition for the betterment of the economy.

California Statute and Non-compete Clauses

Similarly, section 16600 of the California Business and Professions Code states that, with limited exceptions, contracts restraining individuals “from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

There are two exceptions where broad covenants not to compete are permitted, codified in sections 16601 and 16602 of the California Business and Professions Code, which provide that covenants not to compete are permitted where a person sells the goodwill of a business, or where a partner agrees not to compete in anticipation of dissolution of a partnership.  In the partnership example,  the statute is designed to prevent situations where one partner desires to abandon a partnership, take all the partnership’s clients, and start the same business over on his or her or its own with those clients.

Enforcing a Non-compete Clause

A non-compete clause will be enforced if it does not “circumvent California’s deeply rooted public policy favoring open competition,” meaning that the contract would have to fall within an exception to section 16600.  Even then, a non-compete clause may still be void if it is too broad or held to be a sham designed to evade the public policy against non-compete agreements.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and contract  claims. Contact us at (310) 277-7747 to see how we can help you with your business law concerns.

Protecting Yourself from Partnership Disputes

Countless business people go into a business partnership, whether in the form of a true partnership, a joint venture, limited liability company, or corporation with the best intentions, only to find themselves in a legal dispute. Clashes amongst partners, members, joint venturers, and/or shareholders are extremely common, and occur in every type of business and industry.

As in divorce, financial issues predominate over other causes of insider disputes and dissatisfaction.  Also like divorce, business partners are inclined to blame each other for poor financial success and fight over control, assets, and the future of the partnership.  Disputes of this nature may have severe negative impacts on the overall functionality of a business partnership, irrespective of the form, and make it difficult for partners to reach a resolution. The most common partnership disputes include:

  • One or more partners, members, joint venturers, and/or shareholders wanting to sell the company;
  • Deciding who will retain ownership and control over the business;
  • Personnel retention; and
  • How will profits be distributed and losses will be allocated.

If your business is suffering from internal disputes, disagreements, or financial losses, an experienced business lawyer can help you resolve issues before the dispute gets to a point where winding-up, dissolution, or litigation becomes necessary. Having an experienced business attorney can also help identify and evaluate options to be explored.

If your partnership or business is failing or if you are in the midst of a dispute amongst partners, members, joint venturers, or shareholders, contact Ezer Williamson Law to discuss how best to protect your business interests.

Interpreting Ambiguous Contract Terms

One of the main reasons that contract disputes arise is because of ambiguous contract terms.  Of course, this can be prevented with meticulous drafting, but in the event that issues do come up after the contract is completed and signed, it is important to understand how the provisions will be interpreted.

Most contracts include an “Interpretive Provision” or “Other Definitional Provision.”  There may also be  certain clauses that provide that some clauses or terms will supersede conflicting clauses or terms found in another part of the contract.  If these clauses do not help solve issues of inconsistency or ambiguity (or simply are not present), California statutes and case law (court rulings) will be guide how the contract clauses or terms will be interpreted.

The California Civil Code §§ 1635-1663 provide rules of interpretation that are used when no provision in a contract helps clear up an apparent ambiguity.

  • All contracts must be interpreted to give effect to the mutual intention of the parties at the time of contracting.
  • The language of a contract is to govern its interpretation, and the whole contract is to be considered together.
  • If there are several contracts between the same parties relating to the same matters, they can be interpreted together to resolve ambiguities.
  • Words in a contract that are technical or particular to an industry will be interpreted as they are understood by people in that industry.
  • California law also allows a contract to be explained by reference to the circumstances under which it was made.
  • If there are words in a contract that are inconsistent with the contract nature, or with the main intention of the parties, they will be rejected.

It bears repeating that the best way to avoid ambiguity in contract disputes is in the drafting phase. Even form contracts can and should be tailored to the specific party agreement. If at any point a party guesses or assumes the meaning of a contract provision, a written clarification or definitional paragraph should be added to avoid misunderstanding or ambiguities later.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with any business dispute or related concerns you may have.

Provisions of a Partnership Agreement

Although it is not required to have a formal written agreement to form a general partnership, having one is highly recommended, not only because it can be very difficult to prove the existence of and enforce informal oral arrangements, but also because the “default” statutory laws a court will apply in the absence of an agreement may not ensure an equitable result.

Before creating any partnership, the parties should work with an attorney to create a formal, written partnership agreement that outlines exactly how management control, profits, and losses will be divided. The following are typical partnership agreement provisions and should help those who are considering a partnership begin to think about the issues to be addressed at the outset.

Partner and Partnership Information

Each agreement should contain the most basic information, including the name, purpose, and location of the partnership.  It should also spell out partner names and how much capital (or other investment) each  partner contributed, and/or agrees in the future to contribute.

Sharing Profits and Losses

An agreement should state the percentage of partnership profits and losses that each partner will bear and how the percentage is derived.
Management and Voting Information

To prevent future disputes about partnership control or obligations, establish who is going to manage the partnership, who has authority to sign checks and contracts, and whether partners will receive salaries or other benefits for their services to the partnership.  The agreement should also include a provision establishing partner voting rights.

Plans for Winding Up

In case of partnership dissolution, an agreement should include provisions for winding up. This will be an anticipated exit strategy detailing the circumstances under which partners can withdraw, how much notice they must provide, and how partnership assets will be distributed. The agreement should also address how to handle partner retirement, bankruptcy, disability, and death.

Dispute Resolution Preference

The partners can and should agree to bring disputes to mediation or arbitration prior to or as an alternative to filing a lawsuit.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with any business dispute concerns you may have.

The Difference Between General and Limited Partnerships

The two most common types of partnerships are general partnerships and limited partnerships. Depending on the type of business involved, one type of partnership may be a better option than the other.

General Partnerships

All it takes to form a general partnership is an agreement between two or more people to enter into business for profit.  There does not need to be a written agreement, and no state or local filings are required. This formation requirement is so simple that individuals may not even know they have created a general partnership.

In a general partnership, each partner is jointly and severally liable for the partnership’s liabilities, and, most importantly, an individual partner is personally liable for partnership liabilities.  That means each partner is liable for any debts of the partnership or of any partners on behalf of the business, and creditors or third parties can attempt to collect debts and liabilities by going after an individual partner’s personal assets. This makes the general partnership a particularly risky business form.

Limited Partnerships

To form a limited partnership, there must be a formal agreement and the required documents must be filed with the California Secretary of State’s office.  Limited partnerships are similar but distinct from general partnerships. In a limited partnership, there has to be at least one general partner and one limited partner.  The general partner faces the same liability risks described above – joint and several, and potentially personal liability.  Because of this, the general partner in a limited partnership is typically an entity with limited liability.  The limited partner has limited personal liability in most instances, with the limitation being the limited partner’s investment in the partnership.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with any business dispute concerns you may have.

Solving Partnership Disputes

Disputes between business partners often center on issues of money and control. As common as business partnership are, they can be quite difficult to sustain. Partnerships between any number of people often entail complicated relationships, which lead to conflicts within partnerships. Most issues between partners do not necessarily mean that the entity should be dissolved, liquidated, and split-up.  Rather, the problems can be solved with a collaborative approach and the relationships preserved.

Concerns about control and decision-making power must be objectively addressed and evaluated as soon as a partner starts worrying about how the business is controlled, begins to perceive unfairness, or has doubts about the integrity of another partner’s actions.  A collaborative approach toward resolution can be accomplished by working with an attorney to explore possible options, such as inspecting accounting books and records, before other dispute resolution methods are pursued.  One of the key steps in evaluating partnership disputes is examining the partnership agreement, which will typically set out how partners are to share management and financial control.

If you are entering into a partnership agreement, it is critical to have a practical understanding and approach before entering the agreement, and to have an attorney review the agreement to help prevent misunderstandings or mitigate the potential damage from future disputes.

If you are in the midst of a partnership dispute, it may be a good idea to revisit and revise the agreement, if possible, as part of resolving the dispute prevent future disagreement over matters such as management control or finances.

Sometimes a partnership dispute can be resolved with creative, cost-effective solutions through negotiation or mediation. Unfortunately, such out-of-court solutions cannot always be reached, and when other means have been exhausted, litigation may be necessary to move forward or remedy any wrongdoing or mismanagement.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. Contact us at (310) 277-7747 to see how we can help you with any business dispute concerns you may have.

Understanding the Principal-Agent Relationship

Understanding the principal-agent relationship  is critical for all business transactions. The laws of agency govern this relationship, and they establish when an agent can bind a principal to an agreement, how far an agent’s liability extends, and what the fiduciary duties are that arise from the relationship.

The Principal-Agent Relationship

Generally (in terms of an “actual agency”), a principal hires an agent to act on his or her or its behalf.  The principal-agent relationship is not limited, however, to employers and employees. Rather, it is quite broad, incorporating corporations and directors, business partners, and trustees and beneficiaries, to name a few.  Thus, it is not always easy to establish whether an agency relationship has been formed.  For an agency relationship to exist, an agent must consent to do something for the principal, the agent must agree to operate primarily on behalf of the principal, and the principal must exercise control over the agent.

It is important, however, to know whether a principal-agent relationship exists and to define its scope, because failing to do so can pose significant risks to business owners and other principals, particularly because an agent can bind a principal to a contract, principals may be liable for an agent’s torts, and principals and agents have and owe certain fiduciary obligations to one another.  For example, a principal can be bound by a contract that an agent enters if a third party is under the impression that an agent does have signing authority even if the agent does not have the actual (explicit) authority to do so.

Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and property claims. Contact us at (310) 277-7747 to see how we can help you with your business law concerns.