Quiet Enjoyment for a Commercial Tenant in California

Previously on our blog, we have discussed the many differences between rights held by residential as opposed to commercial tenants. Recently we examined how both residential and commercial tenants have a right to quiet enjoyment of their rented property, but that it is sometimes more difficult for commercial tenants to escape the term of a lease for a violation of the covenant. Here, we will discuss what quiet enjoyment means for a commercial tenant.

The right to quiet enjoyment requires a landlord to ensure that a tenants’ use and enjoyment of the property will not be disturbed.  Every California lease includes a covenant of quiet enjoyment, and such a covenant is often an express term in commercial leases.  But unlike residential rental agreements, parties to a commercial lease can modify or waive the covenant of quiet enjoyment.

Even if a commercial lease contains a provision ensuring quiet use and enjoyment, another provision in the lease can modify or limit the remedies available for a breach by the landlord. For example, in one case, the lease agreement reserved a right for the landlord to renovate the property. The Landlord did so, but the tenant complained that the renovation, which was diminishing the tenant’s visibility to customers and causing dust to enter the premises, was interfering with his right to quiet use and enjoyment. A court held that the provision allowing remodeling without claims for damages modified the covenant of quiet enjoyment, and the tenant lost. Fritelli, Inc., v. 350 North Canyon, 202 Cal.App.4th 35 (2011).

As this case shows, the answer to “What does quiet enjoyment mean for a commercial tenant” is often determined by the specific terms of the commercial lease at issue.  The right can be eliminated or modified by a term or multiple terms of the lease agreement, making a particular commercial tenant’s rights as unique as their lease.

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 or real estate law concerns.

Constructive Eviction in Commercial Leases

California law provides tenants with a right of quiet enjoyment of the property they are renting. This right requires a landlord to ensure that tenants’ use and enjoyment of the property will not be disturbed. The right to quiet enjoyment is heavily protected in residential lease agreements and cannot be waived.  However, the right to quiet enjoyment may be waived in commercial lease agreements, and therefore  showing constructive eviction in commercial leases is often more difficult.

It is understandable why the right of quiet enjoyment is more protected for residential tenants than commercial tenants. Obviously, residential tenants are inhabiting the rented space, whereas commercial tenants are merely using rented space for business purposes. If a residential tenant’s right to quiet enjoyment is interfered with, the tenant has the option to either stay in the rented space and sue for damages or vacate the premises and claim constructive eviction. Constructive eviction is essentially a claim that the tenant could no longer live in the property because of the interferences with use and enjoyment of the property, justifying abandonment of the space.

However, showing constructive eviction commercial leases can be more difficult.  In 1994, the appellate court in Lee v. Placer Title Company held that a lease provision prohibited a commercials tenant’s claim for constructive eviction, restricting his rights to a claim for damages or injunctive relief.  In that case, the tenant claimed that cleaning fumes from a neighboring laundromat made his rental space unusable, and on that basis the tenant stopped paying rent and vacated the premises on the claim that there had been a constructive eviction. The commercial landlord sued the tenant for the balance of the rent owed on the lease as damages, arguing that the lease agreement contained a provision prohibiting constructive eviction. The court agreed with the commercial landlord, and held that the covenant of quiet enjoyment was  waived by the tenant. Lee v. Placer Title Company, 28 Cal.App.4th 503 (1994).

In the case of Lee v. Placer, the tenant may have been more successful in seeking a reduction of rent for the duration of the interference, rather than vacating the premises. If the tenant could prove that the fumes were making it impossible to use the space, they may also have been able to sue for damages to cover a temporary office location somewhere else.

Before ever vacating  premises for which rent is still owed and the lease term is still running, it is highly advised that you consult with an experienced attorney. 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 or real estate law concerns.

Negotiating a Commercial Lease

Unlike run of the mill residential leases, many terms of commercial leases are usually negotiable, although your leverage in the negotiation will be affected by your real estate knowledge and the current rental market. For example, if there is a surplus of commercial space available in your preferred area, you will likely have more leverage to negotiate terms with a prospective landlord.  Similarly, having confidence in and being informed about the terms of the lease, strength of the market, and desirability of the property, you will also work in your favor during negotiations.  In negotiating a commercial lease, common negotiating points include the rent, rent increases, lease term, common area operating expenses, and sublease and assignment terms.

Negotiating a Commercial Lease: Rent Payment and Increases

Although landlords generally do not lower the rental prices they offer, they may consider reduced rent, i.e., rent concessions, to compensate for moving costs, tenant improvements, or caps on rent increases. Commercial lease agreements almost always contain an annual percentage increase on rent. The amount of the annual increase is often negotiable, as is a cap on the percentage increase. If the lease space needs a lot of improvement, this may be used to lower rent or support a request that the landlord cover certain improvements.

More complicated commercial leases, such as leases with rental provisions that include percentages of net sales as a component of the monthly rental amount, are often subject to more intensive negotiations where the tenant and the landlord would look to balance the benefits of a lower base rent against the potential for high returns from sales figures.

Negotiating a Commercial Lease: The Term of the Lease

Depending on whether you are a commercial landlord or tenant, you may prefer either a short or long term lease.  Generally, a tenant will prefer a short-term lease, which will allow more flexibility.  A commercial landlord will usually prefer a long-term lease, ensuring steady rent for a period of years. Commercial tenants negotiating a commercial lease who have a location-sensitive businesses often find that long term leases are more beneficial because they can rely on the affordable business space for a predictable period of time, and the stress of moving frequently is eliminated.  In addition, a long term lease generally allows tenants to lock in more favorable rental rates. A common way to balance the competing benefits of long term and short term  leases is to negotiate option rights, i.e., the right to renew the lease for successive terms.

Negotiating a Commercial Lease: Subleases or Assignments

The right to sublease or assign a space is also negotiable. Tenants usually seek this right to protect themselves from being locked into a space when business needs require the tenant to move. Landlords sometimes will agree to a sublease or assignment in order to make sure their property is filled, but some either specifically prohibit or restrict such rights to protect the quality and type of tenants.  Granting the tenant sublease and assignment rights subject to the landlord’s “reasonable” discretion and approval is a good way to reach a reasonable compromise on these issues.

If you have any questions about negotiating a commercial lease, contact an experienced attorney. 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 or real estate.

Supreme Court Rules for Amazon in Employee Searches Case

It is common practice for retailers to search their employees before they leave work. In a recent United States Supreme Court opinion,  Integrity Staffing Solutions v. Busk, the Court ruled that workers do not have a federal right to be paid for the time spent in these post-shift employee searches. This decision will save businesses billions of dollars, including companies like Amazon, who is projected to save over $100 million.

In the opinion  the justices unanimously rejected former Amazon warehouse workers claims that Amazon and the company that staffs several Amazon facilities were not fairly compensated for their time during these employee searches, and that Amazon and the staffing company were therefore violating federal wage laws. Integrity Staffing Solutions v. Busk, 574 U. S. ____ (2014).

The opinion of the Court centered on what constitutes a “principal activity.” Under the 1938 Fair Labor Standards Act, workers must be compensated for their principal activities, which the Supreme Court previously described as activities that are “integral and indispensable” to the job itself.  The Court found that the security screenings at issue did not constitute principal activities, as they were not integral and indispensable parts of the job. Therefore, there is no need for companies to compensate their employees for the time they spend waiting to be searched and the time of the employee search.

Amazon’s position was that employee searches help protect against theft, and is necessary but not part of the employees’ jobs. This ruling may shield several other companies who use employee searches from facing similar claims, including Apple, Ross Stores Inc., CVS Health Corp., and J.C. Penney Co.  If the Supreme Court had decided for the workers, Amazon and the various staffing agencies it uses could have been liable for the back wages of as many as 400,000 workers, amounting to $100 million or more.

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.

Healthcare Laws Prevent Paying High-Cost Employees to Use Exchange

Many business are self-insured, meaning that they provide healthcare plans for their employees. However, because of the high costs associated with this practice, some companies have been paying employees with significant health issues to opt out of company medical plans and get coverage on the insurance exchange market. Recently, a number of federal agencies have said that this practice is illegal under current healthcare laws.

From a business perspective, it is easy to understand why companies may encourage this practice.  An employee with major health care issues, such as a chronic disease, can accrue hundreds of thousands of dollars in medical costs each year.  If that same employee uses the Affordable Care Act’s health insurance exchange program, their total healthcare costs would only be about $10,000.  The reason for this is that the cost of coverage through the exchange is set at $10,000 regardless of pre-existing conditions.  Therefore, employers are often tempted to pay an employee around $10,000 to enter an exchange, rather than expend (potentially) significantly more than that through a company health plan.

The problem is that when companies pay their employees with high healthcare costs to go through the exchange, this shifts the high costs to taxpayers and other insured individuals. The Department of Labor, backed by the Department of Health and Human Services and the Treasury Department, have said that such shifting also violates current healthcare laws, including the Health Insurance Portability and Accountability Act and the Public Health Service Act because the practice unlawfully discriminates against employees based on their health status.

Although it is unclear what penalties companies could face for violating the healthcare laws paying employees with significant health issues to opt out of the company medical plan, companies are being discouraged from this practice in light of the government’s position described above.

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.

What is an Indemnification Clause?

An indemnification clause is often found in contracts and is designed to protect one party from financial loss, and shift the risks and any potential loss to another party. Usually, the risk of loss is shifted to the party who is in the best position to control and prevent the risk at issue.  While an indemnification clause is a great term to have in a contract to protect parties from certain events, they can also be used by one party to take advantage of another.

The duty to indemnify (that is, the obligation to take on another’s risk or loss), can arise from an express contract term, an implied contract term, or for equity/fairness reasons. When a party provides indemnity it is in effect acting as an insurer for the other party. An example of a typical indemnity situation is where one party is obliged to reimburse the other party if that other party is forced to defend itself for an issue arising out of the agreement containing the indemnification clause.

However, an indemnification clause can be ambiguous and create complications and risk for the parties to the agreement.  California law itself also complicates indemnification issues by differentiating between responsibility for “passive negligence” and “active negligence.” More specifically, if an indemnity clause is general and does not expressly provide for indemnity for negligence, California courts will still consider the indemnification clause to cover indemnity for passive negligence if intent can be shown under the particular circumstances. Passive negligence includes nonfeasance for failure to discover a defect or perform a duty imposed by law.

In short, it is highly recommended that any contract containing an indemnification clause be reviewed by an attorney and modified as appropriate to clarify any ambiguities and clearly define the parties’ respective rights and obligations.

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 Coastal Access and Property Law

A common issue that arises in California property law surrounds public coastal access. In September 2014, a California Superior Court judge ruled in favor of coastal access advocates by holding that a property cannot block the only public access route to Martins Beach (located less than an hour outside of San Francisco, California), without permission from the Coastal Commission, and demanding the property owner to open the gate blocking access to the beach.

The case, Surfrider Foundation v. Martins Beach 1, LLC, et al., was a bitter dispute over private property rights and public access to California’s coast filed in the San Mateo County Superior Court, Case No. CIV520336, before Judge Barbara Mallach.  The court held that blocking access to the road constituted “development” under the California Coastal Act, and the owner, venture capitalist Vinod Khosla, must apply for a permit if he wants to block the public from accessing the road.

Khosla was sued by the nonprofit Surfrider Foundation after his property manager blocked off Martins Beach Road, the only access to Martins Beach.  His property manager previously allowed the public to occasionally visit a stretch of sand off the property where locals went surfing and smelt-fishing for decades, but Khosla had the gate permanently closed after his property manager received a letter from the county in 2010 demanding that the gate stay open every day.

The issue is complicated because, under the public trust doctrine, beaches are widely considered public property and access to them is protected. However, there is no legal requirement that private property owners allow the public to cross their land to get to the beach.

The court sided with the Surfrider Foundation’s position that under the 1976 Coastal Act, which gave a statewide Coastal Commission jurisdiction over beachfront land and coastal access. Khosla needed to apply for a development permit in order to close the gate. The commission usually only grants development permits, typically to build a home or another structure, if the public gets an established right of way in return. However, the Commission cannot ask a property owner to dedicate an easement for public access.

The Judge’s ruling and recent injunctive relief order require public access to be restored to Martins beach. Khosla’s lawyers are considering appealing the verdict and pushing the issue of private property rights. Even if he does, a bill has been proposed that would require the State Lands Commission to consider purchasing the road if negotiations with Khosla for public access fail.

This case is important because the final determination will set a property law precedent that will impact all 840 miles of California’s coastline.

If you have any questions about easements or real estate transactions, contact an experienced attorney. 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 or real estate concerns.

Is an Oral Contract Enforceable in California?

Despite the fact that it remains the better and safer practice to put all contracts in writing, many important business and partnership agreements are still made orally.  While oral contracts are enforceable in California in many circumstances, the California Civil Code specifically requires that certain agreements be put in writing to be enforceable.

Specifically, California law requires that the following contracts be in writing in order to be enforced:

  • A contract in which performance will necessarily exceed one (1) year after the signing of the agreement.
  • A contract in which performance is not scheduled during the promisor’s lifetime.
  • A contract containing a special promise to pay for the debt or default of another.
  • A leasing contract where the lease term is over one (1) year.
  • A contract for the sale of real property.
  • A contract authorizing or employing an agent, broker, or any other person to purchase or sell real estate, or to lease real estate for a period than one (1) year.
  • A contract to loan money or extend credit in an amount greater than $100,000 that is not primarily for personal, family, or household purposes and is made by a person engaged in the business of lending or arranging for the lending of money or extending credit.

There are some exceptions to these requirements, such as the fraudulent inducement by one contracting party who causes another to agree not to have a written contract for an agreement that is normally required to be in writing. In such a case the oral agreement may be enforced.

If you are concerned about the enforcement of an existing verbal agreement, keep in mind that California Courts are inclined to enforce contracts if they feel that one of the parties somehow used fraud to induce another person to rely on a promise. Still, a written contract is always recommended, especially considering the potential costs associated with efforts to enforce a verbal agreement in court.

Ezer Williamson 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.

Non-Compete Clauses in Action

Previously on our blog, we discussed the enforceability of non-compete clauses. It is important to be familiar with the concept not only for contracting purposes, but also from the standpoint of being either an employer or employee. Recently, this issue has been in California state news, as it appears that large companies are trying to enforce non-compete clauses that are found in employment agreements of low-wage workers.

The case at issue involved Benny Almeida, a former employee of the company ServiceMaster. While at ServiceMaster, Almeida was paid $15-an-hour for his cleaning job. Another company reached out to him and offered to pay him $18 an hour to do cleaning work there. Almeida took the higher paying job, but was then threatened with legal action from ServiceMaster. The reason is because Almeida’s employment agreement with ServiceMaster contained a non-compete provision allegedly prohibiting him from doing similar work in the same geographic area as the ServiceMaster location. ServiceMaster has claimed that the non-compete provision is to prevent ServiceMaster from training employees only to see their efforts benefit competitors.

As we discussed previously, non-compete provisions are heavily disfavored both by the Courts and by the public policy codified in the laws of the California Labor Code.  However, the Code provides one exception to this general rule, allowing non-compete agreements between individuals selling the goodwill of a business, so as to protect a company’s intellectual property, trade secrets, or client lists.

Considering the intent behind the law, it is unlikely that a low-wage worker such as Almeida will be bound to a non-compete agreement with his or her previous employer. But as shown by the Almeida case, there is still uncertainty about the line between illegal and permissible non-compete contract provisions and whether employers can or (economically) should enforce the non-compete provisions in their employment contracts.

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.

Understanding what “Doing Business As” Means in California

The phrase “doing business as” or “DBA” is a legal term used to signify that the trade name, or fictitious business name, under which the business or operation is conducted and presented to the world is not the legal name of the business responsible for it. For example, a company may incorporate under the name “XYZ Inc.”  This is their legal name and where the business’ creditors can seek payment or compensation, that is, any lawsuits against the company would, or should, be brought against this entity. However, XYZ Inc. can file for a fictitious business name that they will do business under, such as “Better Name Company.”  This name is their “DBA” and the full legal designation would be XYZ Inc., DBA Better Name Company.

In California, if you are going to have a DBA, you need to register a fictitious business name statement with the county clerk in the county where your principal place of business is located. A fictitious business name statement needs to be filed if the business is a:

  • Partnership;
  • Sole proprietorship doing business under a name that does not contain the owner’s last name; or
  • Corporation doing business under a name other than its legal name.

As stated above, unlike most corporate filings, when you are doing business as a fictitious business name, you do not file with the Secretary of State’s Office, and instead you will need to contact either your city or county clerk or recorder.  Be sure to ask about their specific filing requirements relating to DBAs, as fees vary and sometimes multiple copies of forms are required.

The fictitious business name statement needs to be filed either within forty days of starting the business or before the current statement on file expires.

After filing a fictitious business name statement, you need to publish a fictitious business name statement with the name you will be doing business as in a newspaper of general circulation in the county where the statement was filed. You have thirty days to do this after filing the statement, and the publication needs to appear once a week for four successive weeks. After the last publication date, you have another thirty days to file an affidavit of publication with the county clerk’s office.

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.