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Orange County Legal Blog

What business interruption insurance does not cover

Like other retail establishments across the country, most located here in Orange County take as many steps as possible to avoid losses that could have an adverse effect on operations. Since there are many events that retailers cannot plan for, they do the next best thing and purchase insurance policies to cover losses associated with them. One policy many companies have is business interruption insurance, which is designed to cover a variety of expenses and lost revenue under certain conditions.

However, there are things that this insurance does not cover. For instance, if a business suffers property damage, this is not the policy under which to file a claim. This policy will not cover the losses of materials such as equipment, inventory and other items. It will cover any revenue losses while the business cannot operate due to the property damage.

Force majeure clauses and public health concerns

The world seemingly changes every minute as a result of the impact of the deadly coronavirus. Everyday life is on hold as communities struggle to get the virus under control. Due to quarantines and social distancing, many businesses have had to adapt in order to retain some sense of normalcy in these trying circumstances. The constant changes have made it difficult for small business owners to know how to best protect themselves in the event of such a widespread pandemic.

Most small business owners have signed leases that detail their obligations in regards to the property or building where their business is located. The financial impact of the virus may make it difficult to make ends meet, and owners may need to know about their options when dealing with their landlords on matters of concern. When reviewing their lease, they may notice a force majeure clause, which excuses performance in the matter of unexpected events. But what does this mean? And how can this protect tenants in the face of a global health event such as this?

Commercial tenant calls out landlord for bad asbestos disposal

Renovations and build-outs happen all the time when someone wants to rent office space here in Orange County or elsewhere. As the construction progresses, workers may come across asbestos, which needs to be handled carefully in order protect people from exposure to this toxic substance and human carcinogen. When a landlord fails to properly handle this situation, it could lead to illnesses and litigation.

An office building in another state has become the center of litigation and controversy over the issue of asbestos. A former tenant claims that the landlord directed a former contractor to take materials covered and made with the toxic substance to a dumpster outside the building. The landlord wanted it done quickly and quietly.

It's vital to do some research before becoming a landlord

Owning commercial property here in Orange County could provide a lucrative source of income. However, before becoming a landlord, a property owner may want to do some research. Otherwise, the experience may not be as positive as both landlord and tenant expect.

For instance, understanding the property's zoning is crucial. If the property owner leases to the wrong party, he or she could end up in trouble with authorities. After the substantial investment it will take for the owner to rent the property and for the tenant to lease it, having to deal with zoning violations could become expensive. After gaining an understanding of the zoning, it may be easier to understand the type of prospective tenants to search for when marketing the property for rent.

Issues to address in a commercial lease

Orange County business owners looking to rent space will first need to enter into negotiations regarding the terms of that rental. No one should simply sign a commercial lease put in front of them without investigating the terms first in order to make sure their interests are protected. Below are just some of the issues to address when working out the terms of a lease.

The property owner may want a personal guaranty, which makes a company owner personally liable for any payments not made by the company under the lease. Many leases include clauses regarding an increase in rents. These clauses require close attention in order to double-check the landlord's math and determine whether the terms are fair to and doable by the prospective tenant.

An Orange County development needs to comply with the ADA

How many people living in or visiting Orange County live with some type of disability? Someone may have those numbers, but if there is even one person here who needs accommodations in order to frequent a certain commercial property, it must comply with the Americans with Disabilities Act. Few people would argue that a development needs to be in compliance, but it can be easy to miss something unless the property owner is familiar with what the Act requires.

Developers and property owners may want to educate themselves as thoroughly as possible regarding what the Act and any California laws require when it comes to making sure a commercial property includes the accommodations needed by individuals with disabilities in order to enter and otherwise function within the property. Doing so could not only make sure these clients or customers have access, but also make sure that the property owner does not end up facing fines, lawsuits or expensive remodeling. How is it possible that developers do not already know what the ADA requires?

A commercial tenant's proposed TI allowance may not be enough

Finding rental space in a new building may seem like a stroke of luck to some Orange County small business owners. New buildings often come with "bells and whistles" not yet offered in older buildings. This may cause a prospective commercial tenant to think that it will not be necessary to have a significant tenant improvement allowance from the property owner.

As it turns out, that may not be the case. What may seem like a generous allowance could actually not be nearly enough. Research indicates that it costs approximately $14 more per square foot to build out a new space to a tenant's needs and specifications than it would to renovate an older space.

Pay close attention to the letter of intent for retail space

Deciding to rent space here in Orange County instead of buying is a crucial business decision that affects the future of a business. Before the negotiations for a commercial retail lease begin, there is often a letter of intent from the landlord or property owner. This document outlines the basic terms the landlord expects for the final lease agreement.

Before signing this document, Orange County business owners may want to closely scrutinize this document. Once signed, it may be more of a challenge to make changes in the terms outlined in the letter of intent. If a potential tenant does not agree with one or more of the terms, now would probably be a good time to begin those negotiations.

Encroachment can lead to a boundary dispute on your property

Boundary line disputes can be a big problem when you're trying to sell your home or purchase one from another party. Whether you're trying to build a new property or want to sell what you have, it's always important to know what the land boundaries are. When there is a boundary dispute, it can make it hard to do the things you want to do on your land.

You might not think there is an issue with something you're planning to do on your property until a neighbor complains that you've encroached on their land. Maybe the listed property boundaries no longer match up to what you see in front of you. Whatever the case may be, it is necessary to resolve the dispute and set true boundaries, so you can continue with your sale, purchase or construction.

Repurposing an old development could be the way to go

People no longer want their lives as segmented as they used to be. Living in the suburbs, shopping on its outskirts and working in the city may have made sense decades ago, but not as much anymore. Now, whether living here in Orange County or elsewhere, many people want to be able to take a short walk from their home, to the grocery store and to work, which means a mixed-use development would be ideal.

Finding the space to start a new development in highly populated areas such as Orange County presents a challenge. It could make more sense to repurpose an old development that is languishing. Considering the housing shortage here in California, zoning issues may not be quite as complex as they used to be. In addition, finding the right anchor tenant in one of these developments could put it on the map.