Question 1

What are common disputes in commercial lease relationships?

Accepted Answer

Commercial lease disputes frequently involve rent payment issues including CAM charge disputes and percentage rent calculations, maintenance and repair obligations, lease interpretation regarding permitted uses and exclusivity provisions, tenant improvements and allowances, assignment and subletting rights, insurance and indemnification requirements, options to renew or purchase, default and termination procedures, and security deposit disputes. Many disputes arise from ambiguous lease language or changed circumstances not contemplated by the original agreement. Careful lease drafting and prompt attention to disputes helps protect both landlord and tenant interests.

Question 2

What remedies are available if a seller breaches a real estate purchase agreement?

Accepted Answer

Buyer remedies for seller breach typically include specific performance (court order requiring completion of the sale), since real estate is considered unique, damages for the difference between contract price and market value, reimbursement of expenses incurred in reliance on the contract, and return of deposits with interest. Seller remedies for buyer breach often include retention of deposits as liquidated damages (if provided in the contract) or actual damages if deposits are insufficient. Recovery depends on contract terms, the nature of the breach, and applicable law regarding damages limitations and mitigation requirements.

Question 3

How are construction disputes typically resolved in commercial projects?

Accepted Answer

Construction disputes often involve complex technical issues requiring expert analysis. Common resolution methods include project-level negotiations between owners, contractors, and design professionals, mediation for facilitated settlement discussions, construction arbitration under AAA rules or contract provisions (common in construction contracts), and litigation for disputes not resolved otherwise. Claims typically involve defective work, delays, change orders, payment disputes, and design errors. Construction contracts heavily influence available remedies, so careful contract drafting and administration is essential. Timely notice of claims as required by contract is critical to preserving rights.

Question 4

What should I know about commercial property due diligence?

Accepted Answer

Thorough due diligence protects buyers from unexpected problems. Key areas include title review for ownership, liens, easements, and encumbrances, physical inspection for structural and environmental conditions, environmental assessment (Phase I and potentially Phase II studies), survey review for boundaries and encroachments, zoning and land use compliance verification, lease review for tenant rights and obligations, financial analysis of income and expenses, and review of service contracts and warranties. Purchase agreements should provide adequate time for due diligence with appropriate termination rights if problems are discovered. Document all findings and obtain representations and warranties addressing concerns.

Question 5

What is lender liability in real estate transactions?

Accepted Answer

Lender liability claims arise when lenders exceed their traditional role and cause harm to borrowers through wrongful conduct. Potential claims include breach of loan commitment or failure to fund, improper loan administration, fraud or misrepresentation in loan origination, breach of implied covenant of good faith, tortious interference with business relationships, and wrongful foreclosure. Lenders have significant defenses including contractual limitations and the traditional rule that lenders act in their own interest. However, controlling borrower operations, making commitments beyond loan documents, or engaging in bad faith conduct can create liability. Document all lender communications and commitments carefully.

Question 6

How do real estate partnership disputes differ from other business disputes?

Accepted Answer

Real estate partnerships combine general partnership dispute issues with property-specific concerns. Disputes often involve contributions and distributions, particularly when projects underperform, differing views on property management, sale, or refinancing, allocation of tax benefits and obligations, guarantor liability issues, capital call disputes, and fiduciary duty breaches in property transactions. Partnership agreements should address these issues specifically. Real estate partnership litigation may involve both business tort claims and property-related remedies. Valuation of real estate interests for buyouts requires real estate appraisal expertise in addition to business valuation methods.

Question 7

What are my rights if a commercial development project is delayed or abandoned?

Accepted Answer

Rights in delayed or abandoned projects depend heavily on contractual relationships and the cause of delay. As an investor, review your investment agreement for provisions regarding project delays, capital calls, and exit rights. As an owner dealing with contractors, examine construction contracts for delay damages, liquidated damages, and termination provisions. Lenders may have remedies for construction loan defaults. Government approvals may have expiration provisions. Claims may include breach of contract, fraud if material facts were misrepresented, or breach of fiduciary duty by managing parties. Prompt legal consultation helps identify and preserve available remedies.

Commercial Real Estate and Development Disputes

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