COMMERCIAL REAL ESTATE

 

The Crisis Facing the Commercial Real Estate Sector in New Jersey, New York, Pennsylvania, and Texas has Created Legal Problems for Both Landlords and Tenants, for Owners and Buyers. As Commercial Real Estate Attorneys, our Lawyers are Prepared to Help.

Purchase or lease of commercial real estate

The commercial real estate sector has been rocked by a number of stresses and strains in recent years. This includes everything from landlords who cannot rent the same space as before—given that there are so many people working remotely these days—to tenants who are paying for space that is underutilized. Likewise, there are many owners of commercial real estate that are trying to market the property to buyers who may not be able to rent it out and banks and other creditors that are not in a position to provide as flexible terms for loan repayment as was the case in the past.

All of this leads to the same place: the potential for litigation in the federal and state courts. There are many ways of avoiding this, the most notable of which is arbitration or mediation. But that does not always work. Sometimes, the only way forward is to take a hard-edged approach to asserting one’s legal rights through the judicial process. There may be little choice.

It should be noted that litigation may not just involve a suit for damages, but also equitable or injunctive relief. In other words, the parties may ask the Court to force the other side to do something or not do something consistent with the nature of the real estate dispute.

Having said all of that, it is also true that if the parties can agree on the outlines of a transaction involving the purchase of an interest in—or sale of—commercial real estate, that may be a way of heading off a dispute before it starts. Our attorneys are experienced in a wide range of transactional matters concerning the ownership and interest in commercial real estate, from leases to liens, from sale agreements to mortgages, from easements to environmental issues. With law offices in NY, NJ, PA, and TX, we are prepared to defend commercial real estate matters in wide range of locations.

 

The Nissenbaum Law Group represents its clients with respect to a wide variety of legal challenges involving the purchase or lease of commercial real estate, such as the following

  • Litigating commercial landlord-tenant disputes, as well as those involving commercial real estate sale and ownership;
  • Filing lawsuits for money damages and/or injunctive relief if the real estate matter becomes contested;
  • Drafting and negotiating sale agreements and closing documents, including deeds, promissory notes, security agreements, mortgages and other pre-closing documentation;
  • Drafting and negotiating commercial leases;
  • Structuring real estate sale and lease-back transactions;
  • Creating an entity to own the real estate, such as a corporation, limited liability company, partnership or joint venture;
  • Addressing title and ownership issues;
  • Recording UCC financing statements and mortgages;
  • Addressing pre-closing environmental issues such as those under the Industrial Site Recovery Act;
  • Handling foreclosure, condemnation and eminent domain actions;
  • Effectuating Like-Kind Exchanges Under IRC Code Section 1031;
  • Appearing before municipal zoning and planning boards; and
  • Structuring new real estate developments, including commercial, residential and mixed-use cooperatives and condominiums.

FAQs — Frequently Asked Questions About Commercial Real Estate Representation

#1 Should I sue if a commercial tenant does not pay their rent?

Not necessarily. The approach should be a process by which the landlord assesses why the problem is happening; addresses it in the least disruptive way; and finally, only if all else fails, institutes suit.

It is important to have a dialogue with the tenant at the earliest possible point when the rent is overdue. After all, there is the possibility that the tenant simply made a bookkeeping error or the mail was incorrectly addressed or some other innocuous event occurred that resulted in the rent not being paid. If the tenant is having difficulty meeting its financial obligations, or there is a tangible reason why they feel they should be withholding the rent, that can often be resolved directly between the landlord and tenant. If not, it may make sense to bring in a mediator to resolve the issue. Likewise, if it becomes obvious that the matter is not simply going to be consensually resolved, the lease should have a list of remedies that are available that may include interest, attorneys’ fees and rights upon eviction. All of that should be factored in when deciding whether the situation has deteriorated to the point that a lawsuit needs to be filed.

The litigation process for evicting a New Jersey commercial tenant is more abbreviated than that used for the typical residential tenancy. The key statute is N.J.S.A. 2A:18-51 et seq. It should be noted that there are a number of defenses that can be utilized, such as for example, the breach of the covenant of quiet enjoyment or constructive eviction. Most of them are set forth in the applicable case law interpreting the rights under the statute. The overarching legal issue that these defenses typically raise is whether the defenses themselves have rendered the matter significantly more complex than first anticipated by the eviction alone. If so, the Court may consider whether the case should be transferred to the higher court, e.g. the Law Division of Superior Court of New Jersey. The case law in this area sets forth a number of factors that relate to that determination, such as

  • how complex the matters raised by the defenses are and the resulting pre-trial discovery and motion process that will be required;
  • how many properties are at issue and whether there are multiple eviction matters pending simultaneously;
  • whether a class of parties are similarly situated, such that joint relief may be warranted;
  • whether there are multiple courts considering the same factual predicates relating to the underlying eviction; and
  • whether additional parties will need to be added to the action.

#2 Does my lender have the right to tell me how to run my commercial real estate venture?

It depends. There are certain basic requirements that a lender can impose as conditions for the loan. Obviously, one of them is prompt payment, but there are others, such as non-impairment of collateral, a low vacancy rate of paying tenants, and clean title without significant liens. However, when these requirements expand into the area of mandating how the commercial real estate business should be run, it can implicate legal concepts such as “lender liability.” This can impose potential liability upon the lender for damages in the event the requirements it is imposing result in damage to the borrower.

In sum, commercial real estate financing should not be considered a gateway to allow the lender to determine how the underlying property is managed. That sort of entanglement can create a number of defenses against the lender’s assertion of remedies if there is a claim later on.

#3 If a commercial building is being sold, is it a good idea to first sign an MOU?

No. Our firm generally advises its clients not to sign an MOU (Memorandum of Understanding) or its counterpart, an LOI (Letter of Intent), when contemplating the sale of commercial real estate. These documents generally are devoid of any sort of nuance relating to the deal that is being contemplated and can actually leave out material terms. While it is understandable that the parties may want to “get something down on paper,” the far better approach is to have a formal agreement negotiated between counsel for the buyer and the seller, so that material terms are not left out.

#4 Are there scenarios in which it makes sense for a commercial real estate owner to consider filing a bankruptcy even though they have enough cash from other sources to run their unrelated other businesses?

Yes. One of the hallmarks of commercial real estate is that it is expected to sometimes generate losses. This can actually be advantageous from a tax perspective, though on a balance sheet it provides the impression that the business is failing. There are scenarios in which it may make sense to utilize this as a means to meet the requirements for filing a Chapter 11 business reorganization.

For example, this might be used to wipe out a potential litigation claim, while consenting to allowing the secured lenders to maintain a business-as-usual approach to paying the mortgage. Of course, it is not as easy as it sounds; this strategy will usually involve a series of motions and ultimately a plan of reorganization in the Chapter 11 matter. It is by no means a foregone conclusion that this approach will work. However, the paradox is that by filing a bankruptcy, a commercial real estate owner can emerge at the end far more financially sound than when they filed the bankruptcy.

Commercial Real Estate Attorneys

Do you have a commercial real estate litigation issue? With offices in New Jersey, New York, Pennsylvania, and Texas, our attorneys welcome your inquiry.

Publications & Presentations

Gary D. Nissenbaum, Esq.

  • Panelist, Construction Contracts & Getting Paid: Vital Information Every Business Should Know, Construction Expo, Meadowlands Convention Center, New Jersey, December 2007
  • Panelist, Home Contracting: Getting Paid for Your Work, May 2007 (Presented as part of the Nissenbaum Law Group’s Construction Seminar Series)
  • Panelist, Home Contracting in New Jersey, April 2007 (Presented as part of the Nissenbaum Law Group’s Construction Seminar Series)
  • Facilitator, 2003 Mediation Training, Superior Court of New Jersey, Union County

Laura J. Magedoff, Esq.

  • Presented Seminar, Construction Law: Negotiating Contracts & Filing Construction Liens, Various, 2007 – 2009

Looking for advice?

We're here to help.

Contact the Nissenbaum Law Group to schedule an appointment at 908-686-8000 or feel free to use the following form to e-mail us. Please include as much information as you can to ensure that we are able to handle your request as quickly as possible.

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Looking for advice?

We're here to help.

Contact the Nissenbaum Law Group to schedule an appointment at 908-686-8000 or feel free to use the following form to e-mail us. Please include as much information as you can to ensure that we are able to handle your request as quickly as possible.

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OFFICE LOCATIONS

MAIN OFFICE

2400 Morris Avenue

Union, NJ 07083

P: (908) 686-8000

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140 Broadway

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New York, NY 10005

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Philadelphia, PA 19103

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Dallas, TX 75201

P: (214) 222-0020

F: (214) 222-0029

PLEASE NOTE Meetings by appointment only in Union, NJ; New York, NY; Philadelphia, PA & Dallas, TX offices. Legal services generally performed from the Union, NJ office. The firm has attorneys licensed in New Jersey, New York, Pennsylvania, Texas and/or the District of Columbia. In limited circumstances, the firm may practice in other states under the prevailing multi-jurisdiction rules or through pro hac vice admission.

 

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