Category: News

You sold property; the purchaser hasn’t paid; the promissory note is in default.

How can you recoup your losses?  What are your options?

• Negotiate a Resolution
• File a Lawsuit
• Pursue Foreclosure

Negotiation

Before heading directly to foreclosure, you may want to consider negotiating with the purchaser in default.  Your attorney can advise you on how best to proceed and can help review terms of the original agreement, send a letter on your behalf to the entity in default and work with you and the purchaser to work out a realistic payment solution.

Lawsuit

If time for negotiation is past, and other resolutions have failed, one choice is legal action. You may file a collection lawsuit under the promissory note.

Or you may foreclose on the property and sell it to recoup your losses.

Foreclosure

There are two kinds of foreclosure judicial and non-judicial*. Real Property Foreclosure law in Georgia allows both; however, today judicial foreclosure sales are relatively uncommon in Georgia. Judicial foreclosure requires a lawsuit and navigating the court system, which typically results in a long drawn out process. In a non-judicial foreclosure there is no court oversight and therefore resolution can be accomplished much faster. However, very specific requirements must be followed to avoid becoming vulnerable to a lawsuit for wrongful foreclosure.

Non-Judicial Foreclosure

Once the decision has been made to foreclose, your creditor representation lawyer will be instrumental in helping navigate the process.  There are several things that you will need to gather and many documents that the attorney will need to review. As mentioned above, there are very specific procedures that must be followed exactly.  These include careful review of the Promissory Note, the Security Instrument, along with any default provisions, the completion of a proper Title Search, and the detailed preparations necessary to advertise and sell the property once it is foreclosed upon.

One advantage of non-judicial foreclosure is the speed to which it can take place including the sale of property, once it is set in motion. You will want to be prepared to gather what your attorney needs to move through the process quickly. Each month of non-payment creates a wider financial gap, lowering the percentage of likely monetary recapture.  Your first step is to call your creditor representation attorney and make an appointment.

*Real property foreclosure law in Georgia is generally governed by two (2) code sections.  O.C.G.A. 44-14-180 is the authority with regard to Judicial Foreclosure Sales. O.C.G.A. 44-14-162, et seq., and Georgia case law directs how a non-judicial foreclosure should be conducted.

About Mark Walker

Mark Walker, Partner at Hecht Walker, has been a litigator for 27 years.  Mark specializes in representing banks, creditors, lenders, landlords, businesses and individuals in commercial foreclosure actions, in lender liability matters and in bankruptcy proceedings.

Full bio at https://hechtwalker.com/about/attorneys/mark-c-walker/

Issue Number 5, November 2014

As we get close to Thanksgiving, we at Hecht Walker have a lot to be thankful for.

It looks like Georgia and the U.S. are experiencing a market recovery, which we hope impacts all of you in a positive way. In this issue, we concentrate on how our clients can better protect themselves through understanding their rights and legal requirements in certain situations. We include articles related to overtime compensation and how properly placed liens can add a layer of protection for contractors.

We want to let all of our clients know that we appreciate your business and hope that you have a fantastic Holiday Season.

Greg Hecht, Mark Walker, Jon Jordan, Bob Quinn, Joe Cloud, Ben Greene

Market Recovery Means

Commercial Real Estate Loans on the Rise

According to the Federal Reserve survey of bank lending officers in May of 2014, many respondents said that they had eased the requirements for commercial real estate loans. This is great news for builders and buyers who are looking to invest in commercial real estate. In fact, in every financial quarter since the economy started to recover half way through 2010, a sizeable percentage of the lending officers surveyed did indeed report that they were easing the standards for commercial real estate loans. Available financing is not as hard to come by as it was only a few years ago.

New Office Construction

There has been a modest, but very real upswing in the construction of new office buildings. Office construction swelled to sixty million square feet, which represents a ten percent increase from the previous year. (Read the Full Article)

Materialman and Mechanic Liens:

Liens for Authorized Work Only

Georgia law allows contractors, subcontractors and suppliers who supply work, labor or materials improving property for others, to claim an interest in and lien that property if payment is not made. The recording of such Mechanics or Materialmen liens can hold up the sale or refinancing of the property owner’s mortgage, or even result in the seizure and sale of their property. Consequently, these liens can be a very effective tool for Contractors, Subcontractors and Suppliers to ensure payment for their work, services or materials. However, the requirements and procedure associated with the creation and enforcement of liens are very specific and strict. Failure to properly follow these procedures can result in the forfeiture of lien rights and possibly legal liability by the property owner against the lien claimant. Prior to filing a lien, it is important to ensure that (1) there is a legal right to file a lien, and (2) the lien filing and lien perfection* procedures are properly followed. (Read the Full Article)

Is Your Salaried Employee Entitled to Overtime?

Our firm represents businesses on overtime compensation claims. Many businesses don’t understand why the former employees would be entitled to overtime compensation as most, if not all, of the former employees were paid a salary. The businesses are frustrated by the fact that these employees entered into contracts, stated that they wanted to be paid a salary in lieu of an hourly wage, and then can turn around and sue for overtime. On some occasions, it was even the former employee’s suggestion to be put on a salary instead of paid on an hourly basis.

The fact of the matter is that the Fair Labor Standards Act, which governs employee compensation for any business involved in Interstate Commerce, requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. (Read the Full Article)

According to the Federal Reserve survey of bank lending officers in May of 2014, many respondents said that they had eased the requirements for commercial real estate loans. This is great news for builders and buyers who are looking to invest in commercial real estate. In fact, in every financial quarter since the economy started to recover half way through 2010, a sizeable percentage of the lending officers surveyed did indeed report that they were easing the standards for commercial real estate loans. Available financing is not as hard to come by as it was only a few years ago.

New Office Construction

There has been a modest, but very real upswing in the construction of new office buildings. Office construction swelled to sixty million square feet, which represents a ten percent increase from the previous year.

This shows no signs of slowing down either, as companies such as Panasonic, Google, AT&T and others have all announced plans to invest millions in new corporate buildings in major centers all across the United States.

In Atlanta, national construction heavyweight DPR Construction purchased locally renowned developer Hardin Construction in April 2013. The two companies have combined their operations in the Southeast and Texas markets. With this growth in the number of offices and employees, DPR Hardin Construction will have greater opportunity to handle major commercial projects in the Southeast market.

Retailers Are Spending Money on Construction

While the increase in the construction of new office complexes was moderate, the jump forward in the construction of new retail space was substantial, increasing by twenty-five percent in 2013 when compared to 2012. There was one hundred and five million square feet of retail space constructed in 2013 in the United States, with much of it built by discount and outlet stores.

Although the economy is recovering, there is still uncertainty felt by many consumers. Therefore, discount and outlet retailers thrive in such circumstances. For example, Wal-Mart alone built 287 stores in 2013, which amounted to 19 million square feet of new commercial real estate around the United States.

In addition, to accommodate the increase in retail space, the square footage in warehouse space has jumped fifty percent, to a whopping ninety-six million square feet in the United States.

The Economy Will Continue To Grow

All of this new commercial development means that more people are working. Granted, this recovery has been sluggish compared to the recovery that usually follows a period of recession. In the 2014 edition of the highly influential publication “Emerging Trends in Real Estate, one economist was quoted as saying, We have a new paradigm here. It is not the kind of recovery we have seen before with 250,000 new jobs a month. It’s a recovery with 100,000-plus jobs a month.

Nonetheless, more people having money to spend means that the banks are less hesitant when it comes to approving commercial real estate loans. If you have been thinking about applying for a commercial real estate loan, now is the time to do so.

Each commercial real estate attorney at Hecht Walker are here to help guide and support startup businesses and established businesses alike, whether you need permitting assistance, rezoning representation, or even a legal eye review of your Purchase and Sale Agreement or Lease Agreements. An increased commercial economy creates more and more Landlord/Tenant relationships as well. Landlords and tenants will continue to have a vested interest in ensuring their legal rights are protected, and at times will need legal assistance in enforcing their rights. As commercial real estate attorneys, Hecht Walker is also here to help you protect and enforce your lease rights. As your business grows, contact Hecht Walker to ensure your legal rights are best protected.

Georgia law allows contractors, subcontractors and suppliers who supply work, labor or materials improving property for others, to claim an interest in and lien that property if payment is not made. The recording of such Mechanics or Materialmen liens can hold up the sale or refinancing of the property owner’s mortgage, or even result in the seizure and sale of their property. Consequently, these liens can be a very effective tool for Contractors, Subcontractors and Suppliers to ensure payment for their work, services or materials. However, the requirements and procedure associated with the creation and enforcement of liens are very specific and strict. Failure to properly follow these procedures can result in the forfeiture of lien rights and possibly legal liability by the property owner against the lien claimant. Prior to filing a lien, it is important to ensure that (1) there is a legal right to file a lien, and (2) the lien filing and lien perfection* procedures are properly followed.

One of the most fundamental considerations to determine lien rights is whether there is a contractual relationship between you and the property owner or contractor, either directly or through a direct chain of contracts. Where a contractor is hired to perform work for a property owner, he/she is recognized as that owner’s agent. That Contractor’s direct Subcontractor for the project has such a direct relationship with both the contractor and owner. A subcontractor of the Subcontractor does not. Subcontractors and suppliers providing labor or materials to other subcontractors should always ensure that the subcontractor requesting the work or materials was authorized to do so by the Owner or General Contractor. If not, the work or materials may not be secured by a Mechanics or Materialmen lien.

Where there is no direct relationship, remote subcontractors and suppliers may be required by law to provide notice of their work to the contractor and owner. In many cases, a Notice to Contractor, identifying the work to be done, as well as other information must be posted and recorded with the Superior Court of the county where the property is located. This allows the Contractor and owner notice and an opportunity to object to the work or supplies before they are provided. Work that is not authorized by the Property Owner or Contractor cannot be liened.

In Benning Const. Co. v. Dykes Paving & Const. Co., 263 Ga. 16 (1993), a Subcontractor hired a paver to do work on a project it had been hired to do. The contract between the Contractor and original Subcontractor had a provision that prohibited further subcontracting out work without the Contractor’s consent. The paver failed to pay for the asphalt material used for the job and the supplier filed a lien. The Georgia Supreme Court held that because the paving subcontractor was not authorized and expressly prohibited in the original Subcontract, the original Subcontractor’s agreement with the Paving Company was not within a direct contractual line with the Contractor. Thus the supplier had no lien rights for recovering payment for its work.

One area where Owner authorization is often overlooked is when a tenant of property requests work, services, or materials for the improvement of the leased property. The tenant is not necessarily considered an agent of the owner, and thus it is important to ensure that the work, services and materials requested by the tenant is actually authorized by the owner of the property beforehand. As stated in Worley v. Cowper Const. Co., Inc., 259 Ga. App. 263 (2003), By contracting for improvements to be made upon leased premises, a tenant does not create a basis for imposing a materialman’s lien against the landlord’s interest in the premises. Finally, Contractors, Subcontractors and Suppliers should all note that Mechanics and Materialmen liens cannot be filed against government property for government projects.

All Contractors, Subcontractors and Suppliers should ensure that the work or supplies they provide for the improvement to property is authorized by the property owner or the owner’s Contractor. Without such authorization, direct or implied, the worker or supplier will not be able to avail itself of the lien protections established by Georgia law and take the unnecessary risk of not being able to recover payment for their work, services or materials. Ensure your ability to take advantage of the payment protections established by Georgia lien statues by contacting the attorneys at Hecht Walker.

*Perfecting a lien ensures statutory procedural requirements are met so as to make the lien legally enforceable.

This article is not intended to replace the need to contact legal counsel in the event you would like to ensure or protect your lien rights. This article is based upon applicable laws as of the date above, and contains general information that may change depending on particular circumstances of certain matters. Please note that every situation is different and contains unique facts that may allow for a successful claim or defense or not. We always advise that you speak to legal counsel directly in order to learn how to ensure, preserve and protect your lien rights.

Next Installment – Perfecting Your Lien Rights.

Our firm represents businesses on overtime compensation claims. Many businesses don’t understand why the former employees would be entitled to overtime compensation as most, if not all, of the former employees were paid a salary. The businesses are frustrated by the fact that these employees entered into contracts, stated that they wanted to be paid a salary in lieu of an hourly wage, and then can turn around and sue for overtime. On some occasions, it was even the former employee’s suggestion to be put on a salary instead of paid on an hourly basis.

The fact of the matter is that the Fair Labor Standards Act, which governs employee compensation for any business involved in Interstate Commerce, requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. Failing to pay your employee overtime for any hours worked over 40 hours in a workweek can be very costly. Not only could you be liable to pay the employee time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek, but the Court may also assess a liquidated damages fee equal to the entire amount of overtime you failed to pay the employee. In addition, if the employee hired an attorney to pursue the overtime pay, you may be required to pay the attorney’s fees as well. Even if you the employee worked only one hour of overtime, the Court may still hold you liable for all of the overtime pay, liquidated damages and the employee’s attorney’s fees. One little oversight in determining whether employee benefits include overtime compensation may cost you tens of thousands of dollars.

There are, however, many jobs that are exempt from the overtime requirement. While the Fair Labor Standards Act provides for various exemptions from overtime compensation, some of these exemptions are often not clearly defined. Some of these jobs may include certain managerial jobs, executive jobs, and some administrative and professional jobs. However, these jobs may still not be exempt from the overtime pay requirement if the employee’s pay does not meet certain weekly, semimonthly and monthly salary requirements. Furthermore, the Fair Labor Standards Act does not look merely at the employee’s title to determine whether the employee is exempt rather the actual job functions performed by the employee.

Some other exemptions may include employees whose compensation is mostly commission based, employees paid on a piecemeal basis for production, or if the employee is considered a “highly compensated employee” (i.e. annual compensation exceeding $100,000.00). However, because of the intricacies of the exemption provisions, you should consult an attorney to determine whether your employee is in fact exempt from overtime compensation.

If you have salaried employees and are interested in determining whether or not the employees are exempt from overtime compensation, please contact our office for a consultation.

Each year, business people, professionals, students, husbands and wives get a shock at airports around the US. They forgot that they had a small handgun in a briefcase, satchel or purse for protection. The carry-on luggage goes through the airport screening device and as opposed to going on vacation or to their business conference, they end up at a local jail. If this occurs at Atlanta Hartsfield Jackson International Airport, they usually end up at the Clayton County Detention Center.

While some visitors believe that the new 2014 Georgia Gun Law expanded gun owners’ rights to carry guns throughout the Airport in Georgia, they cannot carry a weapon through a screening device. Recently, the AJC reported on several Airport gun incidents. Despite these incidents, it is not legal to transport a loaded gun through security or onto an airplane. We represent clients who have to deal with the repercussions from momentary forgetfulness and accidentally bringing a firearm through security at the airport.

According to the Sunday, January 4, 2015 article of The Washington Times TSA set a new record in 2014 for firearms confiscated from passengers trying to board airplanes, catching more than 2,000 of them, the agency said.  And, As reported in ESPN owned – FiveThirtyEight’s article of January 23, 2015, a total of 109 firearms, 102 of them loaded, were confiscated in 2014 at Hartsfield-Jackson Atlanta International Airport, more than at any other airport nationwide, except in Dallas/Ft. Worth, according to federal figures.

According to another recent article in the AJC, — passengers caught with guns at security checkpoints are taken to the Atlanta Police Department precinct at the airport. Police arrested about a third of the people found with guns at Hartsfield-Jackson checkpoints this year because the passenger lacked a valid permit, according to the airport. Even if the person has a permit and is released, in almost all cases TSA imposes civil penalties of up to $7,500.

Prior to the enactment of Georgia’s New Gun Laws, if you were found in possession of a firearm while in Security Line, you were charged with O.C.G.A. 16-11-127.  The Clayton County Court System has set the mandatory bail amount for such offenses at $5,000.00. A violation of O.C.G.A. 16-11-127 was a misdemeanor, which included up to one (1) year of imprisonment and a fine of up to $1,000.00.  In addition, the Transport Security Agency (TSA) would impose a fine of up to $3,000.00 for the violation.

In addition to being arrested and the criminal penalties outlined above, you would miss your flight, which was not subject to a refund because of the violation, and the firearm was forfeited.  Overall, the entire experience could cost you nearly $10,000.00 and a year in jail.

However, under the new Safe Carry Protection Law, there is an exception for licensed gun owners.  O.C.G.A. §16-11-130.2 (b) provides that a license holder who is notified at the screening checkpoint for the restricted access area that he or she is in possession of a weapon or long gun and who immediately leaves the restricted access area following such notification and completion of federally required transportation security screening procedures shall not be guilty of violating O.C.G.A. 16-11-127.

While the statute provides an exception for licensed gun owners, the language of the statute does not make it clear what is considered the “restricted access area or what the federally required transportation security screening procedures entail.  If you or someone you know has been arrested at the Atlanta Airport for carrying a firearm please feel free to contact our firm to have your rights as a gun owner protected.

When leasing commercial space, many people don’t realize you pay for more than just the actual square footage you will occupy. In many commercial leases, and particularly in retail and industrial space leases, extra fees are often referred to as “Common Area Maintenance” (CAM) fees. These CAM fees serve to offset the landlord’s cost of the Common Area shared by the tenants.

What CAM fees cover, and more importantly what tenants pay for, varies greatly from lease to lease. CAM fees can escalate at a different rate than the monthly lease rate because they tend to be more variable. Some of the fees may even cover services that you as a tenant are not utilizing. As such, the CAM fees may be negotiable. You should never sign a lease without understanding what CAM fees cover in your unique commercial lease. Our real estate lawyers represent many commercial tenants in these negotiations.

In some leases, the CAM fees are clearly defined and outline the specific expenses being covered. Generally speaking, CAM fees include water, gas, electric, HVAC, landscaping and parking lot maintenance. However, some CAM fees may include certain administrative fees and general overhead expenses unrelated to the property and the common area. CAM fees can include advertising, signage, property renovations, salaries or other costs associated with on-site security personnel, permits, taxes, insurance, other costs of maintaining separate leasing office spaces either on or off-site, and even any legal costs. Know what’s in your lease before you sign. If CAM fees are not explained thoroughly in a lease, potential tenants should be sure to specifically ask for CAM fees to be identified including a clear list of what is being paid for in the lease.

It is also important to understand how the Landlord is prorating the CAM fee across the various tenants. Some divide the cost based on square footage while others prorate it based on gross revenue or the number of monthly customers. Some Leases will prorate the CAM fee against all tenants evenly regardless of square footage or gross revenue. This means that a small 1200 square foot store may have the same CAM fee bill as the 20,000 square foot anchor store. Be sure to check to see how the CAM fee is prorated.

In some instances, negotiating with the landlord may get the landlord to give you a Fixed CAM Fee or even a Capped CAM Fee. A Fixed CAM Fee sets the CAM fee at the same rate no matter what the actual expenses are for the landlord. Some of our clients have used the fixed rate to help with budgeting monthly expenses. A Capped CAM Fee sets the maximum CAM charges for a given period, but does not set a minimum. A Capped CAM Fee gives the tenant the benefit of the minimum CAM costs along with the protection from any upside swing in expenses. Landlords are less likely to give a Capped CAM as this may require the landlord to cover more costs with the protection a Fix CAM Fee provides.

The most important thing to remember about CAM fees is that just like the other terms of the lease, the amount of the CAM fee may be negotiable. If you are a commercial tenant or looking to lease commercial space in the near future, contact our office to discuss your options with a real estate attorney.

Just over twenty years ago the groundbreaking Family and Medical Leave Act was signed into law by President Bill Clinton. This law allows individuals the flexibility to balance the care of family members with their employment, without worrying about job loss. In fact, in a recent survey about the law both workers and employers reported overall positive experiences with FMLA.

No matter the positive changes, even after twenty years, FMLA regulations come with challenges for employers. It remains important for both employees and employers to understand their rights under the FMLA to ensure that its regulations are followed appropriately. Proper documentation of regulatory procedures is important to protect both the employer and the workers who use FMLA leave.

FMLA Regulations and Provisions

The Family and Medical Leave Act provides employees with up to 12 weeks of unpaid leave to treat a medical illness, or care for an immediate family member such a spouse, parent, newborn or newly adopted child. It also guarantees job security in that the employee will be returned to their position or one on the same level after leave is completed. To qualify, an employee must have worked at least 12 months for the employer, and must have at least 1,250 hours worked during those 12 months.

Some details of FMLA vary by state, and employers need to be aware of these differences. For example, the federal law specifies that an employer must have at least 50 employees for one to claim FMLA leave, but some individual states have reduced the employee threshold to a lower number to cover smaller businesses. There are also states where in-laws, domestic partners, and grandparents are considered immediate family. It’s important for an employer to know the federal law and the associated state regulations. The law still poses challenges for businesses, especially regarding:

• Administration and documentation of intermittent leave days
• Questionable medical leave certification
• Determination of employee eligibility across work sites

Clear Communication and Documentation

Employers should have documented guidelines in place to give employees upon FMLA leave request, to insure the law is followed correctly. Federal law does not require it, but employers can ask for physician verification of the need for leave, and whether leave will be a block period or used intermittently. However, employers cannot request additional information from a physician beyond what is stated upon the documentation form.

Some employers require personal paid leave be used prior to FMLA, but it does not count against the full 12 weeks of FMLA. Employers should advise their employees if they have a call-in policy for intermittent leave, and how it should be used. Does an employee need to call in every time to use FMLA? What should they say if leaving a message in order to adequately document the leave? Clarifying these steps ahead of time protects both the employee and the employer from abuse of the act and from possible lawsuits.

The attorneys at the law firm of Hecht Walker recommend a proactive approach to company FMLA policy, with clear documentation and eligibility guidelines for personnel. If it has been a few years since your organization examined your FMLA policies, now may be a good time for preventative legal steps from a business attorney.

Workers who are able to take time off to deal with illnesses and adequately care for new or ill family members report more job satisfaction than those denied this ability. Happier workers result in higher productivity and better profits for companies who employ them. The FMLA process may seem complex, but through proper documentation and communication the process should run smoothly and protect both parties from confusion or potential legal complications.

Fraudulent Transfer is the act of transferring money or assets to another person or company in an attempt to avoid a debt. It is a civil cause of action that arises between debtors and creditors, particularly with reference to insolvent debtors. The cause of action is typically brought by creditors or by bankruptcy trustees.

A transfer will generally be viewed as fraudulent when it is made with actual intent to defraud, hinder, or delay any creditor. So, if the intent of a transfer is specifically to avoid satisfying a specific liability, then intent is present and likely will result in legal action against the debtor. Often an insolvent debtor will have multiple obligations. A debtor has the right to choose to pay one creditor over another without being guilty of fraudulent transfer, but care must be taken not to pay subordinate debts before those senior to them.

Even though the debtor may choose which debts to pay first, it can get tricky. For example, there may be a debt to a family member that the debtor would like to clear before paying the banks. This may appear to be a fraudulent transfer, but would depend largely on the specifics of the situation. Was the debt truly legitimate? Was it documented at the onset? Can it be verified by bank records?

Additionally, a debtor could unknowingly commit constructive fraudulent transfer. This can occur when a debtor transfers property but does not receive “reasonably equivalent value” in exchange for the property. If the debtor is insolvent at the time of the transfer, or as a result of the transfer is left with an unreasonably small amount of capital to continue in business, there may be a case for constructive fraudulent transfer.

In Kent v. A.O. White, Jr., Consulting Eng’r, Inc., 279 Ga. App. 563 (2006), the Georgia Court of Appeals not only upheld the trial court’s setting aside of a property transfer as a fraudulent conveyance, but also an award of punitive damages against the Transferor. In Kent, a consulting engineer obtained a prior judgment for his unpaid services against an attorney that had hired the engineer.  Just before the verdict at trial, the attorney conveyed his law office property to his daughter, and then continued to practice law at the office for free.  The engineer then filed a subsequent suit to set aside the property transfer as a fraudulent conveyance so that the property could be used to satisfy his earlier judgment.  The Court of Appeals not only upheld the setting aside of the property conveyance, but also the trial court’s award to the engineer for $29,434.50 in attorneys fees, $2,685.00 in expenses, and $75,000.00 in punitive damages against the attorney for the fraudulent conveyance.

Making a mistake in any of these situations can have dire consequences. While repaying a debt can be burdensome, avoiding repayment can be even more costly, especially when moving property to avoid losing it to the debt. The creditor can pursue not only the debtor, but the party the debt was transferred to, and will likely seek additional damages. As in the case cited above, recovery of all legal fees and punitive fines can total tens of thousands in addition to the original debt decisions related to your debts and assets.  An attorney can help negotiate a repayment plan for the original debt or can help protect clients to reclaim debts from a fraudulent transfer. While a Hecht Walker attorney can step in to help at any point, by contacting your attorney before taking action, costly mistakes can often be avoided.

Due diligence is the legal term for a wide variety of searches and inquiries undertaken before entering into a legal contract. In short, it means doing your homework in order to protect yourself. In commercial real estate leasing, this involves investigating a range of issues connected with the lease, the building, and the landlord or leasing company. All information gathered in this process can materially influence the tenant’s decision on a lease of real property.

One component of due diligence related to leasing property includes an onsite inspection to help assess the overall condition of the property. Taking an inventory of everything from wall conditions and water spots, to obvious foundation cracks will allow the tenant to know if repairs are needed. The ventilation, air conditioning and heating equipment can be a major expense for a tenant which can be impacted by each system’s age and whether it is under warranty. Checking maintenance records and thoroughly reviewing any proposed contracts will clearly identify which party has responsibility for repair or replacement of every element or system belonging to the property. At some point any commercial property will need to be repaired. One way to avoid costly surprises when systems need to be replaced is to have your real estate attorney from Hecht Walker review the lease to make sure you are fully protected and understand each party’s responsibility.

Start From Square One with Measurements

Due diligence should also determine the square footage in any commercial lease. Many sellers or property owners fail to specify an exact property size, even when charging tenants per square foot. By taking measurements, taking photos and notes to document the conditions of the premises, a prospective tenant will clarify potential issues and have proof that the issues existed prior to occupancy.

Property usage is another factor in due diligence. Many tenants do not realize that a property owner has the power to rent out spaces to competitors, which can adversely affect business success. The language of the lease contract can often be negotiated to include a no-competition clause to prevent the landlord from leasing nearby property to another company that sells the same type of services or products.

Get It in Writing Before Signing

According to Jon Jordan, Partner at Hecht Walker, “The most important thing related to Due Diligence from a legal perspective is to make sure all parties thoroughly read and completely understand all of the provisions and real and potential ramifications of the legal contract before signing on the dotted line.”  His advice, “If there are provisions that you don’t understand make sure you seek guidance from a legal professional to help you before you sign the lease.” Once any commercial lease contract is signed, it may be too late to negotiate additional changes.  Consulting with a real estate lawyer at Hecht Walker to assist with the due diligence process before entering into a commercial lease with another party will help keep you protected.