Commercial Division Rejects Landlord’s Application to Vacate Arbitration Award Establishing Fair Market Rent to be Paid by McDonald’s Restaurant

The recent decision by Hon. Shirley Werner Kornreich in Broadway Retail Owner, LLC vs. McDonald’s Corp., No. 651884/2014, 2017 N.Y. Slip. Op. 50011(U), 54 Misc.3d 1206(A) (Supreme Court, New York County, Jan. 9, 2017) concerned a very common provision in commercial leases, which established future rent based upon a percentage of the fair market rent (“FMV”), and provided that if the parties could not agree on the FMV, the issue would be resolved by a binding arbitration. The FMV percentage amount in McDonald’s was 90%.

After the parties could not agree on the FMV, an arbitration was commenced. The panel found that the FMV was $5,354,893, 90% of which was $4,819,404. The landlord submitted a petition to Judge Kornreich seeking to vacate the award. In her decision, Judge Kornreich emphasized the extremely heavy burden that must be met to vacate an arbitration award, which in most cases is a showing that the party was prejudiced by corruption, fraud or misconduct in procuring the award, or that the arbitrator was biased. The Judge found that the landlord’s sole argument concerned alleged misrepresentations made during the arbitration by McDonald’s and its counsel regarding a decision that Judge Kornreich had issued in a previous related action. Based on this finding Judge Kornreich denied the petition because the landlord’s allegations concerned the allegedly improper conduct of a party, rather than the arbitrators.

This decision brings home the point commercial lease parties must comprehend when they include a FMV/arbitration clause in a lease – the agreed-upon arbitration will be their last legitimate bite at the apple if a dispute arises because the chances of vacating awards are minimal at best. In order to reduce the odds of a poorly reasoned award, parties should seek terms that allow them to control the arbitration proceeding to the extent that they can. Examples of such terms include those that mandate arbitrator qualifications, the use of party selected and/or neutral arbitrators, the appraisal methods to be utilized, the arbitration administrator (i.e., the AAA), and the rules to be applied (i.e., the AAA’s Real Estate Industry Arbitration Rules).

Hon. Sabrina B. Kraus Orders Seller to Return Purchaser’s Down Payment

The recent decision in Gonzalez v. Char & Herzberg, LLP, 2017 WL 1031941 (Bronx County Mar. 13, 2017) concerned a dispute that frequently arises after a deal blows up – whether or not the purchaser has the right to recover her down payment. The purchaser agreed to purchase a single-family home located in Bronx County and delivered a $20,000 down payment to the escrowee. The contract of sale included a mortgage commitment contingency, which conditioned the purchaser’s obligation to close on a lender’s commitment to issue a $495,000 loan for a term of at least 30 years within 45 days.

A lender issued a mortgage loan commitment letter on the 45th day, which included the condition that the purchaser secure a fully executed contract for the sale of her current home prior to the closing. Three days later the lender issued a letter notifying the purchaser that the loan application was denied because she failed to meet the condition. The next day the purchaser’s counsel notified the seller that her mortgage application had been denied and requested the return of the deposit. The seller rejected the request and set a closing date several weeks later pursuant to a time is of the essence demand, which notified the purchaser that her failure to close would result in the retention of the down payment. The seller ultimately retained the down payment and sold the premises to a different buyer approximately four months later.

In her decision after trial, the Hon. Sabrina B. Kraus held that where a mortgage commitment letter is revoked, as was the case in Gonzalez, the purchaser’s right to return of the down payment “turns on whether the commitment revocation and consequent failure of the transaction was attributable to bad faith on the part of the [purchaser]”. Judge Kraus found there was no evidence of bad faith on the purchaser’s part in the record, and entered judgment for the purchaser in the amount of the $20,000 deposit plus interest.

The Gonzalez decision highlights a best practice to be followed by purchasers and their attorneys when a contingency has not been met – notify the seller in writing ASAP!!! Here, the purchaser’s counsel did just that, and as a result, the purchaser prevailed absent any evidence that she acted in bad faith.

Appellate Division Kills Commercial Lease Guaranty Claim for Failure to Submit Original Agreement at Trial

In 76-82 St. Mark’s, LLC v. Gluck (Supreme Court, Kings County) a commercial tenant sought to recover damages for breach of a guaranty agreement. At trial, the landlord’s counsel attempted to enter into evidence a faxed copy of the agreement that was missing two lines on the second page. The trial judge denied admission of the copy and granted the tenant’s motion to dismiss the case on the ground that the landlord failed to meet its burden of proof.

By a decision dated February 22, 2017, the Appellate Division, Second Department affirmed the trial court’s decision. Copies of documents are regularly admitted into evidence at trial under CPLR 4539 when a party business can demonstrate that it makes copies of the subject document in the regular course of its business by a reliable process. However, the Second Department found that the landlord did not meet the requirements of that statute.

Thus, the copy of the agreement could only be admitted into evidence if the landlord established that it was a reliable and accurate portrayal of the original. The Second Department held that the landlord failed to meet that burden because “the [landlord’s] principal was not present when the original guaranty was executed, and thus could not testify as to whether the original guaranty was similarly missing a portion of paragraph four, while [the tenant] testified that the guaranty she executed contained complete paragraphs.” See Gluck, 2017 WL 691073, at *2 (2nd Dep’t 2017).

The Gluck decision puts real estate investors and tenants on notice that original transaction documents must be maintained to avoid a trial disaster.

3 Ways a Commercial Litigation Attorney Can Help Your Firm

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When it comes to litigation, this area is growing by the day. This specialty of law is really beginning to drive not only revenue at law firms but their legal hiring as well. A survey by Robert Half Legal found that up to thirty percent of the hiring that legal departments and law firms do is in this area, filling crucial positions for commercial litigation.

Hiring attorneys to do commercial litigation and specialized attorneys in general is a good choice for any law firm. With more and more competition popping up in specialty areas, they can hardly afford not to! The real question is, could your firm benefit from hiring a commercial litigation attorney?

When you hire professionals who have the right skills to fit the requirements of your firm, that means that you can deliver the right attorneys to the right cases because they’re more qualified to argue the case. It ultimately costs less to depend on one of your own from in house than to rely on outside legal counsel, and the bottom line may be appealing to those corporate legal departments. It just makes sense to have specialization, from being able to offer that to clients to the cost savings.

By bringing commercial litigation experts over to your side, you can cut back on costs and bring their experience and knowledge to your side. If your firm is considering hiring an attorney experienced in commercial litigation, check out these reasons why they’re so in demand while you’re thinking it over.

1. Specialized Focus

Since your commercial litigation lawyer can be the one to go to on commercial litigation, it means that you can free up other lawyers who may not want or wish to work in this field. Since commercial litigation is so complex, a specialized focus means that the cases can be complicated and drawn out, it can be hugely inconvenient to have members of your team on the case that could be utilized elsewhere, especially for your corporate specialty lawyers. Having a specialist on staff will ensure you have the right person to deal with these cases.

2. Extra Protection of Business Interests

Firms, people and businesses need to protect their business interests, and this type of attorney can help them do that. Whether it’s a merger or a contract, a litigation attorney will have the knowledge and experience necessary to protect the interests of the firm through their excellence.

3. Commercial Litigation Experience

Their experience will be able to help your firm decide whether to litigate or not. Sometimes legal matters are best pursued in court, and other times your attorney will recommend not pursuing the matter further in court and pursuing another strategy instead. As legal cases are time consuming and expensive, it’s good to have someone on board that can weigh in on how to proceed.

Hire an attorney for a short term or work with a recruiting firm. Whether you hire them short term or long term on a contract is up to you, but if your firm could use a commercial litigation attorney then consider getting one on board soon and see what a difference it makes.

Condos and Co-Ops: Taking on the Secondhand Issue?

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When it comes to your housing, is prohibiting smoking in place? Many residential co-op and condo boards are finding that cigarette smoking regulations are a hot button issue. Whether they are able to impose bans on what residents are allowed to do in the privacy of their own home, and whether they should do so or pursue other ways to cut back on secondhand smoke affecting residents is another matter.

In the case of Reinhard v. Connaught Tower Corp., a decision by the New York Supreme Court dealt with a situation that concerned this issue.

The Connaught Tower Corp. was a Manhattan residential co-op that was home to plaintiff Susan Reinhard. She had bought an apartment there in 2006 and lodged a complaint about smelling cigarette smoke in her apartment in May 2007 after smelling it since January of the same year.

However, the board did not respond to her complaint. They denied that they were legally required to act on the issue. The board effectively informed Reinhard that she would have to alter the apartment if she wanted to take action against the second-hand smoke on her own dime. In response, she left her apartment and ended up suing Connaught Tower Corp. for complete maintenance abatement.

So who won? Well, Susan Reinhard was awarded $120,944.38 in six-year maintenance abatement and coverage of attorney’s fees and interest on the abatement at 9% per annum. This was reached due to her leaving the apartment, a considerable breach of the warranty of habitability, and a breach of proprietary lease.

The abatement awarded by Judge Engeron was based on the fact that the value of an apartment that is polluted with secondhand smoke is zero. The plaintiff had the burden of proving a breach of contract and did so, thus having the benefit of receiving bargain damage. She deserved the value that the apartment would have been if it had been smoke free.

Building owners can provide smoke free residences by saying that you cannot smoke in or outside of residences to be sure that tenants do not breathe in second hand smoke. Even co-op boards have the burden of reducing second hand smoke infiltration into the building or being smoked at all. However, a trial court decision may not be replicated in other states and until reversed has effectively set a precedent.

While it’s not set whether these decisions will impact condos, building owners can help themselves out either by instituting no smoking policies or adapting the apartments so smoke does not seep into other residences. Since bans are more affordable than full-scale remodels, it’s foreseeable that action could take the form of restricting smoking on the property. Boards may only have to address the issue, however, when someone complains about the condition, and perhaps not even then.

Buildings must get rid of the secondhand smoke issue one way or another to avoid legal liability. Whether it’s banning smoking on the residence or amending laws or documents or putting the burden on the smokers, action must be taken to address smoking complaints by tenants. Non-compliance may result in proceedings or the levying of fines. Every co-op and condo is different, but smoking may be the next thing to go to avoid legal liability in both.

Civil Litigation Cases 101

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When it comes to civil litigation cases, are you up to date? A civil litigation is the result of two or more parties that are involved in a legal dispute and are seeking something other than criminal sanctions, such as money. In these types of cases, they must be tried in a courtroom and a judge or jury will weigh in on the matter and ultimately decide the result. Read on to find out more about these types of cases.

Civil litigation cases are specialized in by civil litigation attorneys. A civil litigation attorney is also known as a trial lawyer and will represent clients in many types of proceedings including depositions and pretrial hearings. They may also represent clients during processes like mediation or arbitration, where the goal is to have both parties reach a settlement so that they do not have to deal with going to court.

These cases and the litigation can be about many subjects and areas, so litigators frequently specialize in one or more areas. These could include personal injury claims, intellectual property disputes, environmental law, workers’ compensation claims, product liability disputes, landlord and tenant disputes, education law disputes, divorce suits, workers’ compensation claims, and more. The litigation essentially deals with cases that do not involve criminal charges or penalties.

The litigator have many responsibilities. First and foremost is to represent their client and fight on their behalf. They must be comfortable with conflict and fighting against the opposition. They must work to get the best possible outcome for this client and do everything they can to fight for their client. It can be a tough job, demanding a lot from individuals in the field. They frequently work long hours and put a lot of energy into their cases. Litigators have the weight of getting their client the result they need.

You must also have certain skills and a background of knowledge in the field (including experience from cases) to be a great litigator. These attorneys must have logical and analytical reasoning abilities, interpersonal skills, intelligence, knowledge of procedural/substantive law, know how to research, work with clients, negotiate, and argue a case successfully in order to benefit their client.

What goes on during civil litigation? There are several stages to any case. These include investigation, the pleadings, and later on discovery, pretrial, settlement/trial, and possibly appeal. The longest stage is discovery, which takes far more time than trials in most cases because so much effort is put into getting information that is relevant to the case (along with the necessary subpoenas, depositions, and interrogatories). Subpoenas may help get documents or information, while the depositions and interrogatories involve getting information through questioning under threat of perjury. Questions are posed orally in depositions, whereas the interrogatories involve written questions.

While many suits go through every stages, many are settled before even seeing the light of a courtroom. Parties may even decide to settle during a trial, where they can settle some aspects of the suit. Cases that do go to trial can be months or years. If you are going to be involved in a civil litigation case, be sure to have a reliable litigation attorney on your side because it will make a difference.

All About Intellectual Property Law

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When it comes to Intellectual Property Law, do you know your stuff? This is a law that outlines the rules when it comes to getting and enforcing the legal right to a variety of things such as art, design, inventions, and more. That’s because laws protect personal property, real estate, and also intangible assets and their control.

If you have questions about this law or just want to know more, consult an intellectual property attorney. They’ll be able to tell you more about the subject and advise you on specific instances. However, if you want a quick crash course on the issue for free before going in, read on to find out more!

Intellectual Property Law protects individuals that want to profit from their work. It encourages innovation as it gives people a way to profit without their ideas being misappropriated by others. According to the U.S. Constitution in Article 1 and Section 8, they can give Congress the express authority to give individuals rights that are exclusive to their creations and regulate commerce through states and abroad. These laws are looked over by the U.S. Copyright Office and the U.S. Patent and Trademark Office.

The existence of patents also gives people who invent things the right to profit by either selling their product or selling that right to someone else. The patents will be valid for up to 20 years and a surprising variety of items qualify such as manufactured goods and new machines. A patent will be awarded if an invention is not found unuseful, offensive, or to contain obvious design. The trademarks will also protect slogans, symbols and names to not only avoid confusion but prevent misleading advertising by distinguishing their rights.

The copyrights also apply to a variety of artistic and intellectual expression. It could be music, architecture, movies, writing, inventions and machines and more. Creating work creates copyright. You can use a symbol and a date for copyright, but it is not required. Copyrights are good for a surprisingly long time– the lifetime of the creator, with seventy years added on.

So, what is infringement? This term refers to use that is unauthorized when it comes to intellectual property. Owners should notify others of rights to protect against infringement by clearly alerting someone to your rights. It also helps legally, because if you have notified someone of your intellectual property, then you will have a stronger case when prosecuting an infringement if the case makes it to court. They can do this by marking a product using the Patent and Trademark Office assigned number. Patent pending can also prevent others from getting a patent on a copied or similar design before the patent is received. Marks are added to material and the mark is registered and added to the government database.

What should you do if infringement does happen? Well, your right to intellectual property will be enforced in court if you choose to file. Before you file, you should meet with an attorney and see what your legal options are. You should also give considerable thought to the process and whether that is the way you want to go. These cases are after all expensive to prosecute and the rights will not be as extensive as thought. However, if you want to give it a shot, consult an experienced attorney and see what they have to say about your situation.

What can you do if you are sued by someone who claims to own intellectual property? You still have some options. If they successfully sue you, you do have options. A court may order an injunction, or you may be found to owe someone damages. It all depends on whether owner’s rights are established and other details. A license agreement will also allow property use to go on with payments to the rightful owner of it.

At the end of the day, fighting for your property rights can make you some money. Claims of infringement have also bankrupted companies, so there’s a lot at stake. Talking to an attorney that specializes in this law may be your best bet regardless of whether you’re trying to establish your rights or defend and profit from them. If you have rights to protect, have been accused of infringement, or just need to know more, consult an intellectual property attorney today and find out everything you need to know.

5 Real Estate Laws That Real Estate Owners Need to Know 

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When it comes to commercial real estate law, there’s a lot to take in. With so many laws that exist on the books for federal, state, and local laws, it can be pretty confusing. Commercial real estate laws can be so befuddling and complicated that at the end of the day, you really require a lawyer to help you sort through everything. The average person isn’t going to know the ins and outs of the laws on real estate, and when it comes to real estate, when you’ve got money and time invested you really don’t want to get it wrong.

Real estate owners, take note: real estate lawyers can help advise you and get you on the right track when it comes to law. In the meantime, here are five issues in the area of real estate that owners should be informed about.

1. Landlord and Tenant Laws

These change a great deal depending on the state they are relevant to. In many cases, the law may be confusing, so you may need to consult a lawyer to know your rights. These laws may have clauses that relate to such topics as disclosures, rights to privacy, taxation, termination of tenancies, paying rent, and more. If you have a question as an owner about anything regarding tenants, consult a lawyer and you’ll soon have a greater understanding of how to approach the situation and what your rights are.

2. Disclosure Laws

These types of laws relate to the location of a property, as well as the shape it’s in and the restrictions that are placed on the property. This is to clearly outline the expectations and principles so that renters have a structure they can read, digest, and agree to. Owners must disclose if they have any aspects of this property as well, such as toxic substances in the building. These laws vary according to where you live.

3. Zoning/Land Use Laws

These laws relate to how regulations of land use and zoning are established and enforced. They basically say how a property can be used, and if you’re not sure if you can operate the way you want to, you may have to see a lawyer to figure it out or risk losing thousands. Not only that, but you can be shut down if property rights are stepped over, so it’s good to be clear on this issue. Owners may also have to apply for changes to the zoning processes and be approved, which can get tricky. Either way, you want to know what you’re dealing with before renting or leasing space for a business.

4. Contract Law
Binding contracts are accepted by both properties, but they also have to be spelled out very specifically in order to stand up to challenges they have. Most of the contracts drawn up in America will be under the U.C.C., or the Uniform Commercial Code. Real estate sales and contracts are usually under the Common Law of Contracts. Again, a qualified real estate lawyer will be able to answer any questions that you may have when it comes to contract law.


5. Insurance Laws
Insurance is very important when it comes to businesses and homes. They’re doubly important when it comes to commercial property. Having this type of insurance will cover the property and incidents that may occur on your property, but most of it is not going to protect a tenant of their property. They’ll need to have insurance of their own to help cover them in certain states. A lawyer is going to be huge on this one because you really need someone who is familiar with the variables and concerns when it comes to insurance law, especially when it comes to buildings and real estate.

Conclusion

When it comes to being a real estate owner, there can seem like there’s no end to what you have to deal with. Unfortunately, this can sometimes include the law. Laws come into play when it comes to real estate all of the time. Occasionally you may be able to navigate a problem on your own, but sometimes seeking legal advice is the best thing you can do. With so much invested already as a potential or established owner, don’t leave things up to gray area– seek advice from established attorneys today.

Board Business Through a Legal Lens

There are many problems that co-op and condo boards have to deal with that are messy, personal, and time consuming. These often involve quality of life or resident issues where the board is forced to take a stand – either against resident behavior or as a motivator for some type of change.

Watch Ken Jacobs give a lesson on Sexual Harassment featured in the HabitatU course Board Business Through a Legal Lens.