TLD's General Counsel Blog

Commercial Lease Agreements

Most businesses either own or lease space in which to conduct their business. One especially significant term in a commercial lease agreement is the rental amount. Depending on the length of the lease, either the landlord or the tenant may want to have adjustments to the rental amount over time. One common term included in commercial lease agreements is an adjustment based on "CPI" or the Consumer Price Index.

This is a complicated term and one in which most landlords and tenants are unfamiliar. The Department of Labor releases a number of different "indexes." Several of the most frequently used are:

Consumer Price Index for All Urban Consumers for the United States, Consumer Price Index for Urban Wage Earners and Clerical Workers for the United States, Consumer Price Index (All Urban Consumers) for a designated region, and Consumer Price Index (Urban Wage Earners and Clerical Workers) for a designated region.

The later two regional indexes are generated by the Department of Labor for three different metropolitan areas in California: the San Diego Metropolitan Statistical Area, the San Francisco-Oakland-San Jose Consolidated Metropolitan Statistical Area, and the Los Angeles-Anaheim-Riverside Consolidated Metropolitan Area.

Normally, the Index used in the Lease will specifically reference which of these it is referring to.

AVERAGE INCREASE OF EACH INDEX

The average increase in each of these indexes is as follows:

1. Consumer Price Index (All Urban Consumers)

2000 2%
2001 3%
2002 3%
2003 1.6%
2004 2.2%
2005 2.7%
2006 3.1%
2007 3.6%
2008 3.8%

2. Consumer Price Index –Urban Wage Earners and Clerical Workers

2001 2.9%
2002 1.1%
2003 2.2%
2004 2.0%
2005 3.65%
2006 3.68%
2007 2.5%
2008 4.2%

3. Consumer Price Index – All Urban Consumers – Los Angeles

2001 3.5%
2002 3.1%
2003 2.9%
2004 2.2%
2005 4.7%
2006 4.6%
2007 3.5%
2008 3.1%

The normal term in a CPI adjusted lease would say something to the following:

(b) Commencing with the thirteenth (13th) full calendar month after Tenant is obligated to pay rent under this Lease, and at the end of each twelfth (12th) month afterwards during the Term, including any extensions or renewals, the Minimum Monthly Rent for the ensuing twelve (12) month period ("Adjustment Period") shall be an amount equal to the greater of:

(i) the Minimum Monthly Rent in effect immediately prior to the commencement of this Adjustment Period (without regard to any temporary abatement of Rental then or previously in effect pursuant to the provisions of this Lease), or

(ii) the product obtained by multiplying the Minimum Monthly Rent in effect immediately prior to the commencement of the Adjustment Period (without regard to any temporary abatement of Rental then or previously in effect pursuant to the provisions of this Lease) by a fraction, the numerator of which is the Index published nearest but prior to the commencement date of the Adjustment Period and the denominator of which is the Index published nearest but prior to the commencement of the twelve (12) month period immediately preceding the Adjustment Period.

The INDEX is defined as one of the above-referenced indexes.

A TLD attorney can make sense out of the rental adjustment term in your lease agreement, as well as any other terms that may be confusing or uncertain.

Please call us if you would like a lease review or an attorney to help you negotiate a lease agreement.

Article Submitted By: Attorney Brooke Pollard

ARC Walk - ARC of Southeast Los Angeles County

A rowdy gang of 34 TL&D supporters showed- up to the ARC Walk on Saturday, April 5, 2008 to show our great support for ARC of Southeast Los Angeles County. TL&D also donated $2,500 to become a diamond sponsor of this special event.

Arc of Southeast Los Angeles County is committed to providing for people with mental retardation and other developmental disabilities the ability to form and work towards goals through training and education, based on their individual abilities. Arc of Southeast Los Angeles County is further committed to helping to reduce and limit the incidence and consequences of mental retardation through education research, advocacy and the support of families, friends and community.

Tredway, Lumsdaine & Doyle has supported ARC for many years through special events such as this, and by hiring people with developmental disabilities as support for the law firm. “Community service is important for any business, but its particularly important for lawyers,” said Joe Lumsdaine, senior partner for the firm, “Lawyers serve in a privileged position. They should be willing to support the community in return.”

A Victory for Property Owners

In a victory for property rights advocates, Judge Vaughn Walker of the United States District Court for the Northern District of California, recently  found the City of San Rafael's mobile home park rent control ordinance to be unconstitutional.  More specifically, Judge Walker found that San Rafael's ordinance resulted in an unconstitutional taking of private property  in violation of the Takings Clause of the Constitution.  The court's ruling was based, in large part, on its finding that the ordinance resulted in a taking of 75% of the mobile home park's value.  The court further found that the ordinance did not protect fixed-income residents or create more affordable housing as San Rafael argued.  Instead, the court found that the ordinance created a premium in the resale prices of mobile homes located in the protected park and shifted wealth from the park owners to mobile home owners/pad lessees.

Article Submitted By: Attorney Kevin Casenhiser

Parent- Child Exclusion - Recent Property Tax Developments

Propositions 58 and 193 are constitutional initiatives that provide property tax relief for property transfers between parents and children and from grandparents to grandchildren. The two propositions have made it easier to keep property “in the family.” Proposition 59 states that real property transfers from parent to child or vice versa may be excluded from reassessment. Proposition 193 broadens the tax relief to include transfers between grandparents to grandchildren.

Most recently, effective January 1, 2008 Assembly Bill 402 (Ch. 450, Stats. 2007) amends section 63.1 to extend the parent-child exclusion to transfers between foster parents and foster children. These provisions apply to transfers that occur on or after this date and are not retroactive. To take advantage of the foster child exclusion, you must provide: 1) a certified copy of the court decision regarding the foster child status of the individual, and 2) a certified statement from the appropriate county agency stating that the foster child was not, because of a legal barrier, adopted by the foster parent. Further, an assessor may request legal substantiation of these two items.

It is important to note that in order to obtain the parent-child exclusions, the claim must be filed within three (3) years after the date of purchase or transfer for which the claim is filed or prior to transfer to a third party, whichever is earlier, or within six (6) months after the mailing of the notice of supplemental assessment. Tredway, Lumsdaine & Doyle has handled property tax appeals and can assist you in securing your property tax exclusion to keep your family home within the family.

Article Submitted By: Attorney Pamela Tahim

Is your Letter of Intent Enforceable?

In many transactions (including real estate transactions), the final contract is usually preceded by letters of intent to contract.  Are those letters of intent enforceable?  A recent case discussing this issue is Copeland v. Baskin-Robbins U.S.A. Copeland was in negotiations to purchase an ice cream manufacturing plant from Baskin-Robbins.  The two parties came to an agreement that Baskin-Robbins would buy 7 million gallons of ice cream from Copeland. After signing a letter of intent, Copeland returned it to Baskin-Robbins with a $3,000 deposit.  Although negotiations continued on certain details, Baskin-Robbins subsequently put an end to the negotiations and returned the deposit.  Copeland filed a claim for breach of contract.

WHAT IS A QUIT CLAIM DEED AND SHOULD I SIGN ONE OVER TO MY SPOUSE?

A quick claim deed is actually called a quit claim deed.  A Quit Claim Deed transfers whatever interest or title a grantor may have without warranty.  Even when a quit claim deed is signed, it does not release the person from the loan.

A Quit Claim Deed gives up ownership of your home and associated rights and responsibilities.  It operates to release any interest in a property that a person may have, without a representation that he or she actually has a right in that property.

Couples who are divorcing often use a Quit Claim Deed by one spouse to transfer real property ownership to the other.  A Quit Claim Deed is often executed when the property isn't sold.

Before you sign a Quit Claim Deed during the pendency of your divorce proceedings, you should seek legal advice.  You could potentially be transmuting your community property into your spouse's sole and separate property.