Real Estate Questions & Answers

Commercial lease terms and security deposit

Additional Info: I’ve recently exited a commercial lease in Brookline in good standing, however the landlord has sent a letter indicating there are deficiency repairs that I deem unreasonable (amount ~$10k) for an 1 year lease of monthly rent $2.3k. I find that unreasonable and would like to know what consequences I would face if I decide simply not to comply.  Would I need to hire an attorney to represent me?

Attorney Answer:

In virtually every commercial lease, the landlord requires a security deposit of typically 2 month’s rent, at the time the lease is signed.  Assuming there is such a security deposit, it becomes incumbent upon the tenant to hire counsel and seek the release of the disputed monies.  Unlike residential leases, there are no statutory protections for commercial tenants beyond the usual remedies.   If, for some reason, the landlord did not require a security deposit, I would suggest a firm written response to the landlord’s demand, laying out in as much detail as possible why you do not feel the repairs are required or not the responsibility of the tenant.  Thereafter, you would wait to see if further discussions/negotiations are warranted or simply wait for the landlord to back down or initiate legal action.

Can a new owner of a commercial property break a lease of a current tenant once the sale is final?

Additional Info: We are looking into purchasing a building in Newton that is zoned commercial to use for our business. The current owner just signed a 3-year lease with the lessee that is currently occupying the building. Can we make an offer on the property contingent upon negotiating to have the current tenants vacate? Or do the current tenants have legal rights to stay through their lease term?

Attorney Answer:

A purchaser of commercial real estate takes title to the property subject to any existing leases.  It is certainly within the realm of possibility to make an offer to purchase subject to negotiating with the current tenant to relocate, making the desired space available.  If I were representing the seller, however, I would counsel a very short time period for such negotiation to occur, and would insist that the buyer (you) bear all costs related to the possible move by the existing tenant.

We’d like to convert a Chestnut Hill property to condominiums.

Additional Information:

Do I need a special permit to convert a 4 unit apartment building in Chestnut Hill into condos?

ATTORNEY ANSWER:

No – but if you are in Brookline you need to file a copy of the Master Deed with the Town – assessor and Building Department and complete a condominium conversion certificate.   [Read more…]

Property zoned as 3 unit multi family dwelling, can we convert to 4 condos?

Additional Information:

My wife and I are considering buying an investment property in Newton.  It is zoned as a multi family dwelling with 3 separate units.  We are considering buying it and building out the fourth floor to create 4 units, and then converting into 4 condominiums.  Is this doable?

ATTORNEY ANSWER:

The first step is to check with the Newton Building Department to determine if the specific property can be converted into 4 units.  If the answer is yes, and the conversion may be done as a matter of right, you can proceed accordingly.  If you are told the conversion cannot happen without Zoning Board of Appeals approval you may want to make your purchase contingent upon such approval.

Once approval is obtained either by right or after Zoning Board hearing, in Newton a homeowner can convert a property into condominiums without having to obtain approval.  [Read more…]

We’re considering converting Watertown duplex into condos.

Additional  Information:

What are some of the benefits of converting to condos?  My brother and I inherited a duplex in Watertown and we’re considering converting them to condos.  We may or may not move into the respective units and wondering if the benefits outweigh the expense.

 ATTORNEY ANSWER:

It depends upon the real estate market in your area –  in some places conversion into condos is a good economic move and in others it is not.   If one of you wanted to reside in the property but the other wanted just to sell, then conversion into condos allows each of you to get a desired result.  [Read more…]

How do you go about converting apartment building in Cambridge into condos?

Additional Information:

I currently live in an apartment in Cambridge.  The apartment is in my grandmother’s 4 unit building where I pay rent. If she wanted to convert the units to condos, what are the steps she would need to take? Can she convert one at a time or is it best to convert all 4 at once?

ATTORNEY ANSWER:

You cannot convert a building into condominiums without converting all apartments.  The first step in the conversion process is to check to be sure the local city or town does not have an condominium conversing laws or restrictions.   Some cities and towns regulate conversions and others provide protections for certain tenants.   The next step is to have an engineer or architect prepare floor plans, showing the layout of each unit.  Most every conversion has a site plan prepared as well, showing the lot, the building and any outdoor common areas and designated parking spaces.   When the plans are completed an attorney prepares a Master Deed and Condominium Trust for recording.  It is wise to also have an estimated budget drawn up – and if you intend to sell units consider having rules and regulations prepared as well.  The process can take 2 months and the property is not officially condominiums until the plans, master deed and trust are recorded at the registry.  [Read more…]

Difference between real estate attorney and commercial real estate attorney?

Additional Information:

My business partner and I are about to buy a commercial office building in Roslindale and I’d like to use a friend who is a real estate closing attorney.  Are there really that many differences between a commercial real estate deal and buying a house?

ATTORNEY ANSWER:

Yes there are differences –  If the attorney in question, no matter how much of a friend,  is not generally familiar with commercial transactions, I would seek out someone who is.  This is particularly true for a larger building or one housing a restaurant.  Like the answer to the previous question, a smart purchaser has done a good deal of homework prior to signing a purchase and sale agreement.

[Read more…]

What are some common challenges in a commercial real estate deal?

Additional Information:

I am about to sign a P & S for commercial property in the South End.  What are some of the common pitfalls involving a commercial real estate deal?

ATTORNEY ANSWER:

First thing I suggest is the buyer find out if there are existing tenants in the building, if so are they subject to lease agreements and for how long and of course what is the rent being collected.  A review of all leases is a must, and also a check as to whether the tenants are current with rent, any lawsuits pending or threatened.  Check with the City of Boston to be sure all applicable licenses have been issued and that local taxes and fees are not in arrears.  An experienced buyer will have already done the math concerning the income from the building versus carrying costs, improvements etc. but if that has not been done, get busy with the financial analysis prior to signing any documents or engaging an attorney.  [Read more…]

Can I get my restaurant back and void the purchase and sale agreement?

Additional Information:

I sold my Watertown restaurant for $25k (building not included) and have a signed sales agreement showing the purchaser agreed to pay $1000 per month. So far, the purchaser has only paid $800 and refuses to pay anymore. They are not doing well with the business and are saying I misrepresented what the restaurant was worth.  It kills me to see the restaurant not doing well, when it was thriving when my family operated it.  How do I go about getting the restaurant back and voiding our agreement?

ATTORNEY ANSWER:

Your ability to “take back” your restaurant is dependent upon what documents were signed at the closing.  If the buyer executed a promissory note and a mortgage – giving you the right to foreclose in the event of a default, then you can begin that process, usually with formal written notice to the buyer.

If as seller you were not protected you could be limited to simply being able to sue for the monies due you but nothing more.  [Read more…]

Should I hire my own attorney for a restaurant purchase?

Additional Information:

I am about to purchase a restaurant in Jamaica Plain from real estate brokers and they are proposing to be the agents for the restaurant sale transaction.  They’ve presented the restaurant’s operating expenses and income and positive cash flow.  Should I bring in my own attorney to help me purchase this restaurant?

ATTORNEY ANSWER:

I would strongly recommend hiring an attorney to assist you.  For starters you want to have someone review the Purchase and Sale contract, to be sure you understand exactly what you are purchasing – the assets of the business, the fixtures, equipment, furniture, inventory?   In addition, you will need to receive a bill of sale for all the items included in the sale, and a representation that the seller owns the items free and clear.  A UCC title search is often undertaken to be sure none of the equipment that is part of the transaction is encumbered by a loan.  You also need to be sure the agreement you sign obliges the seller to pay all outstanding meal, sales and employment taxes up to the date of the closing.   [Read more…]

In a restaurant lease, what is a typical permit contingency clause?

Additional Information:

I’m about to open a restaurant and will do some renovations before opening.  In a standard restaurant lease, what is a typical permit contingency clause?   If I’m unable to get permits to do the necessary renovations, what kind of notice would I need to give in order to get out of the lease?   I am working with a well regarded Boston restaurant architect and he has great ideas, just not sure the permits will get approved.

ATTORNEY ANSWER:

Most commercial leases provide for a build out period prior to the commencement of the tenancy.  Prior to any work being done on the premises, permits have to be obtained.  Any commercial lease that involves changes, improvements or renovations to a space needs to be contingent upon the tenant obtaining approvals.  Most leases also have plans attached showing the space as it will be once work is complete. This protects the both parties since both lessee and lessor have agreed to the proposed work.  As attorney for either the landlord or the tenant I would not allow any work to start without all required permits in hand.  If the proposed work requires zoning board approval, the lease needs to not only spell that out, but require that the landlord cooperate with the process.  Tenant typically is responsible for all costs of the zoning board process.   [Read more…]

Does the restaurant owner or landlord provide liability insurance?

Additional Information:

I am hopefully going to open my first restaurant in the Greater Boston area and have just reviewed the lease. Who typically covers liability insurance? The restaurant owner or the landlord, or both?  If a customer falls and injures him/herself, and I don’t have my own liability insurance, wouldn’t I be at risk if the restaurant got sued for personal injury?

ATTORNEY ANSWER:

The landlord typically insures the commercial property for loss due to fire, flood etc.  It is almost universally the tenant’s obligation to obtain and maintain liability insurance.  Most landlords require proof of insurance prior to the commencement of business and usually at the time the lease is signed.  Most tenants of commercial property are corporations in part to further protect principals from personal liability in the event of injury.  [Read more…]

Can we get out of selling our condo in Newton?

Additional Information:

My husband and I have already signed a contract to sell our condo in Newton.  However, we have since changed our minds and no longer want to sell. What can we do to get out of selling our home?

ATTORNEY ANSWER:

Having signed a valid contract, your options may be limited.  The sooner you approach a buyer or buyers the better.  Some sellers approach a prospective buyer with the truth, offer to reimburse the buyer for costs such as inspection fees and the like and hope their appeal will be honored.  Another potential “out” is if the buyer requests additional time to obtain mortgage financing.  By declining to give a buyer additional time, you force the buyer to take the chance that the mortgage will be approved or terminate the transaction.  The same tactic can be used if the buyer is unable to close on the agreed upon date.  The latter two options are not risk free and could lead to litigation. [Read more…]

Can I record a declaration of Homestead for my 3 family in Brookline?

Additional Information:

I own a three family home in Brookline, Massachusetts and I want to record a declaration of homestead. I live in one of the units and rent out the other two. Can I do that? Will the declaration of homestead be effective? Does it matter that I live in the home?

ATTORNEY ANSWER:

As an owner occupant you may file a declaration of homestead, which will provide protection from creditors.  The declaration of homestead will not reduce the amount you may owe a creditor, but will protect you from being evicted from your residence to satisfy a debt during your lifetime.

[Read more…]

I live in a condo in the Greater Boston area and my unit has been damaged.

Additional Information:

There was a fire in a neighbor’s condo unit and there was resulting water damage to my unit.  I received an estimate from the Association’s Insurance company and am not satisfied with the estimate since it does not provide adequate compensation to cover expenses for necessary repairs.  What should I do to get better settlements?

ATTORNEY ANSWER:

First review the condominium documents and the insurance policy.  If possible, you may need to make a claim against the owner who created the problem.  If the fire was caused by negligence you may have the right to seek reimbursement.  Often, however, when you accept a settlement from the insurance company you release any and all claims.  Before signing any releases an owner in this situation needs to know what the policy says. It may also be wise to check with a Trustee of the Condominium Association and legal counsel. [Read more…]

Our Boston condo association is foreclosing on a unit.

Additional Information:

Our Boston condo association has recently filed papers to foreclose on a condo in our building for unpaid condo fees. The unit is owned by an LLC and the tenants are asking for a new key to be made because they lost it. As an association can we deny this request? What services do we have to offer if they are not paying their fees?

ATTORNEY ANSWER:

I would advise any condominium association to cooperate with tenants and provide all normal services to them.  When representing condominiums against delinquent owners I have gone to court to request an order that rents be paid to the Association rather than the landlord/owner.  The latter approach is more effective than alienating the tenants of a non-paying owner.

[Read more…]

I’m considering buying a restaurant in Brookline.

Additional Information:

Can a lawyer help me valuate the business or would I need to seek out a business consultant for that?  Also, isn’t it pretty standard for the purchase agreement to contain language that allows an “out” for the buyer if the lease agreement isn’t satisfactory? Isn’t my application for liquor license contingent upon having a lease?

ATTORNEY ANSWER:

Generally an attorney is not the person to determine the value of a business.  An appraiser or accountant can generally provide more detailed and accurate valuations.   When drafting a Purchase and Sale Agreement for a restaurant or other business,  it is standard to include language making the transaction contingent upon the buyer’s ability to either assume an existing lease term or negotiate a satisfactory lease agreement with the owner of the premises.  In most Cities and Towns, like Brookline, an applicant for a liquor license must show the existence of a lease agreement as a condition of being considered for a license.

[Read more…]

Is there any case law in Massachusetts regarding HOAs fining it’s residents?

Additional Information:

My HOA is fining residents, but there is no statutory authority to do so. Condos are authorized to levy reasonable fines, but HOAs are not subject to GL 183a.  Is there any case law here? My understanding is that HOAs are fining their residents all over Massachusetts.

ATTORNEY ANSWER:

If the Condominium Association has by-laws and or rules and regulations which provide for fines in the event of a violation, I believe they are legal.  Condominium owners give up certain rights when they purchase a unit, they are subject to the will of the majority on many issues such as noise, pets and architectural integrity.  When purchasing a condominium, owners agree to the terms of the condo master deed and trust (or by-laws) and where those documents set down rules of conduct and fines for breaches of the same, they are enforceable. [Read more…]

Can a homeowners association legally shut the water off to one of it’s members?

Additional Information:

Can a home owners association legally shut the water off to one of it’s members for non payment of its dues for a shared well? One member owes back fees of over a thousand dollars for their part of a shared well, can the water use be legally shut off to them for non payment by the association?

ATTORNEY ANSWER:

No, this is called “self-help” and is not allowed.  If the Association or any individual member who cuts essential services to another unit owner would be potential liable for damages.  Many homeowners have fallen behind with their mortgages but no lender would seek to have water, heat or electricity cut off to enforce a debt, not because banks are nice but because the tactic is illegal. [Read more…]

Seller has requested an extension of thirty days. What happens if we don’t agree?

Additional Information:

The seller is unable to find a replacement property by the time the sixty day escrow closes. They have requested an extension of thirty days. If we do not agree to that extension, will we lose the appraisal fee, the home inspection fee, and our deposit?

ATTORNEY ANSWER:

Most Purchase and Sale contracts oblige the seller to close unless for some reason such as a tenant in the premises or a title issue.  That fact that a seller hasn’t found a place to live in time is not your problem and is not covered in the standard P&S Agreement.  If you agree to delay the closing, it would have to be conditioned upon your financing also being extended.  In this circumstance no buyer should lose their deposit.  Other costs such as inspection fees and bank costs might be at risk.  I would want all of that covered in any extension agreement that was negotiated. [Read more…]