Last, Faoro & Whitehorn A Professional Law Corporation

How to handle a commercial lease dispute

2022-09-23T20:14:50Z

A commercial lease outlines the responsibilities of both the landlord and business tenant. Although the ideal lease would contain details and give clarity to every situation, this is not often the case. If a dispute arises regarding one of the lease's terms, there are a variety of options both parties can choose from to resolve the issue.

First, check the lease clauses

A lease contains many different clauses, and one may include a dispute resolution clause. If this is the case, the lease states that any dispute will use a particular method to resolve it. According to the American Bar Association, arbitration clauses have been common in commercial agreements, but this method can end up being just as expensive as going through court.

Consider the three main methods for dispute resolution

If the lease does not state which dispute resolution to use, the Harvard Law School Program on Negotiation discusses the three main options the two parties can choose from:

Litigation: Most people are aware of how litigation works. Both sides present evidence and witness testimonies to a judge or jury and judge. Both sides are often able to come up with a settlement agreement prior to the court trial.
Mediation: Mediation is a more collaborative process than the other two methods. A mediator works with both sides to help them come up with an agreeable and sustainable decision.
Arbitration: Although the ABA warned about using arbitration clauses in commercial leases, this method can still be beneficial. Each party presents its side to an arbitrator, who makes a binding decision based on the evidence presented.

Choosing which method to use depends on a variety of factors, including how much each party wants to spend, how complex the dispute is and how well the parties are able to communicate.

Why do you need business contracts?

2022-09-23T20:17:22Z

Operating a business requires careful planning to protect intellectual property and strategies. Equally as important, you want to find the right connections to help you scale your business and reach organizational objectives. Contracts can add value to your company and encourage sustainable and productive relationships. Keeping agreements updated will preserve their function and reduce the risks of disputes from undermining progress.

Build trust

Even though you have a good feeling about contracting with another company, you may still not know much about them. A business contract might provide opportunities for both parties to gain trust in the other. As you observe the other party uphold their contractual obligations, you can determine the best way to leverage the developing relationship. Within your contract, you can discuss a wide scope of topics. According to Entrepreneur, contract terms and conditions may include the following:

Financial requirements
Expectations
Timeline of agreement
Description of work

Enforce expectations

Disputes in the world of business can have detrimental effects on your company. Tension may impact brand reputation, drain valuable resources and prevent your company from moving forward. In serious cases, you might have a lawsuit on your hands. A contract allows you to establish expectations early on. You can disclose disciplinary measures for non-compliant participants. A brief discussion of solutions for potential problems might provide clarification in challenging circumstances. When you have a contract in place, all participants can reference it throughout the relationship. You can have confidence knowing the most sensitive parts of your business have the protection they need to sustain progress and success. Prior to signing any business contracts, verify that it contains all the necessary information for a fair and mutually beneficial outcome.

Protecting your business with solid contracts

2022-09-23T20:17:34Z

Business relationships can allow your company to take advantage of the skills and competencies of other industry professionals. If protected, these relationships can add innumerable value to your organization. One way to protect your company is through the use of contracts. A well-written contractual agreement enables you to disclose your expectations from the start.

Writing a contract

Anyone can write a contract, but missing components could prevent some agreements from staying together in a court of law. According to Entrepreneur, some integral parts of a business contract include the following:

Participants of the agreement
A description of each party's responsibilities
Expected delivery dates
Payment or benefits terms
Applicable law clauses

You will want to collaborate with your legal team to verify that your contract contains all of the required parts. Writing a good agreement may require multiple drafts before signing.

Enforcing a contract

Sometimes disagreements prevent contracts from functioning the right way. As a result, you might lose some of the benefits of the agreement. Enforcing the terms of your contracts requires regular assessments. Within your contract, discuss what will happen during non-compliance. Disclose disciplinary measures, as well as under what circumstances the contract will void. Encourage communication between parties to verify that everyone understands their responsibilities, as well as feels satisfied with their benefits. Developing contracts takes time. Maintaining them requires consistent effort. You will want to periodically update your agreements to reflect changes in your organization. With the right strategies, you can utilize contracts to protect your company as you create meaningful relationships that will support your organization.

Should you negotiate your commercial lease?

2022-09-23T20:13:35Z

Many business owners have to rent a place for their business. If you find yourself in need of a rental, it is imperative that you understand your commercial lease. Always read through it before signing, and if you want the best deal, the California Business Journal suggests negotiating with the landlord before agreeing to a final deal.

The process

Negotiating will ensure that you get the best possible value for your money. You do not have to take the first offer the landlord extends. Do not be afraid, even in a tough market, to ask for more or to request changes. It may be helpful to have a professional who can assist you with the process. Someone who is experienced with negotiations will be better able to read the situation and know how much you can push the landlord.

The perks

Negotiating will expose all the potential options you have with the property, You may discover your landlord is willing to extend extra amenities that you would not have received if you signed the first offer. In addition, you will also uncover unfair situations that will ensure the landlord does not take advantage of you.

The strategy

A great strategy in any negotiation for commercial property is to get in the landlord's head. What does he or she want most? Perhaps the landlord is hoping you will leave so he or she can charge a new tenant more money. However, landlords almost always prefer to keep current tenants especially if they are reliable and stable. They never know what a new tenant could be like. So, use that to your advantage. Negotiate to get a better rent price while playing up that you are saving the landlord from dealing with an unknown tenant.

How can I prevent the contractor from requesting too many change orders?

2022-09-23T20:12:39Z

When you hire a general contractor for a building project, you usually sign a contract. That contract likely has a clause for change orders. A change order is when someone makes an amendment to the construction contract. One of the parties might change the work that's required, and that in turn increases the price. Or else someone may change the length of time needed to complete the project. Change orders are common with construction projects. Still, too many change orders may invalidate the contract. Protect yourself from too many change orders by doing the following.

1. Make sure the contract is clear

Business contracts tend to be wordy and complex, but yours should not be. Make sure your contract terms are clear and detailed. Be upfront with the contractor about what work you expect. If your contract is ambiguous, your contractor may misinterpret what you want. That could result in change orders and delays as well as an increased price.

2. Be specific about communication

Include specific terms in the contract about requests for information. Agree on a way the contractor will communicate with you about any issues that arise.

3. Include a detailed change order clause in the contract

Be sure to include a clause that says that for any change order to be valid, both parties must agree to the new terms. Also, agree on a standard for pricing for change orders. Finally, be aware that some change orders are inevitable in any construction job. The property may have a latent, or hidden, defect no one could have foreseen. A detailed contract helps you prepare for the unexpected.

3 tools to remedy a construction payment dispute

2022-12-07T07:34:38Z

If you provide services or materials for a construction project, you rely on promised payments to keep you in business. When facing a payment dispute, you have multiple ways to remedy the situation in California. Consider these three tools that can help you recover unpaid funds.

1. Mechanics liens

As an unpaid party, you can use a mechanics lien to place a claim on a property until you receive overdue funds. If nonpayment continues, you can force a foreclosure in order to receive compensation. A mechanics lien attaches to the property’s title and is a matter of public record. You cannot take out such a lien against a public works project.

2. Bond remedies

A payment bond is a contract that guarantees unpaid parties on a construction job receive compensation. In California, the prime contractor must take out a payment bond for any public works project over a certain value. You can make a bond claim if you have a payment dispute relevant to the project.

3. Stop notices

A stop notice is a tool that halts funding of a construction project until the sender of the notice receives the unpaid funds. A stop notice only applies to currently outstanding balances and does not guarantee future payments. This is a commonly used method for public works projects, as mechanics liens are not allowed. These formal means of inducing payment can be highly effective, but you may want to pursue other tactics first. Carefully consider the likelihood of payment, your relationship with other stakeholders and the impact on your reputation when determining which approach to follow.

Communication tips for contractors

2022-09-16T18:20:55Z

As a contractor, communicating and collaborating with your clients requires a significant amount of your time. When projects get underway, it can be easy to focus on moving the work along instead of talking with your client frequently. This is especially true if you manage multiple projects at one time and contribute to nearly the $1.4 billion in structures built every year, states The Construction Association. However, miscommunication can result in legal problems, so you should be careful about communicating effectively with your clients.

Rely on written communication

Talking to your clients in person or over the phone is quick and convenient. But to prevent a construction dispute in the future, always follow up on conversations you have with your clients with an email or another form of written communication that covers what you talked about.

Maintain project records

Every time a milestone in a project occurs, document this progress. This way, you have concrete evidence to present to your clients about the progression of the project and what still needs to happen to complete the work at hand.

Manage customer expectations

Many clients become impatient when they do not know exactly what to expect. Set time aside every day or week to send updates to clients and tell people exactly when they will hear back from you. Ultimately, provide as much information about the project to your clients as you can throughout its duration. Effectively communicating can help you manage client expectations and prevent disputes during the construction process.

The role expert determination plays in construction disputes

2022-09-16T18:21:01Z

Construction disputes can be costly for all involved parties. Common construction disputes arise where there is disagreement about a term or terms in the construction contract. For example, the parties may differ on what constitutes contractual completion. Like with other types of contracts, it is usually possible for an aggrieved party to a construction contract to sue the other party. Because litigation is often time-consuming and expensive, parties may pursue one or more forms of alternative dispute resolution. Expert determination is a popular one.

What is expert determination?

Construction contracts can be extraordinarily complex, as they may hinge on technicalities in workmanship, materials or methods. These matters may be too complex for judges or juries to tackle. Expert determination is often appropriate where specialized knowledge is necessary to work through the dispute. With this type of dispute resolution, a specialist who understands the issues provides an opinion.

Who picks the expert?

There are a couple of ways construction contractors may select a specialist to provide an evaluation. First, the contract may name the specialist at its outset. If this is the case, the parties may have had a chance to negotiate before designating the expert. Alternatively, in an effort to resolve the dispute, parties may have to agree on a specialist before pursuing a determination.

Is expert determination legally binding?

The parties to the construction contract have no legal obligation to comply with the specialist's determination. If a party believes the determination is incorrect or unfair, the party typically may explore other forms of alternative dispute resolution, file suit or take additional actions. Ultimately, for parties that wish to avoid prolonged and expensive litigation, relying on the expertise of a qualified specialist may be beneficial.

Mask Mandates are Returning: What the Construction Industry Should be Aware Of.

2022-09-16T18:21:07Z

On August 2, 2021, the Health Officers of San Mateo County, San Francisco County, Santa Clara County, Alameda County, Contra Costa County, Marin County and the City of Berkeley all issued new Public Health Orders regarding wearing face masks indoors. These orders take effect as of 12:01 am on August 3, 2021. The Orders directs that face coverings shall be worn, regardless of vaccination status, over the mouth and nose, in all indoor public settings, venues, gatherings, and workplaces. This includes all offices, retail stores, restaurants and bars, theaters, family entertainment centers, conference centers and government offices serving the public. In addition, as of July 29, 2021, Executive Order No. 13991 was issued by the Federal Government regarding federal workplace safety principles intended to combat increasing COVID-19 infections and hospitalizations. Executive Order No. 13991 requires that all fully vaccinated contractors working in federal buildings and installations, this includes all federal government offices, federal courthouses, military bases and buildings, and land subject to the jurisdiction of any federal agency, must sign an attestation confirming their vaccination status. Any contractor who does not sign the attestation will be treated as unvaccinated. If you are working on a Federal Installation that is in a county experiencing high or substantial transmission as identified by the CDC on their website, a vaccinated person who has signed the attestation you are required to wear masks inside federal facilities, but not outside of the facilities. In counties with low and moderate transmission rates, mased are not currently required for vaccinated persons. For anyone who will not sign the attestation confirming vaccination, or who is partiality vaccinated or unvaccinated, social distancing and face masts are required, as is weekly or twice-weekly COVID-19 testing.

Avoid these common causes of construction disputes

2022-09-16T18:21:10Z

A construction contract dispute can result in wasted time and lost money. Parties to these contracts can mitigate the risk of a disagreement by becoming familiar with some of the common causes. Addressing common issues before beginning can reduce the likelihood that your project will have the same problems.

Problem #1: Failure to understand the contract.

It is not a good sign if the other party simply signs the contract without asking questions. Do they really know what is expected? Take the time to have discussions before signing the contract. Discuss expectations and specific provisions that are important to the project that could be new to the other party.

Problem #2: Delays.

Construction projects can run behind. Reduce the risk of an estimated timeline that is too far off by completing thorough due diligence before putting together estimated schedules to better ensure the timeline is realistic. This is particularly true in today’s market when the pandemic has severely disrupted supply chains on a global level. Take this into account and make plans for potential disruptions.

Solution: There are options for efficient resolution

Although these problems may not rise to the level of a breach of the contract, they can result in frustrated parties and escalate to actions that constitute a breach. In these cases, there are many options for efficient resolution. The first step is often to attempt to negotiate the issue. Ideally, the contract will include a provision that requires negotiation as the first step towards dispute resolution.

If negotiation fails, mediation or arbitration, two forms of alternative dispute resolution, can also provide a solution. These both involve a type of guided negotiation session, using experts to help both parties come to a resolution. If these options fail, litigation is also an option.