Arizona lawyers
Real Estate Owners and Agents: Time to Tighten Up Those Letters of Intent
Sure, deals are scarce right now and nitpicking deal point language may be the last thing real estate owners and agents want to hear. However, a well drafted letter of intent (”LOI“) is critical to laying the groundwork for each party’s expectations in a deal and avoiding sticking points in contract negotiations. In contrast, LOI’s that omit important deal points for one or both parties often sidetrack a deal while the material term is being considered and integrated into the contract documents. To prevent surprises in purchase and sale or lease transactions, agents and their clients should carefully develop a list of material terms to be included in any LOI. Checklists or form letters of intent are available as starting points for any deal, although every deal is different and will present different issues to be addressed in a LOI.
For lease transactions, consider the following sample of terms to address in a LOI:
1. Lease contingencies. A tenant may want a due diligence period to investigate entitlements such as building permits, liquor licenses, to review the status of title, or to obtain an appropriate non-disturbance agreement from landlord’s lender. If agreeable to a landlord, the LOI should be specific on the parties’ obligations, deadlines and any termination rights.
2. Permitted Use and Exclusive Use Language. Most standard leases limit the permitted use of a premises. A well drafted LOI will state any use limits and include all desired tenant uses including the types of food, beverages, merchandise or services to be sold or provided, or business to be conducted. If an exclusive use right is important to a tenant, it should be clearly stated in the LOI. Also consider addressing the remedy for landlord’s breach of the exclusive use provision. An exclusive use clause without an adequate remedy (or the very limited remedies typically available to a tenant in a standard lease) is not much of a right.
3. Lien Against Tenant’s FF&E. In order to secure a tenant’s lease obligations, landlords have a statutory lien against a tenant’s personal property brought onto the premises. A typical landlord lease also requires a tenant to give landlord a contractual security interest and Uniform Commercial Code lien against the tenant’s property. For tenants that need a loan to fund their business start up costs (especially those in the restaurant business or requiring large equipment purchases), they will likely need to give their lender a security interest and UCC-1 lien against their personal property. To grant such a lien, a landlord must waive or subordinate its statutory and/or contractual lien. Every LOI should clearly spell out what lien rights and obligations are expected.
4. Termination Rights. Landlords and their lenders loath termination rights in a lease and typically limit a tenant’s right to terminate to situations following damage or condemnation of the premises or surrounding areas. Early termination rights for matters such as co-tenancy requirements and landlord defaults should be addressed in a LOI if important to a tenant.
5. Caps on Additional Rent. If a tenant is required to pay a share of common area charges, include any agreed upon cap on initial common area charges or subsequent yearly increases.
6. Assignment of the Lease. Provide terms related to the standard of review for assignments (e.g., sole discretion, reasonable standard, net worth requirements of assignee) and whether a tenant will be released from liability following the assignment. Also address whether a release will be immediate or at the end of the current term. Landlords should make sure liability arising from prior acts or omissions is not terminated.
7. Guaranty. Be clear in the LOI as to who must provide a Guaranty and if financial statements have been approved or must be submitted for approval. Landlords should be clear on who the tenant is. If the Tenant is a corporation or limited liability company, consider whether it is a single asset entity or has other assets and liabilities in deciding on whether a Guaranty will be required.
8. Limits on Guarantees. For tenants and their guarantors, address whether a Guaranty terminates after a set time if no tenant default occurs (e.g., after initial term, after 3 years, etc.) or after the tenant has provided evidence that it has net income from business operations at the premises for a set period (e.g., for 3 consecutive lease years). Also address whether a Guaranty remains effective following an assignment of the lease and if so, whether it extends to any extension period of the term or just the unexpired portion of the current term.
9. Condition of Premises and Warranties. If landlord is not doing any work, address whether the tenant will be taking the space as-is, or with a full or partial warranty (e.g., limited 120 day warranty on HVAC, plumbing and electric). If landlord is doing work, address whether all or part of the work or premises will be warranted for a set time (e.g., 1 year after delivery) and whether warranties are being assigned to the tenant. If landlord or tenant are doing work, specific deliveries should be required to evidence completion, e.g., C of O, certificate of completion from general contractor or architect, lien waivers, etc.
If you need to speak to an Arizona attorney, contact the attorneys at McCain & Bursh, PLC. www.mccain-bursh.com.
Foreclosure of Residential Mortgages/Arizona Anti-Deficiency Laws
Before losing a home to foreclosure, it is critical to understand when a lender’s rights are limited to selling the home at foreclosure, and when a lender is entitled to a deficiency judgment. In addition to damaging one’s credit, a foreclosure may also result in a deficiency judgment if the foreclosure price doesn’t pay the lender in full. However, in specific instances in Arizona, a deficiency judgment is not permitted. The following terms and rules provide a summary of when a borrower may be subject to a deficiency judgment following a foreclosure.
1. A real property loan is typically secured by a Mortgage or Deed of Trust. A Mortgage is foreclosed judicially by filing a court action per A.R.S. § 33-721 et. seq. A Deed of Trust is foreclosed non-judicially via a trustee’s sale per A.R.S. § 33-801 et. seq. However, a Deed of Trust may also be foreclosed judicially as a Mortgage.
2. In judicial foreclosures and trustee’s sales, the type of property is key, not the type of borrower. Anti-deficiency rules apply only if the property foreclosed is 2½ acres or less and used for a single 1-family or single 2-family dwelling. Commercial properties don’t qualify nor do loans secured by residential homes being developed for sale but never used as dwellings.
3. If the property passes the test in #2, next determine if the loan is a purchase money (”PM”) or non-purchase money (”NPM“) loan. A PM loan is (a) any carry-back loan given upon buying a property, or (b) any loan used for all or part of the purchase price of a home. A home equity line of credit may be a PM loan if given to pay the price of the home. A PM loan doesn’t lose its PM nature when it is refinanced.
4. In a judicial foreclosure, only a PM lender on qualifying property is prevented from seeking a deficiency; NPM lenders are not — they can obtain a deficiency.
5. In a trustee’s sale, both PM and NPM lenders on qualifying property are prevented from seeking a deficiency. The borrower will not be subject to further liability for the loan.
6. If a 1st position PM lender forecloses via trustee’s sale, a 2nd position NPM lender does not lose its right to sue a borrower on the loan. Unless the 2nd position NPM lender is paid or settles the debt, a bankruptcy filing would be required to discharge the 2nd position NPM lender’s loan.
If you need to speak to an Arizona attorney, contact the attorneys at McCain & Bursh, PLC. www.mccain-bursh.com.
ANTI-GAY MARRIAGE PROPONENTS - GIVE UP NOW AND SAVE THE MONEY AND EFFORT
Ever wonder how much money and effort will be spent trying to prevent gay marriage? Supporters of the anti-gay marriage propositions in California (Prop 108) and Arizona (Prop 102) recently beat back opponents by votes of approximately 52/48 and 57/43, respectively. In California, reports peg spending in favor of the measure topped 35 million dollars while opponents of the measure spent over 37 million dollars trying to defeat it. In Arizona, supporters of Prop 102 spent $6.9 million according to the AP.
Given the history of anti-gay sentiment in this Country, some could argue the margins of victory were relatively small but not altogether surprising. Anti-gay sentiment is, after all, still much more widely accepted than its racially based counterpart. While appealing to religious doctrine to support racism is no longer mainstream, religious dogma continues to prop up anti-gay crusaders. This explains the widely discussed black vote in support of California’s Prop 108. The movement appeals to one’s moral sense of what is natural or ordained. It speaks of unions between a man, woman and god. It tells us that one man and one woman is tradition and cannot be watered down by recognition of homosexual unions.
Apart from overlooking the varying forms of marriage, its development and level of sanctity over time and cultures (such as women as chattel, polygamy and soaring divorce rates), or that heterosexual spouses engaging in open marriages or bi-sexual encounters as part of their “loving relationship” can’t take moral (religious) high ground over monogamous, gay spouses, has anyone considered that we can’t stop the tide of history and intelligent discourse in a pluristic society?
If anything, America should have taught us Americans that arguments based entirely on tradition or religious inspired views cannot prevail in a pluralistic society. They didn’t with woman and voting rights, they didn’t with separate but equal doctrines. Just consider the vote in California and Arizona if the year were 1900. What would the spread have been – 90/10? What about if the year were 1950 – 80/20? 1975 – 70/30? You get the idea.
So, you may not like the idea of sharing the state recognized alter with those of “questionable” sexual orientation, but you ought to get used to it now and put your money and time to more productive efforts and causes. Like actually supporting something — such as education, your favorite cause or charity, alternative energy research, your local youth sports organization. Countless possibilities exist for expanding the lives of others, as opposed to efforts and money spent to prevent another from obtaining some right. The time will come when gay marriage is a cemented right, the only question is how much will we waste and forego in trying to hold off the inevitable.
WHAT’S HAPPENED TO MY CHARGERS?
As a lifelong Chargers fan, having several pre-season “experts” pick my team to win the big one, I figured it would be a long, difficult season. But 4 and 7 and looking more like my home town Arizona Cardinals, who would have figured? I’ve hesitated from blaming the team’s struggles on Coach Turner, not wanting to take the easy route and assail the new Coach when things don’t go right. It is pro football after all, a team is made up of lots of parts, and there’s plenty of talent in the league to make consistent winning something few teams figure out. But enough already, where’s Marty-ball when you need it?
After bemoaning Marty’s rather conservative approach, I now find myself yearning for the days where 2nd and short was a freebie down and 3rd and short was automatic. Where’s the run, where’s the grit, where’s the discipline, where’s the fire? Yeah, we lost Michael Turner and one of the league’s best blocking and short yardage backs in Lorenzo Neal. But they didn’t help LT turn a corner for a big pick-up; they didn’t help the short passing game and the dumps LT used to turn into back breakers; and they certainly didn’t help the defense pressure the quarterback. This team has lost its way and doesn’t seem too interested in finding it.
During the Colts’ game, I heard an announcer comment to the effect that the Chargers’ offense didn’t look very enthusiastic. What an understatement! Despite the defense’s overall ineffectiveness, at least they show fire when they make a play. The offense looks dull, uninspired – like they don’t enjoy what they’re doing and aren’t too confident about their plan. This isn’t the way it was supposed to turn out. Turner was the offensive guru, remember? He would open up the offense, use all its weapons and spread the ball, develop Rivers and be a players’ coach. Now, LT can’t get going, the line isn’t giving Rivers much time to throw, and the passing game has made crucial mistakes in key situations on a regular basis. Each time LT has a decent first down carry, he predictably is sent diving into the line to set up a third down passing situation. No one is being fooled guys.
Speaking of defense, if Steve Nash can win an NBA MVP namely by what happens to his team when he DOESN’T PLAY (they fall apart), how many league MVPs should Shawne Merriman have by now? One guy goes down, and suddenly every quarterback in the league can’t wait to play the Bolts? Have some pride fellas and pick up the slack. And coaches, are you defined by 1 player, or can you make adjustments and use the remaining talent you have? Isn’t adversity to be expected in an NFL Season, not the surprise?
Good teams make adjustments, they win with discipline and toughness in the trenches, they have back ups ready to step in when starters are injured (which is always the case). Good teams also manage game clock and take risks based on situations (like going for it on 4thand short with a game on the line instead of hoping for a tie and lots of other breaks as you give the ball to the best quarterback in the league, or like going for 2 when you don’t trust the momentum but can win it at the end of regulation and go home). No guts, no glory guys. I know it’s in there, I just don’t know if Coach Norv can get it out of you. 5 games to go. What’s it going to be?