LEGAL REMEDIES FOR DEFAULTS BETWEEN BUYERS AND SELLERS

Wednesday, June 6 -- 8:30 - 10:00 a.m.

Cost: $10 REALTORS® and SAR Members/ $15 All Others

Speaker: Bill Hunter, Esquire

This program features buyer and seller disputes. And as with all Bill Hunter seminars, bring your questions to the program and he will answer them!

Disputes between buyers and sellers can arise before or after close of escrow. A third party may cloud the title with a lawsuit claiming ownership or asserting a lien. The buyer may claim the seller failed to disclose material facts or actually committed fraud. The seller may elect to terminate or rescind the sale agreement alleging a material default by the buyer. When troubles like these erupt, what can happen? With knowledge gained in this seminar, a party's broker will be better prepared to help solve the problem. Topics include:

• What contract provisions assist in resolving buyer/seller disputes?
• When is mediation useful? Is arbitration better than litigation?
• How does a recorded lis pendens adversely affect title to real property?
• When will a judge expunge a lis pendens?
• What is required to win a buyer's lawsuit for specific performance?
• How effective are seller remedies against a defaulting buyer?
• How does an escrow holder extract itself from buyer/seller disputes?
• What is the law about "non-refundable" and/or "good faith" deposits?
• How can a "liquidated damages" clause be used effectively?
• When is the remedy of rescission used? What are the consequences?
• How and when is the remedy of reformation used?
• When and how are a prevailing party's attorneys' fees recoverable?
• Contact Brian DeLisi at (916)437-1210 to register or use this form

REGIONAL EVENTS

ADA LAWSUIT REFORM

SB 1186 is being strongly supported by the commercial real estate industry. This bill jointly authored by Senator Darrell Steinberg (D-Sacramento) and Senator Bob Dutton (R-Inland Empire) contains important reforms relating to disability access lawsuits. This legislation builds on groundbreaking reforms contained in SB 1608 (Corbett; Chapter 549, 2008), which our industry also strongly supported.

SB 1186 will enhance accessibility while addressing lawsuit abuses and provides a modicum of protection from predatory individuals to businesses that are striving to do the right thing and complying with accessibility laws.

In a press release, Senator Dutton stated, "Senator Steinberg and I have had some very extensive talks about this issue of predatory lawsuits, which are being filed under the ADA. Both of us agree that this is a serious problem that needs to be addressed." "I'm hopeful we'll be able to finally fix this problem that has plagued thousands of small businesses throughout California, while at the same time protect the rights of the disabled community." Dutton called the current version of SB 1186 a work-in-progress. The bill will be amended during the next four months before a vote of the final version of the bill is taken.

DUELING TAX MEASURES HEADED TO BALLOT

Governor Jerry Brown and his public employee union allies say they have collected enough signatures (more than 800,000) to qualify their compromise tax initiative for the November ballot. The measure would raise the state sales tax on all taxable purchases and would raise income taxes on those earning $250K or more.

At the same time, a "rival" proposition pushed by education activist Molly Munger and her PTA allies have also begun submitting signatures for their across-the-board income tax increase. Click here to read more about the tax proposals (CBPA)

ENERGY STAR BENCHMARKING REQUIREMENTS COMMENCE IN 2013

The California State Legislature recently enacted policy for benchmarking the energy efficiency of nonresidential commercial property with AB 1103 (Saldana, 2007) and AB 531 (Saldana, 2009). These new laws will rate the energy efficiency of a building using the federal ENERGY STAR benchmarking system through ENERGY STAR Portfolio Manager.

Benchmarking will be based on a year's worth of energy consumption which is adjusted for the size of the building, its occupancy, the climate, plus additional factors, resulting in a "score" of 1-100 ranking the building on a percentile basis against comparable buildings nationwide.

Once this new policy is finalized, a building owner will disclose the Statement of Energy Performance: (a) at or before the time the owner presents a sales contract to a prospective buyer, (b) at or before the time the owner presents a lease for the entire building to a prospective lessee, and (c) at or before the time the owner presents a loan application to finance the entire building to a prospective lender.

These requirements have a rolling implementation time frame based on building size. Beginning January 1, 2013, a building owner will disclose benchmarking information for a nonresidential building with a total floor space of 50,000 square feet or more. July 1, 2013 building owners will disclose the Statement of Energy Performance for non residential buildings between 10,000 and 50,000 square feet. January 1, 2014, building owners will disclose this information for buildings with total floor space between 5,000 and 10,000 square feet. Benchmarking Fact Sheet

California ranked fifth in the U.S. last year in the development and construction of office, industrial, warehouse and retail space, according to a recent report.

Additionally, California had $4.5 billion in spending and 70,817 jobs supported by construction according to the report provided by the NAIOP Research Foundation.

Texas was the top state, accounting for $7.9 billion in spending and 150,000 jobs supported in 2011. New York ranked second with $6.5 billion in spending and 83,762 jobs supported; West Virginia ranked third with $5.9 billion in spending and 100,889 jobs supported. Arizona rounded out the top five with $4.2 billion in spending with more than 74,000 jobs supported.

This was the first year the commercial real estate industry posted gains nationwide since the recession began in 2007. The total economic impact of commercial real estate during 2011 added $261.6 billion to the Gross Domestic Product, compared to $231.7 billion in 2010. This is a 13% increase year-over-year.

U.S. construction spending on commercial real estate totaled $92.3 billion, a 12% increase over 2010. This spending supported nearly 2 million jobs nationally. These increases in construction spending and activity resulted in the building of 238.3 million square feet of new space, an increase of 2.5% from 2010. This new space has the capacity to house 610,000 jobs with an annual payroll of $26.8 billion.

In addition to the advances made in 2011, forecasts for 2012 call for project construction spending to increase and to accelerate further in 2013 and 2014, according to the report. "For the first time we are seeing across the board increases in this sector," said Thomas Bisacquino, NAIOP president and chief executive officer. "We believe this is the most solid evidence yet of a strengthening recovery." (NAIOP)
 

by Kelly Johnson

Ryan DeAngelis thinks "tweeners" are getting overlooked.

The CBRE Inc. industrial broker isn't talking about kids approaching their teen years. He's talking about industrial buildings that fall between distressed properties and trophy properties. Investors are missing an opportunity with industrial tweeners, he said.

Most of the action in industrial real estate is focused on the bargain-basement deals that investors scoop up when a property goes back to the lender. The building requires a lot of renovations, has few or no tenants and needs a leasing team. The owner, in most cases, lost the property because any rent coming in wasn't covering the mortgage.

At the other extreme are the trophy industrial buildings with long leases to national tenants that go for $5 million or more. Pension funds, real estate investment trusts and other institutional investors with ample cash are chasing those deals, and pushing up prices. "People may want to start broadening their horizons a little bit," DeAngelis said.

In a normal market, a 53,780-square-foot industrial building his CBRE team which recently sold "would have sat on the market for no time at all." Instead, the building at 8470 Belvedere Ave. took nine months to sell. That's despite being fully leased with four tenants -- a mix of local and national tenants -- locked into leases of two to five years. The building sold for $36.26 per square foot, or $1.95 million, to a Bay Area investor who owns another industrial property in the Power Inn area.
"We haven't seen a lot of activity in this kind of stabilized asset class," said DeAngelis, who, with fellow brokers Mike Luca and David Liu, represented the seller.

That tweener property is "a good little niche," and there's "an appetite for that sort of transaction," agreed Peter Winterling, an industrial broker with Cornish & Carey Commercial Newmark Knight Frank. (Sacramento Business Journal)
 

by Mark Anderson

Just as investors are getting hungry again for initial public offerings, Sacramento is moving in the opposite direction: The region is losing public companies.

With the departure of Waste Connections Inc.for Texas and the acquisition of SureWest Communications by Illinois-based Consolidated Communications Holdings Inc., Sacramento now has just 21 -- far fewer than comparable metropolitan areas around the country. Salt Lake City, for example, has half Sacramento's population and twice as many public companies, according to Dun & Bradstreet.

Here's why, according to local chief executive officers, economists and investors:

• The region's most successful companies are closely held and have no interest in going public, in part because of the regulatory burdens.
• Many of the region's biggest private employers are nonprofits or tribal casinos that can't legally go public.
• Younger tech firms that spring up here are more likely to move or be acquired than to stay here and grow into publicly traded companies.
• With a history shaped by big quasi-public companies or government agencies like Southern Pacific, the U.S. Air Force and the state of California, Sacramento has a risk-averse culture.
• The derth of public companies is all the more startling in comparison to the Bay Area and Silicon Valley, where IPO mania is growing in anticipation of the Facebook Inc. initial public offering in May. (Sacramento Business Journal) Public Companies

 

Government may be big, but it's getting smaller in California. The state shed 2.31% of its government jobs in the last decade, according to a new analysis.

California bucks the national trend. The number of federal, state and local government jobs across America expanded by 2.8% during the past 10 years, according to an On Numbers analysis of seasonally adjusted data from the U.S. Bureau of Labor Statistics. There were 22.17 million government positions as of March 2012, a gain of 613,800 jobs from 21.55 million a decade ago.

California saw its government jobs shrink by 56,400 between March 2002 and March 2012. The state ranked almost last in number of jobs lost in the nation. Only Michigan pared more government jobs, 73,000 in 10 years.

Texas and Wyoming registered the sharpest increases. Texas added 164,400 government jobs in 10 years, the biggest raw gain by any state. Wyoming's 17.8% was the largest growth rate for government employment during the decade. (Sacramento Buiness Journal)

LOCAL PLAN EASES ENVIRONMENTAL RULES FOR PROJECTS

by Melanie Turner

Urban projects near mass transit stand to benefit the most from regulatory relief under a transportation plan approved last week for the Sacramento region.

The Metropolitan Transportation Plan 2035 allows some builders with projects in urban areas to construct houses or apartments faster and more inexpensively, with fewer environmental hurdles.
That's good news for the construction industry, which has yet to recover from the Great Recession.
"We're hoping that it will cut (developers') costs, increase their certainty and make it clear that the welcome mat is out on the regulatory side for smart growth," said Mike McKeever, Executive Director of the Sacramento Area Council of Governments.

SACOG's board of directors, made up of elected leaders from 22 cities and counties, last week approved the federally required transportation plan, which guides how the six-county Sacramento region will spend $35.2 billion in transportation funds through 2035.

The plan also serves as the region's Sustainable Communities Strategy, required by the state under Senate Bill 375. The law, signed by former Gov. Arnold Schwarzenegger in 2008, requires regions to create land-use plans that reduce vehicle travel. The plans also must include strategies that better coordinate planning for transportation, housing and other land uses.

Under SACOG's plan, some developers can even be exempted from all provisions of the California Environmental Quality Act, or CEQA. To qualify, projects can't be more than eight acres, have more than 200 residential units or affect wildlife habitat, among other criteria.

The North State Building Industry Association hopes the process will do as Mc¬Keever says: cut costs, remove regulatory hurdles and increase certainty, said John Costa, interim director of government affairs, in an email. "However we are at the early stages of implementation and proof is still uncertain," he said. (Sacramento Business Journal)

State officials are working to regain assets that cities tried to hang onto following the elimination of redevelopment agencies last year, according to the Mercury News. Many cities entered deals to transfer properties to protect them from the state and keep development projects alive.

But state officials are now saying that any asset transferred after Jan. 1, 2011, must be returned.

by Kris Hudson and Stu Woo

U.S. shopping-center owners, smarting from high vacancies partly due to the rise in Internet shopping, are throwing their weight behind federal bills aimed at requiring online retailers to collect sales tax.

At the same time, some of the biggest mall owners also are gaining traction in their efforts in individual states to squeeze sales tax out of the world's largest online retailer, Amazon.com Inc. Seven states have reached pacts with Amazon to collect sales tax, with Nevada and Texas joining the list last week. Five more are in talks on similar deals.

David Simon, chief executive of the eponymous mall chain, has personally met with a long list of senators' to press for states and online retailers to come together on sales-tax collection.

Internet shopping is posing a mounting threat to bricks-and-mortar retail outlets now that smartphones allow consumers to price products online even while they're standing in a store. The appeal of online shopping is enhanced by the absence of sales tax in many transactions.

Malls and shopping centers have been hit by closures by stalwart shopping-center tenants such as bookstores, electronics sellers and some huge retailers like Sears Holdings Corp. and Gap Inc. Online sales swelled to $37.2 billion in the U.S. last holiday season, up 15% from a year earlier, according to comScore Inc. By comparison, sales at U.S. brick-and-mortar retailers last November and December rose by 4.1% from a year earlier to $471.5 billion, according to the National Retail Federation.

Online retailers' tax advantage stems from a 1992 decision by the U.S. Supreme Court finding that catalog companies need only collect sales tax in states where they have a physical presence, such as a store or a warehouse. That exemption eventually was applied to online retailers. (Wall Street Journal)

By Mark Heschmeyer

The CMBS cumulative default rate for fixed-rate deals increased to 12.96% in the first quarter, a 25 basis point rise from year-end 2011, according to Fitch Ratings.

 
Newly defaulted loans in the first quarter totaled $1.7 billion (155 loans). And that pace accelerated in April, according to Trepp LLC.

Office loans, which led defaults in 2011, continue to lead defaults in the first quarter with 49% by balance (48 loans). Fitch Ratings expects office loans will continue to make up a greater component of defaults in the near term as leases signed at the height of the market are rolling into lower rent environments, potentially further reducing owner's rent-base revenue.

 
Retail loans made up the second largest component of defaults with 29% by balance, but led by number of loans at 60. The retail sector is continuing to stabilize; Fitch Ratings is cautious on the impact any store closings may have on the sector, especially for second tier malls and single tenant big box centers. 

The majority (139 of the 155) newly defaulted loans were less than $20 million, with only 14 loans greater than $25 million. The larger loans were predominantly office loans, with nine of more than $25 million.

There appears to be no softening in the default rate. (CoStar) CMBS Defaults

By A.D. Pruitt

A controversial real-estate investment is getting a makeover -- and while the critics still aren't sold, some advisers say it is worth considering for investors comfortable with the risks.

The vehicles, known as "nontraded real-estate investment trusts" because they aren't traded on exchanges, have faced increasing regulatory scrutiny after investors complained of high fees, poor disclosure, frozen redemptions and erratic valuations during the property boom.

In response, many companies that specialize in nontraded REITs are creating new versions with lower fee structures, more redemption opportunities and shares that re-price daily.

In the past nine months, four such REITs have been launched and five more have registered with the Securities and Exchange Commission, according to Robert A. Stanger & Co., a real-estate investment bank in Shrewsbury, N.J. The companies behind these REITs hope to raise $18.3 billion.

Two already have started buying properties. American Realty Capital Daily Net Asset Value Trust, which has raised $7 million, has purchased five properties, including three Family Dollar stores. Cole Real Estate Income Strategy (Daily NAV) has purchased nine properties-mostly housing free-standing Walgreens and CVS stores-for nearly $30 million.

Industry executives say these new nontraded REITs will do a better job of giving investors a way to invest in real estate without the volatility of exchange-traded REITs, which have assets of roughly $500 billion. Like existing nontraded REITs, the new ones are offering attractive initial dividends, such as American Realty Capital's nearly 7% distribution and Cole Real Estate's 5.5% distribution.
But these new structures haven't completely silenced critics, who point out that some fees remain high and investors might still face redemption problems. (Wall Street Journal) More

by Chris Oliver

Commercial and industrial real estate investment in Asia tumbled 42% in the first quarter from the prior three-month period, signaling an across-the-board weakening, apart from Hong Kong where investment doubled, according to a report Tuesday by CBRE.

The transactions, involving offices, retail complexes and industrial facilities, totaled $11.6 billion for the quarter, CBRE said. The real estate services company said the Chinese Lunar New Year holiday dampened activity in the January-to-March period, while buoyant sales activity in the second half of last year was also a factor casting a softer tone on this year's figures. Among notable trends, cross-border investment flows declined during the period, with domestic investors taking up a bigger share of the total transactions, accounting for around 86% of total investment volume, according to CBRE. (MarketWatch)
 

by Bendix Anderson

Conduit lenders are competing for investors' business, offering progressively lower interest rates and larger loans to commercial real estate borrowers, according to worried bond underwriters at Moody's Investors Service.

"Spreads have come in ... some lenders are offering more leverage," says Tad Philipp, Director of Commercial Real Estate Research for Moody's and co-author of a report "U.S. Q1 2012 Review: Q2 Poised to See More Highly Leveraged Collateral Pools, Increased Subordination Levels."

In the second quarter, Moody's expects to rate CMBS-backed by loans with a weighted average interest rate of 5.53%. That's down from 5.7% in the first quarter.

Those higher-interest loans suffered from anxieties over the European Union as Greece wobbled on the brink of chaotic default, which would have pushed the capital markets back into crisis. Europe is still making negative headlines today, though disaster no longer seems to be just around the corner.

Calm in the capital markets means lower interest rates for conduits. Spreads have tightened to within 50 basis points of the lower interest rates offered by portfolio lenders like life insurance companies. That's down from a spread of more than 100 basis points two quarters ago, according to Moody's.

Sharp-elbowed competition between lenders has had a major impact on the types of loans that appear in CMBS loan pools. Nearly half rated by Moody's in the first quarter were made to retail properties -- a relatively less desirable asset class, aside from the best properties. Fannie Mae and Freddie Mac lenders compete fiercely to lend to apartment properties, which account for 10% or less of the loans in CMBS pools. Portfolio lenders compete to lend to industrial properties, high-quality offices and top-quality malls, luring some of these borrowers away from conduits.(NREIOnline) Interest Rates Down

Do you have a fear of being apart from your cellphone? If so, you may suffer from "nomophobia" or "no mobile phone phobia," MSNBC.com reports.

It's on the rise. And in the real estate industry, where smartphones are dominant, you may be at risk. Do you never turn off your phone? Obsessively check it? Constantly worry about losing it?

If so, you may be among the 66% who recently admitted to having "nomophoboia," according to a national study by SecurEnvoy, a mobile phone technology firm. Four years ago, a study showed 53% admitted to having it.

According to the survey, respondents, on average, reported checking their cellphones 34 times a day. Seventy-five percent reported taking their cellphone with them to the bathroom. And some of those surveyed also reported sleeping with it and even taking it in the shower with them (protecting it so it stays dry, of course).

"Cellphones are tools that should be used to enhance our lives -- not to destroy our interpersonal communication skills with those that we love," Mitch Spero, director of child and family psychologists, told MSNBC.com