Real Estate and Construction Law Blog

Patel v. Liebermensch (Aug. 21, 2007, D048582 [4^th Dist, Div. 2]) __ Cal.App.4^th __; http://www.courtinfo.ca.gov/cgi-bin/opinions

By William M. Flieshhacker

In this case, the Fourth District Court of Appeal of California addressed the issue of the enforceability of an option contract that did not include essential terms regarding the time and manner of payment.  The court held that the evidence showed that the parties continued to negotiate these terms (and terms related to the amount of the deposit, the escrow period, and the payment of escrow expenses) following the tenant’s notice that he was exercising the option.  The court found that these key terms could not be added by the trial court by implication, thus rendering the option contract unenforceable.

Kristina Dyer v. Exon Martinez et al. (February 23, 2007, G037423) __ Cal.App.4th__; http://www.courtinfo.ca.gov/opinions

By Katharine E. Allen

In this action for specific performance of a contract for the purchase of real property, the Court of Appeals found that the physical recordation of a lis pendens in the county recorder's office was insufficient to provide a prospective purchaser with constructive notice of the claim until the recorder properly indexed the lis pendens in the county real property records because a diligent title search would not reveal the existence of the claim unless it was properly indexed.

Anne Manderville et al. v. PCG&S Group, Inc. et al. (January 24, 2007, D047285) __ Cal.App.4th__; http://www.courtinfo.ca.gov/opinions/

By Katharine E. Allen

In this case, the Court of Appeals determined that exculpatory clauses contained in a purchase contract are against public policy to the extent such clauses exempt any individual from liability for his own fraud and therefore do not preclude a buyer of real property from showing that he justifiably relied on a broker’s intentional misrepresentation about the character of the property.  The court also found that any lack of due diligence by a buyer in investigating zoning and other laws restricting the use of property, even if negligent, does not preclude the buyer from establishing justifiable reliance if (a) there has been an intentional misrepresentation; and (b) the purchase contract only permits, but does not require, the buyer to undertake his or her own due diligence.

Black Hills Investments, Inc. v. Albertson's, Inc. - January 12, 2007

By Thomas B. Snyder

On November 22, 2004, Black Hills entered into a contract to purchase two parcels of real property in a retail shopping center.  At the time of the contract, the two parcels had not yet been created through subdivision of the property.  Black Hills deposited earnest money of $133,000 which was described as non-refundable.  The contracts contained a provision which permitted the seller, Albertson's, to terminate the contract if it failed to obtain the proper governmental approvals for creation of the two parcels.  Black Hills was given no such right.

By Doug Van Gessel

On August 4 the California Supreme Court ruled, in Grafton Partners v. Superior Court (Pricewaterhouse Coopers LLP), 2005 DJDAR 9387 that California contractual provisions in which the parties thereto pre-agree to waive the right to a trial by jury are unenforceable. The unanimous opinion stated that a right to a jury trial is a fundamental constitutional entitlement that cannot be waived in advance of a dispute between the contracting parties unless such a waiver is permitted by statute. Thus, the court has left the door open for the legislature to pass a statute allowing such waivers, and the forum for interests pursuing this debate will likely shift to the legislature now.

In order to negotiate a successful lease agreement for a biotechnology laboratory facility ("biotech lab"), landlords and tenants should evaluate the nature of their concerns, adopt a cooperative attitude, and avoid relying on traditional "form leases" better suited to leases for general office space. Biotech lab leases differ from leases for general commercial office space in that they, among other things, (1) have a higher base rent, in part because of a general shortage in biotech lab space; (2) require more tenant improvements; (3) entail a more costly facility build-out; (4) present greater risks in terms of both degradation of the facility and liability for both parties arising out of environmental damage; and (5) require more flexibility with respect to the tenant's use of the commercial space. As a result of these differences, the tenant will generally be concerned with flexibility and safety, while the landlord will be concerned with achieving high rents, maintaining the value of the facility over the long term, and limiting its exposure to the risks inherent in a lease of a biotech lab facility. Among the major clauses in which these concerns manifest themselves are those relating to tenant improvements, those relating to hazardous materials, and those relating to services and utilities.

By Doug Van Gessel

The sudden and dramatic reversal in the financial condition of many high-tech companies, and the ensuing softening of the local commercial real estate market, has led to a flood of sublease space on the commercial real estate market. Although this flood represents a potential economic windfall for those seeking to occupy commercial space, there are a number of potential legal pitfalls and practical problems commonly overlooked by potential subtenants, who often merely rely on boilerplate sublease forms when entering into subleases.