Commercial real estate transactions are significantly different from residential deals. While some legal concepts are similar, commercial real estate transactions are more complex. High-stakes commercial real estate litigation affairs often involve contentious disputes when parties disagree.
You may be wondering when you need to hire an attorney, and the answer to this question is twofold:
- Most commercial real estate disputes demand legal help
- The time to retain counsel is early in your case when there is still time to resolve it without a lawsuit.
You should always hire a lawyer who has experience in commercial litigation. Not every attorney knows the intricacies of this area of the law. Real estate litigation can combine aspects of commercial contracts with complex issues of property law.
The case can involve multiple difficult issues at once that require a resolution. An attorney with a personal injury or family law background may lack the knowledge and experience to handle a real estate case.
Here are some situations where you may need a real estate litigation attorney.
Eminent Domain
According to the Fifth Amendment to the United States Constitution, the government may take your property for a public purpose so long as they pay you just compensation.
State and local governments sometimes use their eminent domain power for reasons like building a highway, mass transit, or even a large commercial development. The use of eminent domain power is very controversial, given the importance of property rights.
You need a real estate litigation attorney for an eminent domain case:
- To challenge the taking itself as not being for a public purpose
- To contest an unjust amount of compensation the government offers you
- To seek compensation when a regulation interferes with your use of your property, amounting to a regulatory taking
Easements
One property may need to use the property of another for various reasons. Most property owners do not want an easement on their property because it can reduce the value. However, the easement may be a necessity for the other owner.
Here are some of the types of easements that can apply in commercial real estate:
- Easements of necessity - These are created by the court when one owner has no way to access their property without passing through the property of the adjacent property owner.
- Easements of prescription - These are created over time when one owner uses another's land, and the other owner knows about it but does not object.
- Easement by condemnation - The government may create an easement through eminent domain after compensating the owner.
- Party easement - Two parties may create an agreement between them for an easement. One may pay the other.
Easements can actually be a way to solve a property dispute between two adjacent owners. They can reach an agreement to create a party easement for compensation to avoid a lawsuit.
An attorney can negotiate with the other property owner's lawyer or argue your case in court.
Commercial and Retail Evictions
Landlord and tenant disputes do not just happen in residential real estate. In some cases, a commercial real estate owner may seek to evict a tenant for not following the terms of the lease. Then, the dispute becomes a breach of contract lawsuit. The landlord may seek damages from the tenant, while the tenant may claim that the landlord wrongfully evicted them.
If you face eviction as a commercial tenant, you could lose your entire business. A forced and immediate move can disrupt your operations, and you might not find another suitable property in time to maintain your company.
Nuisance Lawsuits
What happens on one property owner’s land can affect other adjoining property owners. The value of your property can be affected by what someone else does, over which you have no say. Your business can suffer harm due to your neighbor’s lack of courtesy or care. For example, a smell or noise coming from another property can harm you economically. The appearance of another property can lower the value of your own.
You have the right to sue under nuisance laws. A property owner does not have an unlimited right to do whatever they want on their own land if it can harm others outside of their property. You can file a civil lawsuit to stop the behavior and seek economic damages in a nuisance lawsuit.
Partnership or LLC Disputes
Two or more people may enter the commercial real estate business together. They may have a partnership or a limited liability company. As sometimes happens, business relationships can sour over time.
Several disputes between business partners or LLC members can lead to litigation, including:
- Breach of fiduciary duty claims
- Partners disagree over the direction of the business or certain decisions
- Breach of the operating agreement or partnership agreement
If there are shareholders in an entity, a minority owner may accuse the controlling majority shareholder of freezing them out. Shareholders may file a derivative lawsuit against the directors on behalf of the company.
You may resolve disagreements through a robust disputes clause in the agreement. An attorney can help you reach an understanding or litigate your case in court. Here, you cannot afford to delay hiring an attorney and taking legal action because one partner or LLC member can cause irreparable harm to your business in the meantime.
Construction Disputes
Real estate litigation attorneys represent builders and their customers when there are disputes about construction projects.
Construction litigation can involve:
- The failure to construct a project according to the specifications in the contract
- Building defects
- Failure to pay for the project in accordance with deadlines
- Change orders from the buyer, whether they are actual or constructive
- Differing site conditions
- Termination of the contractor for defaulting on the contract
- Differences of opinion over the meaning of the contractual terms
Even though you may have had an experienced construction contracts attorney advise you on the agreement, you cannot completely eliminate the possibility of a disagreement.
A construction dispute can result in a settlement, a modification to the contract, or a court case. You need a commercial real estate litigator at the beginning of a construction dispute because how you handle the disagreement from the start can determine whether you are successful in litigation.
Commercial Lease Disputes
Commercial leases are far more complex than residential agreements.
The following clauses that may cause disagreements:
- Responsibility for building repairs and utilities
- Restrictions on usage of the premises (including the type of business that you can conduct on the property)
- Rent escalation charges
- Expense stops that pass costs to the tenant once the landlord has spent a certain amount
- Who can or must make improvements to the property
- Requirements for compliance with local laws and building codes
One party will rarely, blatantly violate a commercial lease. More often, the two parties disagree over the meaning of the terms.
Commercial Real Estate Transaction Disputes
A commercial real estate deal can fall through at any stage of the negotiations. You may have been well into negotiations, and the parties may have even signed an understanding or a contract, and the deal may still collapse.
Sometimes, a failed real estate deal will give you a legal cause of action. If your deal appears to be in jeopardy, you should prepare to sue or be sued by hiring a lawyer.
The dispute may happen after the deal closes. One party may begin to notice that the property was not what they thought it was according to the contract. Hidden defects may cause monetary damages.
At that point, you should hire a litigation attorney to handle the communications with the other party. You can still reach an agreement where the builder pays the customer. In the meantime, you will continue to prepare yourself for litigation.
The Right Time to Hire a Real Estate Litigation Lawyer
Commercial real estate disputes do not go straight to a lawsuit. There is often a prolonged dispute beforehand as the relationship worsens over time. The disagreement may have started over one matter and degenerated from there.
Without a legal professional to guide them, one might either make a mistake or do something to inflame tensions. Sometimes, the best result in a commercial real estate dispute is when your company avoids litigation altogether.
Accordingly, the best time to hire a real estate lawyer is right when you have a dispute with the other party.
At the outset of the case, your real estate litigation lawyer can:
Over time, your need for a real estate litigation attorney will increase. Your lawyer can communicate with the other party's lawyer in the hopes of reaching an understanding.
Keeping the lines of communication open always helps resolve a dispute. Your attorney may even help you negotiate a quick settlement to the dispute that can help you avoid litigation. Whatever you agree to should serve your own interests.
Early Legal Help Gives You More Options
Hiring an attorney early in the process can also give you more time to meditate your dispute. A mediator is a trained professional who helps facilitate discussions between the two parties.
Most civil cases that go to mediation successfully resolve without the need for a trial. You can mediate early in the case or during the lawsuit itself. Mediation has a high rate of success when both parties agree to the process and approach it with an open mind. Agreeing to the process shows that both sides have an interest in taking the time and investing the money to resolve the dispute.
Hiring an attorney early in your case gives you more legal options. Your lawyer will have more time to prepare and learn your case. Their early intervention can lead to a better result for you. While your lawyer will always know the facts, it is better for you if they can invest the time early in the process to become knowledgeable.
You Should Hire a Real Estate Litigator, Even if You Are Playing Catchup
Still, it is never too late to hire an attorney. While you may miss early opportunities in your case, you will always need a lawyer at some point before your case goes to litigation.
Real estate cases are too complex not to have an experienced lawyer on your side. You do not want to have to scramble to hire a lawyer after you have been served with court papers because you will have a limited amount of time to respond.
Disputes and litigation can cast a pall over your business. The stress can distract you from doing what your company does best. The time involved can reduce the time that you use to earn revenues and make money.
A commercial litigation attorney will handle the details of the dispute. While a lawyer will not take all your stress away, they can reduce the level of your anxiety regarding a property dispute. It helps your peace of mind to know that you have an experienced professional representing your interests.
Hiring a lawyer early in the process is a wise investment that can increase your chances of success. In the best-case scenario, the money you spend on a lawyer helps you avoid a much larger expenditure in the future. In a worst-case scenario, you are more protected when your legal rights and your finances are under attack.
The right commercial real estate litigator is waiting to assist you and protect your business. Seek a consultation with a trusted law firm today.