commercial real estate lease negotiation

How to Handle Commercial Lease Disputes

It can be uncomfortable having a disagreement with your landlord. Financial matters can be stressful, particularly when you don’t feel that you’re in control of the situation. This short guide is for you if you are wondering how to proceed when you are embroiled in a commercial lease dispute.

Alabama has specific laws in place governing tenants, landlords, and the agreements or disputes between each other. You should consider working with an experienced attorney if a legal matter comes up to ensure that your interests and rights are fully protected.

Commercial Lease Disputes in Alabama

Commercial leases are considered more complicated than the agreements made between a residential tenant and a landlord. Commercial leases contain numerous potential pitfalls. You should have your agreement reviewed by a seasoned attorney before you enter such an agreement. It is best to have an attorney draft the agreement to minimize the risk of deadlock if a dispute does arise.

Here are some helpful tips for dealing with a commercial lease dispute:

  1. Go over the lease again

The first step you should do when involved in a commercial lease dispute is to read the contract again. You should ask yourself if the contract says anything about your particular concern. You should check for any clause that outlined your liability to pay for the landlord’s cost in case of a dispute.

  1. Try to arrive at an agreement

It helps to approach the landlord in most situations to try to work things out. You can ask for a healthy discussion about your concerns. Good negotiation can help you prevent expensive legal fees.

Discussions can also help preserve the professional relationship you have with the landlord. You should make accurate notes about the communication, including dates and records of things that were said in case the dispute doesn’t go your way.

  1. Seek advice

You should seek advice about the reasonability of the clauses mentioned within the rent agreement. This is particularly true if you are required to pay for the lessor’s fee in case of a dispute. Getting legal advice is one of the most important elements of commercial lease disputes.

  1. Seek alternative dispute resolution (ADR)

You may need to bring the dispute to the relevant venue if your informal attempts towards arriving at a resolution don’t materialize. You may be required to take part in formal mediation with the landlord in most instances. Mediation makes use of negotiation and discussion for arriving at an agreeable resolution for both parties.

Mediation is cheaper than litigation. Hence, it is an option that is worth your time. You should keep an open mind about the results you can achieve through mediation. You may find that mediation helps you discuss the issues in a positive environment with better results. It will also help in improving the relations between you and the landlord.

Another form of alternative dispute resolution involves arbitration. Speak to your attorney about which form of ADR is most suitable for your particular situation.

  1. Legal compliance

Commercial spaces are required to be in compliance with state, federal, and local laws and regulations. Generally, it is the responsibility of the landlord to make sure the property remains legally compliant. However, you should check the agreement to determine who is responsible for the lease agreement.

Commercial Evictions in Alabama

Landlords are required to follow proper procedures for evicting a commercial tenant. The eviction process may differ depending on the specific conditions mentioned in the lease agreement. However, there are a few general guidelines:

  • Tenants must be provided with a written note explaining the eviction reason
  • Notice may be issued with two timelines:
    • Unpaid rent – 7 days
    • Other breaches of lease – 14 days
  • The landlord is required to file eviction paperwork with the local court after proper notice is issued
  • The landlord may request the assistance of the sheriff to carry out the eviction if the tenant refuses to leave voluntarily

These are a few common reasons why disputes arise between landlords and tenants in Alabama:

  • Non-payment of rent
  • Term of the lease has expired
  • Space is not being used as per the lease agreement
  • Subletting concerns
  • Issues with upgrades and modifications

Call an Experienced Business and Real Estate Lawyer in Alabama Today

Landlord-tenant laws in Alabama can be complicated. You should consider seeking strong legal counsel if you are involved in these issues. This will help you navigate the complexities of real estate issues and avoid any pitfalls that may cost you in both financial and legal terms.

The attorneys at BHM Law Group are here to assist you in all your landlord-tenant legal matters. We will give advice and take the necessary legal steps after reflecting on all aspects of your particular situation so that you are covered. Give us a call today at 205-994-0902 or complete our online contact form to schedule a consultation with one of our accomplished attorneys.

 

preparing for a property tax auction

Tips for Preparing for a Property Tax Auction

When a property owner fails to pay their property taxes, the past-due amount becomes a lien, which generally has priority over other liens, including mortgages. In Alabama, when taxes are delinquent, the taxing authority will eventually sell the lien in the form of a tax certificate at auction.

The high bidder at a tax lien sale won’t immediately get the title to a property, but they will have an interest and sometimes it’s a good investment. If you are planning to participate in a property tax auction in Birmingham, AL, here is what you need to know.

What is a Tax Lien?

Tax lien investing is a type of real estate investment where individuals buy tax lien certificates. Local governments create these tax lien certificates on properties in response to unpaid taxes. A tax lien will eventually give the purchaser the right to claim ownership of the property if the owner doesn’t pay their obligations.

The Pros and Cons of Tax Lien Investing

Tax lien investing can be lucrative. But it’s important to understand its potential risks.

The Pros of Tax Lien Investing

  • Rate of return — Most of the profits from tax lien investing come from the interest property owners have to pay to investors when paying off their debt, which is set at 8% in Alabama.
  • Get the property under market value — If the property owner fails to satisfy their debt, the tax purchaser will get the deed to the property. When this happens, the investor gets a property for a fraction of market value.

The Cons of Tax Lien Investing

  • Require research and organization — Tax liens are not passive investments because you’ll need to do a lot of work upfront and keep track of dates to get the best results.
  • May need repairs — Some homes may need costly preservation improvements to keep the property in safe and habitable condition.
  • Other liens — There might be other liens on the property, which can complicate the process of getting a clear title.

How Tax Lien Auctions and Investments Work

Tax lien auctions can be an excellent investment when approached properly. If you are planning to attend or participate in a property tax auction in Birmingham, AL, here is how you can prepare.

  1. Conduct Plenty of Due Diligence

Because there is some risk involved, it’s critical to do thorough research leading up to a tax lien auction. To start, you should be familiar with the neighborhoods in the Birmingham area so that you can quickly gauge whether one tax lien might be more valuable than another.

Next, you’ll want to put eyes on the property to get an idea of any major defects that you might have to address. Finally, it’s important to verify the value of the property and search for any existing title defects or liens.

  1. Be Ready for Competition

While tax lien sales were once an obscure form of investment, they have grown in popularity. As long as you aren’t purchasing the least desirable properties on the list, you have a good chance of making a return on the interest rate the state sets for delinquent taxes, which is 8% in Alabama. More and more investors are turning to tax lien auctions because of their advantages.

  1. Have Sources for Preservation Improvements

Some of the tax certificates you might purchase at an auction will be in poor shape or neglected. This is information you should uncover in your preliminary research. But, if you do get one of these properties in your portfolio, you have the right to make preservation improvements.

These are any improvements made to keep the property in repair for its reasonable and proper use. Some examples include exterior painting, termite control, and water leak repairs. Even if the property owner exercises their right of redemption, they will have to reimburse you for the reasonable cost of any preservation improvements.

  1. Get Your Dates in Order

Tax certificates are not passive investments, meaning you have to do some legwork to achieve the desired return. Even if you win an auction, you’ll need to immediately place the property owner on notice and demand possession. Then, if they haven’t vacated after six months, you can file suit. Finally, there are dates to track with respect to the owner’s right of redemption, after which you can file to get the deed for the property.

Tax lien investing is an indirect and potentially profitable way of investing in real estate by purchasing tax certificates at an auction. For help with or questions about tax lien purchases, contact BHM Law Group, LLC at 205-994-0902

 

preservation improvements

Preservation Improvements for Delinquent Real Estate Property

Tax lien sales are an inevitable consequence in a society where revenue from real estate taxes pays for a large portion of the infrastructure and government-provided assistance, such as schools, police, and libraries. Although the exact percentages vary, taxes assessed on real property account for a large portion of state and local revenues.

Government can’t afford to forgo property tax collections. But not every property owner can afford to pay what they owe. Failing to collect past-due taxes would be an unfair system for those who pay their bills and enjoy the services.

According to Alabama law, the state has the right to sell tax liens, or tax certificates, when a property owner is delinquent. The purchaser of the tax certificate, who is usually a private investor, also has the right to protect their investment by preserving or improving it. When it comes to the right of redemption and quiet title actions, documenting preservation improvements is vital.

Buying Tax Deeds in Alabama

In Alabama, once there is a tax lien on a piece of property, the taxing authority can sell the lien at auction and transfer a tax certificate to the new owner. The auction winner won’t immediately get a title to the property. But they do have the right to immediately demand possession of it from the owner.

If the owner doesn’t respond to the demand within six months, the tax purchaser can sue for ejection. Whether the tax purchaser takes possession of the property or not, the owner has the right of redemption under law, meaning they can try to get the property back.

Currently, many counties in Alabama require the redeeming party to obtain written verification from the tax purchaser of the presence or absence of additional expenses, like preservation improvements.

After owning a tax certificate for three years, the tax purchaser becomes entitled to a tax deed. The purchaser should have a marketable title before renovating or adding onto a property. To obtain a marketable title after getting a tax deed, the purchaser will need to be able to show three things:

  • Adverse possession of the property for the statutory period of three years;
  • That taxes due on the property have been paid; and
  • That there are no minors, creditors, or others who wish to exercise a right of redemption.

What are Preservation Improvements?

Preservation improvements mean improvements made to preserve the property by properly keeping it in repair for its proper and reasonable use, having due regard for the kind and character of the property at the time of sale.[1]

While there is no appellate decision defining precisely what is meant by “preservation improvement,” it is commonly argued that improvements to preserve a property can consist of anything necessary to return the property to habitability (but no upgrades or additions or changes). This will include things such as termite control and painting exterior wood.

It’s important to understand that there is not a presumption that any and all improvements can be redeemed if the owner exercises their right of redemption. Not surprisingly, there have been conflicts with respect to whether work done on a property was necessary, the value of the work, and whether it qualifies for reimbursement.

These disputes can lead to time-consuming negotiation and litigation, which impacts any return on investment and jeopardizes the property interests of the involved parties.

Getting Reimbursement for Preservation Improvements

Not every property you take possession of or get a tax deed issued on will remain in your name. Many property owners do exercise their right of redemption, either administratively or through the courts. Likewise, the seller may be compelled to transfer the title to you through a quiet title action, which could take some time to conclude.

It is important to thoroughly document the condition of the property once you take possession. It is also essential to keep thorough records of any preservation improvements made to the property. These records will be crucial to prosecuting any quiet title action and recovering the costs of the improvements in a quiet title action, administrative redemption, or judicial redemption action.

For help with or questions about tax lien purchases, contact BHM Law Group, LLC at 205-994-0902.

commercial real estate lease negotiation

Tips For Negotiating a Commercial Lease in Alabama

A commercial lease agreement is a critically important legal document to protect your rights. A poorly written lease agreement can put you at a serious disadvantage if a difference or dispute arises at some point in the future. Commercial leases are often extensively lengthy and complicated, which is why it is prudent to have a knowledgeable commercial lease attorney by your side in order to draft and review the agreement thoroughly before signing.

This is particularly important if you are going to be responsible for the maintenance and repairs of a rented property. You should remember that you want the best possible deal while the landlord wants a tenant while negotiating a commercial lease. You should ask your commercial real estate attorney for advice if you don’t understand anything in the agreement. An experienced business lawyer will help ensure that you get a fair deal.

Here are a few things you should keep in mind while negotiating a commercial lease:

Understand All the Legal Terms

You should have a fair understanding of all terms listed in the commercial lease even before you attempt negotiations. This involves understanding every line after reading it painstakingly. You should also read the small print. Don’t hesitate in clarifying doubts with a commercial real estate attorney if something is not apparently clear.

Know Your Needs

It’s crucial that you head into negotiations after having a clear idea about your needs and priorities. You should also list factors and things that are non-negotiable. You will be better equipped for handling negotiations when you have a clear idea about what you want.

Come to the Negotiations Prepared

You should come to the negotiations prepared to get what you want. This means having a clear understanding of leases and putting a strategy in place. You should be prepared to back up any request you make with examples from other similar commercial leases in your area.

Start Negotiations with a Strong Position

Good negotiations take place when you have a strong position. You should start negotiations by taking up points that you believe the landlord will be less likely to compromise on or give up. Once you have successfully navigated these issues, you will find it easier to move on to less important concerns.

Don’t Become Too Rigid

It is vital that you are flexible in your negotiations. You should be prepared to stand up for your priorities, but you should also have a clear idea about how flexible you can be. It may be worth compromising on certain issues just to get the deal done.

Commercial landlords are less likely to budge on properties that are in strong commercial areas. However, commercial markets are open to change. And, if things change, you can always ask for renegotiations. While there are no strict rules, most commercial landlords are open to renegotiations when commercial rents go down in a particular area.

Be Reasonable and Realistic

Nobody appreciates a pushover. Commercial landlords don’t tend to appreciate possible tenants that come to negotiations with unrealistic expectations. It doesn’t matter how good you are at sugarcoating your expectations – they need to be realistic.

It’s crucial for you to know the commercial real estate market and commercial real estate business inside out. However, you also need to be realistic about the things you can expect to achieve during negotiations.

Consider Multiple Offers

Don’t be in a rush to sign a commercial lease agreement without taking time off to consider it completely. This is even when the landlord makes a tempting offer. You may end up making a poor business decision if you rush into things. Hence, you should take time to digest the little things on offer and discuss it with your employees, colleagues, and family. You should never take a commercial real estate decision lightly.

Remain Positive during Discussions

The best negotiations are those that have a positive tone throughout. You are trying to get a deal done and not pick a fight. You may not find it helpful to be aggressive or hostile. It is important that you remain constructive and positive.

Look Ahead in Future

Don’t just look at the immediate benefits but focus on the long-term as well. Commercial rent negotiations usually have long-term implications. You need to ensure that you would be happy with the terms 5 – 10 years down the line as well.

Have a Trusted Lawyer on Your Side

Commercial rent leases are often full of small print. However, don’t let this scare you away from negotiating for a useful deal. Always remember that even though the commercial landlord may know the fine print inside out, you have the law on your side. Having a good commercial real estate lawyer make the negotiations can prove to be invaluable to your interests. They can help you navigate tricky clauses for ensuring that the agreement is fair.

Contact a Competent Commercial Estate Attorney Today

Commercial leases can be difficult to negotiate because they are so complex. With a knowledgeable commercial estate lawyer on your side, you can fully protect your interests. The attorneys at the Birmingham Law Group are thoroughly experienced in handling different types of commercial lease negotiations. You can schedule a free consultation with one of our capable attorneys by calling (205) 994-0902 or completing our online form.

 

right of redemption

Right of Redemption and Judicial Redemption

If a property owner in Alabama fails to pay their Ad Valorem taxes, the past-due amount will become a lien on the property. The taxing authority can eventually sell the lien in the form of a tax certificate. The purchaser of that certificate has the right to possess the property, which may involve a process of giving notice and even filing a lawsuit for ejection.

Assuming an investor purchases a tax certificate and gets an ownership stake in a property, that doesn’t necessarily mean they will immediately possess the deed. The original owner still has an opportunity to get their property back through the right of redemption, which can take several forms.

Right to Possession

If a private investor purchases a tax certificate at a state tax sale, it will contain a description of the property and the taxes owed. The investor is immediately entitled to demand possession of the property from the owner.

If the owner has not surrendered the property within six months of the purchaser’s demands, the purchaser can sue the owner for “ejectment” to remove them from the property.

Right of Redemption – Administrative Redemption

Whether or not the property owner is still in possession of the property, Alabama statutes give them an opportunity to get it back. The owner of a property that has been purchased at tax sale has the right to administratively redeem the property from the tax purchaser.

The right of redemption period is three years from the date of sale of the tax certificate. In order to administratively redeem the property, the owner must pay to the tax purchaser the back taxes paid, plus interest (8% on sales after 1/1/2020); any insurance premiums paid by the tax purchaser; and the value of all preservation improvements made to the property.

Issuance of Tax Deed

If the original property owner has not redeemed the property within three years from a tax certificate purchased by an investor, the tax purchaser can demand a tax deed from the appropriate probate court. This tax deed will give the tax purchaser all rights, interest, and title of the original owner who had a duty to pay the property taxes.

If the state purchased the property and later sold it to an investor, the tax purchaser can also request a tax deed that gives them all rights, interest, and title of the original owner who had a duty to the property taxes. When a tax deed is delivered to the tax purchases, this ends the owner’s legal claim to the property.

Right of Redemption – Judicial Redemption

Judicial Redemption comes into play once the property owner’s three-year right to administratively redeem the property has expired. From that point, the property owner will need to file an action in the court in the county in which the property is located in order to redeem the property.

The property owner has three years from the date when the tax purchaser became entitled to demand a tax deed on the property (i.e., the expiration of the administrative right of redemption period). However, this three-year period does not begin to run until the tax purchaser is in adverse possession of the property. This means the tax purchaser has taken control of the property exclusively, openly, and continuously from all other persons.

If the tax purchaser has a tax deed and is in adverse possession of the property, then the owner has only three years to file an action for judicial redemption. After the three-year period has run, the tax purchaser may quiet title to the property by suing all persons claiming an interest in the property. If the property owner maintains possession, meaning the tax purchaser has not taken control of the property, there is no time limit to judicially redeem the property.

Who Can Redeem the Tax Delinquent Property?

The owner (including his/her heirs or personal representative(s)) or anyone having a legal or equitable interest in the property may redeem the property. You’ll generally need written documentation in order to establish your right to redeem.

Cost to Exercise Right of Redemption in Alabama

The amount you have to pay depends on who buys the lien – the state or a private party. Generally, you need to pay the amount paid by the purchaser for the tax certificate, any interests, fees, additional taxes due, and the value of preservation and improvements made to the property to keep it safe and habitable.

For help with or questions about tax lien purchases, contact BHM Law Group, LLC at 205-994-0902.