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Houston Business & Commercial Law Blog

Handling risky commercial real estate markets

Investors in Texas who have commercial real estate assets or who are considering investing in commercial real estate may be interested to know how to successfully navigate in an uncertain market. There are many factors that can create anxiety and uncertainty in the commercial real estate industry. However, taking certain steps to remain agile enough to respond quickly to unexpected changes can help investors avoid being left behind.

One important step investors can make is to take a critical look at their mixture of tenants. Commercial leases that range from 10 to 15 years are no longer the norm. Corporations now favor short-term leases due to the uncertainties that can arise in the business market. Commercial real estate investors should respond in kind and revamp their long-term business models by focusing on short-term leases. While the short-term leases may change real estate valuation and financial forecasting, investors will experience an instant rise in their net operating income, which will compensate for any of the risk associated with having vacant space.

FMLA and employee family members

Many Texas companies are subject to the Family and Medical Leave Act. FMLA allows leave from work not only for an employee's own health reasons, but also when an employee has a relative with a serious health condition. Intricacies in this aspect of the law can cause confusion for employers and potentially leave them open to charges of discrimination.

A family member as it pertains to FMLA means a spouse, parent, son or daughter. When an employee requests leave to take care of an ill relative, the employer is allowed to request documentation to prove the relationship, but it may not dictate the type of documentation. The employee can choose to submit a simple statement, a birth certificate, or other type of evidence of his or her relationship to the relative.

Commercial real estate attracts prominent investors

Commercial real estate in Houston and around the country can be a profitable investment, something that is reflected in the growing interest of high-net-worth investors in these projects. While commercial real estate projects have long been appealing for more local or smaller investors, a range of high-profile companies and individuals have become involved in an array of real estate ventures. Of course, urban real estate has long been an appealing investment, given the vast growth in value and the scope of many urban projects, which may be valued in the high millions of dollars.

Indeed, commercial real estate projects are also often appealing for global companies and individuals looking for a secure yet highly profitable investment. Cities like Seattle, Vancouver, and San Francisco have attracted a wide variety of firms with their highly valuable real estate and opportunities for development. While billionaires have become major players in the industry, less-wealthy people have also become major investors in both property development and private equity real estate firms. While publicly traded investments like REITs may have higher levels of vulnerability to changes in the stock market, commercial development projects often offer strong profitability with more limited risk profiles.

Water company and model in contract dispute

A bottled water brand popular among many Texas consumers is engaged in a legal battle with a model who has become known for her association with the company. Model Kelleth Cuthbert found her way into photos and videos at the 2019 Golden Globes by showing up behind celebrities on the red carpet while serving bottles of Fiji Water. Photos and videos featuring the model went viral on the internet, and she became known as "Fiji Water Girl." After the exposure, Fiji engaged in an online advertising campaign using Cuthbert's images with the water brand.

Cuthbert sued Fiji, saying that she was pressured into signing a fake contract with Fiji and that her image was being used without consent in the marketing campaign. Now, the company is returning fire; Fiji countersued Cuthbert for breach of contract. The water company said that the model and her representatives agreed to be paid $90,000 to serve as a brand ambassador for one year. She signed the documents while being video recorded at Fiji's office and allegedly agreed to the water company's use of her name and image, including in cardboard cutouts. The company said that the model took the only signed copy of the documents and destroyed them, but it retained the recording of the signing.

Amazon in lawsuit with Woody Allen

In 2018, rumors emerged suggesting Amazon was looking to dump Woody Allen from the 2017 four-movie contract signed between the two parties. The first of the four films, "A Rainy Day in New York," was filmed in 2017 and has yet to receive a release date. The long wait for a release date coincides with the timing of the #MeToo movement in which Allen was implicated, leading some to believe that the stalled release is intentional.

Woody Allen has responded to the delay by filing a lawsuit in New York for breach of contract. Allen is seeking $68 million from Amazon for allegedly "reneging on its promises" stated within the contract. The lawsuit alleges that Amazon was aware of the 25-year-old claim that Woody Allen molested his daughter prior to entering the contract; therefore, the molestation claim may not be grounds for terminating the contract. Allen also claims the molestation allegation is false.

How blockchain could change commercial real estate

Investors and others who are involved in Texas commercial real estate may have heard about the disruptive potential of blockchain. For instance, blockchain may bring about the advent of the smart contract. Smart contracts tend to allow for greater transparency between parties in a deal, which can increase trust between those parties. It may also result in the deed to a property being transferred immediately after the contract's conditions are met.

Furthermore, blockchain may help to prevent fraud in the commercial real estate sector. This can save hundreds of millions of dollars in costs related to fraud. Using a blockchain enables investors and others to verify who owns a property and where funds for a purchase or other investment have come from. It also allows interested parties to look through every transaction related to a property to verify that it occurred correctly.

How technology can change the real estate business

Commercial real estate investors in Texas may find that artificial intelligence technologies will begin to have an impact on the industry as a whole. The residential real estate market is already seeing some effects from the use of bots to respond to inquiries as well as algorithms that seek out potential homes for interested buyers. However, on the commercial side of the market, the greatest potential for AI may be found in easing and transforming transactions. AI principles may allow investors to better understand the opportunity presented by a particular potential transaction.

Some machine-learning systems may be able to generate predictions for how a particular investment will perform by analyzing large amounts of other data. Because AI technologies can process this information quickly, it can speed up the process of making a decision about an investment far beyond the knowledge easily within human reach. For example, algorithms can include calculations based on occupancy, rent, demographic data, crime rates, mobility scores and economic trends to produce reliable predictions for the potential of a certain real estate project.

How U.S. Supreme Court ruling could affect your trucking company

In New Prime Inc. v. Oliveira, 139 S. Ct. 532 (2019), the United States Supreme Court recently addressed concerns over the enforceability of arbitration agreements with independent contractors "engaged in foreign or interstate commerce" by settling two contentious issues:

  • When an employment agreement delegates questions of arbitrability to an arbitrator, must a federal court allow the arbitrator to resolve disputes over the application of the Federal Arbitration Act's ("FAA") exclusions
  • Whether hiring an independent contractor constitutes a "contract of employment" as contemplated by the FAA

The benefits of an enforceable contract

A contract can be one of the most important tools a freelance professional or small business owner in Texas has at his or her disposal. When written properly, contracts form the foundation of the relationship between a business and a client. They can also provide clarity and eliminate a variety of problems that could potentially arise before they have a chance to come up. By creating certainty, a company can spend its time delivering a quality product or service.

If a company or client breaches the terms of a contract, the document itself could spell out what the penalties are. If there is any confusion as to whether a contract has been breached, a written contract can serve as the starting point for negotiations. It can also obligate parties to go to mediation or present their case at an arbitration hearing before heading to court.

Coffee company punished for copyright infringement

Texas residents may be interested to learn that a large coffee company has been slapped with a multi-million dollar bill for infringing on the trademarks of reggae musician Bob Marley. In a ruling by the 9th Circuit Court of Appeals, the judgement by a lower court to award damages was affirmed. The coffee company was originally sued for illegally modifying the royalty agreement paid to the owners of Marley's copyrighted work.

Jammin Java Corp, the California-based coffee company accused of using music and images from the reggae artist even after its license to do so expired, is required to pay $2.5 million in damages. The company fought the original May 2017 decision in the lawsuit by claiming that California includes a disfavored forfeiture clause. Judges in the cases disagreed, stating that the coffee company had an unambiguous procedure for terminating their agreement.

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