Thursday, April 17, 2014

Lockout of a Commercial Tenant: The Pitfalls

If a commercial property tenant neglects or refuses to pay rent and is in arrears for more than five days, or if a tenant violates another provision of the lease, under certain conditions and circumstances Arizona law[1] allows the landlord the option to reenter and retake possession of the premises, seize personal property belonging to the tenant, and, after a statutory allotted time period and proper notice, publicly auction the tenant’s property. Entering and retaking possession, however, may not be the best course of action and, in fact, may expose the landlord to liability if not done properly.
The following is a list of questions and comments intended to give landlords a glimpse of just a few potential issues, and why it is imperative they consult with a knowledgeable attorney to discuss whether reentering and retaking possession is legal without a court order, or, is the best option for their situation.
  1. Read the lease first.  Does the lease contain language that would prohibit a lock-out?
If so, a lockout is not an option.
  1. Does the lease require the landlord provide written notice to the tenant before there can be a default or breach of the lease?
If so, a lockout remains a potential option only if the written notice has been properly delivered to the tenant, and the time to respond to the notice and cure a potential default has expired.
  1. Is the tenant five days in arrears on the payment of rent or has there been a material default under the lease by the tenant aside from late rent?
Arizona statutory law provides that the right of a commercial landlord to reenter the premises arises when the rent has been unpaid for five days past the date it was due or when the tenant has violated another provision of the lease. Thus, before contemplating a lockout, questions the landlord should consider include whether the rent is at least five days in arrears and/or whether there has been some other material violation of the lease.  The landlord should also assess whether the tenant has a valid argument that the failure to pay rent or alleged material default of the lease was prompted by the landlord’s own failure to comply with a term of the lease. A breach by the landlord may excuse a tenant from having to comply with certain performance obligations.
  1. Has the landlord given the tenant a period of time in which to pay rent as part of an effort to resolve the issue?
If the landlord has given the tenant an additional period of time to pay rent as part of an effort to resolve the issue, the landlord should avoid retaking possession of the premises until the allotted period of time expires.
  1. Has the landlord routinely accepted late rent payments or led the tenant to believe timely payments would not be required?
If the landlord has regularly accepted late rent payments from tenants, it should bring this fact to the attention of its counsel. This history of such conduct can potentially impact whether reentry is a prudent option and/or whether additional steps should first be taken.
  1. Can the lockout be performed without any of the tenants, employees, or representatives present?
A landlord cannot retake possession while someone is inside the building.
  1. Can a lockout be accomplished without breaching the peace?
If entering the property will result in a breach of the peace, the lockout cannot be performed. If a breach of the peace occurs during a lockout, then the lockout needs to be terminated. [The phrase “breach of the peace” has been said to include, but not be limited to, conduct or words which interfere with public order. Thus, violent acts and words likely to produce violence in others, among other things, would likely fall within a “breach of the peace.”]
  1. Is the personal property on the premises owned by the tenant and, if so, is it of sufficient value to cover past due rent and other costs associated with the lockout?
If the personal property is not owned by the tenant, it cannot be sold by the landlord.  Further, a landlord’s possessory lien will not take priority over another creditor who perfected a lien on the personal property before it was brought into the leased space.  Thus, a UCC lien search should be conducted before deciding whether repossession is prudent. Also, consider what the personal property is likely worth in used condition. If the property is not worth enough to cover the rent owed, the lockout process may not be the best option. Additionally, a landlord could create liability exposure for itself if it retakes and disposes of personal property (such as computers) that contains protected personal information of the tenant’s customers. This is clearly an issue that should be discussed with counsel before initiating the repossession of personal property.
  1. Will a lockout put the tenant out of business and, if so, is that in the landlord’s best interest?
Locking out a tenant and taking possession of its equipment may prevent it from satisfying obligations to its clients, forcing it to close it doors permanently.  If the tenant is under a long-term lease and has simply fallen behind on one month’s rent due to a cash flow issue, a lockout is probably not going to be in the landlord’s best interest.
  1. Is there a personal guaranty and do the guarantors have money?
If the tenant is a corporation or LLC, the owners of the company signed a personal guaranty, and there is reason to believe the guarantors would not be able to pay a judgment if one was obtained, filing suit on the personal guaranty and getting a money judgment against the guarantors may prove to be a better course of action than going through the time-consuming and uncertain process of seizing and selling the tenant’s assets. The suit can also include a request for a court order requiring the tenant to turn over the premises to the landlord.
In summary, lockouts are ripe with hidden dangers and potential problems if not executed in accordance with the law. It is highly recommended that landlords consult an attorney familiar with commercial lockouts before moving forward with such a process.
*Garrett Olexa is a member with the law firm of Jennings, Strouss & Salmon, PLC. He practices in the areas of real estate and commercial litigation.  Mr. Olexa can be contacted at golexa@jsslaw.com or 623.878.2222.


[1] A.R.S. 33-361(A).  NOTE: The same is not true for residential landlords.

Friday, April 11, 2014

Jennings, Strouss & Salmon Voted as a Top Law Firm in 11 Ranking Arizona Categories


PHOENIX – (APRIL 11, 2014) – Jennings, Strouss & Salmon, PLC, a leading Phoenix-based law firm, is pleased to announce that it has once again been listed among the top 10 law firms with 51 or more attorneys in the 2014 issue of Ranking Arizona: The Best of Arizona Business.
Overall, the firm received recognition in 11 law firm categories, and was voted No. 1 in alternative dispute resolution. Other categories for which Jennings, Strouss & Salmon was ranked include:
  • bankruptcy/reorganization
  • business/corporate
  • construction litigation
  • employment/labor
  • estate/trust
  • family law
  • healthcare
  • real estate
  • tax
The top rankings follow Jennings Strouss’ recognition in the March issue of Arizona Foothills’ Best of Our Valley 2014 as “Best Real Estate Law Firm,” in addition to eight of the firm’s attorneys being selected for Az Business Magazine’s “Top Lawyers List.”
About Jennings, Strouss & Salmon
Jennings Strouss & Salmon is one of the Southwest's leading law firms, providing legal counsel for over 70 years through its offices in PhoenixPeoria, and Yuma, Arizona; and Washington, D.C. The firm's primary areas of practice include agribusiness; bankruptcy, reorganization and creditors’ rights; construction; corporate and securities; employee benefits and pensions; energy; family law and domestic relations; health care; intellectual property; labor and employment; litigation; real estate; surety and fidelity; tax; and trust and estates. For additional information please visit www.jsslaw.com and follow us on LinkedInFacebook and Twitter.
The firm’s affiliate, B3 Strategies, assists clients with lobbying and public policy strategy at the local, state, and federal levels. For more information please visit www.b3strategies.com.
~JSS~
Contact:  Dawn O. Anderson |  danderson@jsslaw.com |  602.495.2806

Tuesday, April 8, 2014

Jennings, Strouss & Salmon Voted Best Real Estate Law Firm in the Valley


PHOENIX, Ariz. (April 8, 2014) – Jennings, Strouss & Salmon, a leading Phoenix-based law firm, was voted the “Best Real Estate Law Firm” in Arizona Foothills Magazine’s “Best of Our Valley 2014” contest. Each year, AZ Foothills asks readers to vote on their favorite Valley businesses, people and places. The contest garners millions of votes from Valley residents.
“It is an honor to be voted “Best Real Estate Law Firm,” states Bruce May, Chair of the Real Estate Department at Jennings Strouss. “I am very pleased that the exceptional efforts of our real estate attorneys have been recognized.”
Jennings Strouss has an extensive real estate practice, representing clients in every segment of the real estate industry, including owners, lenders, borrowers, investors, developers, contractors, brokers, property managers, title insurers, escrow agents, municipalities, and syndicators.
Our real estate attorneys’ strengths include acquisition, development and disposition of real property; financing; title insurance; syndications; leasing; construction, renovation and restoration; tax-deferred exchanges and other tax issues; subdivisions; condemnation; and real estate litigation.
About Jennings, Strouss & Salmon
Jennings Strouss & Salmon is one of the Southwest's leading law firms, providing legal counsel for over 70 years through its offices in PhoenixPeoria, and Yuma, Arizona; and Washington, D.C. The firm's primary areas of practice include agribusiness; bankruptcy, reorganization and creditors’ rights; construction; corporate and securities; employee benefits and pensions; energy; family law and domestic relations; health care; intellectual property; labor and employment; litigation; real estate; surety and fidelity; tax; and trust and estates. For additional information please visit www.jsslaw.com and follow us on LinkedInFacebook and Twitter.

The firm’s affiliate, B3 Strategies, assists clients with lobbying and public policy strategy at the local, state, and federal levels. For more information please visit www.b3strategies.com.
~JSS~
Contact:  Dawn O. Anderson  |  danderson@jsslaw.com|  602.495.2806

Tuesday, April 1, 2014

Jennings, Strouss & Salmon Attorneys Recognized as “Top Lawyers”



Eight Attorneys Selected for Az Business Magazine’s Top Lawyers List 
PHOENIX, Ariz. (April 1, 2014) – Jennings, Strouss & Salmon, a leading Phoenix-based law firm, is pleased to announce that eight of the firm’s attorneys were included in the March/April issue of Az Business Magazine’s “Top Lawyers List.”
Nominees for “Top Lawyers” were submitted by area of focus and selected based on career achievements and commitment to the legal industry.
The Jennings, Strouss & Salmon “Top Lawyers” include:

About Jennings, Strouss & Salmon
Jennings Strouss & Salmon is one of the Southwest's leading law firms, providing legal counsel for over 70 years through its offices in PhoenixPeoria, and Yuma, Arizona; and Washington, D.C. The firm's primary areas of practice include agribusiness; bankruptcy, reorganization and creditors’ rights; construction; corporate and securities; employee benefits and pensions; energy; family law and domestic relations; health care; intellectual property; labor and employment; litigation; real estate; surety and fidelity; tax; and trust and estates. For additional information please visit www.jsslaw.com and follow us on LinkedInFacebook and Twitter.
Contact:  Dawn O. Anderson  |  danderson@jsslaw.com|  602.495.2806

Friday, March 21, 2014

FERC Issues Show Cause Order to Interstate Pipelines to Comply with Capacity Release Regulations

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At its monthly meeting on March 20, 2014, the Commission initiated a show cause proceeding, pursuant to section 5 of the Natural Gas Act. The Order requires all pipelines to either (1) revise their tariffs in accordance with the Commission’s capacity release posting regulations; or (2) otherwise demonstrate that they are in full compliance.
 
Under Order No. 636-A, pipelines must post offers to release or to purchase released capacity, as well as the terms and conditions of such offers, on their websites for a reasonable period. The purpose of these postings is to facilitate communications between buyers and sellers of capacity. These postings provide releasing shippers greater information as to who is interested in obtaining released capacity and what rates they are willing to pay, as well as providing parties interested in purchasing released capacity a greater ability to communicate that interest to potential releasing shippers. This increased communication between buyers and sellers of released capacity is intended to maximize the benefits of the capacity release programs and promote efficient use of firm capacity by those who value capacity most.

At an April 2013 technical conference, comments were made expressing interest in the ability for buyers of capacity to post offers to purchase capacity when needed (for example, to transport gas to a gas-fired electric generator). Based on these comments, the Commission decided to evaluate whether pipelines are in compliance with its posting regulations, 18 C.F.R. 284.8(d). A review of ten pipeline websites revealed that none provided a location to post such offers. Furthermore, none of the tariffs reviewed contained provisions providing for the posting of offers to purchase released capacity or describing the terms to be included in such offers. This review prompted the Commission’s show cause order.

Additionally, the Commission requested that the North American Energy Standards Board (“NAESB”) develop standards specifying: “(1) the information required for requests to acquire capacity; (2) the methods by which such information is to be exchanged; and (3) the location of the information on a pipeline’s website.” In their compliance filings, each pipeline must explain how it will comply with 18 C.F.R. 284.8(d) until NAESB develops, and the Commission implements, these standards.

All pipelines must submit their filings within 60 days of the Order, by May 19, 2014. Each filing will be assigned a separate RP docket and provide for intervention by interested parties. In addition, any person wishing to intervene in the show cause order docket (RP14-442) must do so by April 1, 2014.

If you have questions or would like more information on the issues discussed in this article, please feel free to contact us.

Thursday, March 20, 2014

Jennings, Strouss & Salmon Expands Phoenix Office with the Addition of Lindsay G. Leavitt

PHOENIX, Ariz. (March 20, 2014) – Jennings, Strouss & Salmon, a leading Phoenix-based law firm, is pleased to announce that Lindsay G. Leavitt has joined the firm as a litigation associate in the Phoenix office.

“Lindsay’s experience with general commercial litigation, personal injury, and labor and employment disputes fits nicely with the firm’s diverse commercial litigation practice,” states Eric Gere, Chair of the firm’s Commercial Litigation Department. “In addition, his highly-honed negotiation skills and proficiency with handling complex cases makes him a great addition to the firm.”

Leavitt focuses his practice in the areas of commercial litigation, insurance defense, labor and employment, and administrative law. He earned a J.D. from Arizona State University, Sandra Day O’Connor College of Law and a B. Ed. from the University of Alberta.

“Jennings Strouss has a long-standing history of excellence and I am thrilled to work with the firm’s strong team of talented litigators,” said Leavitt. “I look forward to contributing to the high level of service Jennings Strouss provides to clients.”

About Jennings, Strouss & Salmon
Jennings Strouss & Salmon is one of the Southwest's leading law firms, providing legal counsel for over 70 years through its offices in Phoenix, Peoria, and Yuma, Arizona; and Washington, D.C. The firm's primary areas of practice include agribusiness; bankruptcy, reorganization and creditors’ rights; construction; corporate and securities; employee benefits and pensions; energy; family law and domestic relations; health care; intellectual property; labor and employment;www.jsslaw.com and follow us on LinkedIn, Facebook and Twitter.
litigation; real estate; surety and fidelity; tax; and trust and estates. For additional information please visit
 
~JSS~
 
Contact:  Dawn O. Anderson  |  danderson@jsslaw.com  |  602.495.2806

Monday, March 17, 2014

Employers May Lose Benefit of Overtime Exemption for Some Employees


Under the federal Fair Labor Standards Act (“FLSA”), most employees are entitled to receive overtime compensation (1.5 times their regular rate of pay) for all hours they work above 40 hours in a workweek.  However, the FLSA also exempts certain executive, administrative and professional employees who are paid on a salaried basis and make at least $455 per week.  President Obama announced last week that he is directing the U.S. Department of Labor (the agency charged with enforcing the FLSA) to amend its regulations to raise that salary threshold.

The legal effect of this change is that employers will have to begin paying overtime compensation to some of their employees who would otherwise be exempt from the overtime pay requirement.  For example, a store manager of a restaurant earning a $25,000 salary who is exempt under the current regulations would no longer be exempt under the new regulations.  The employer will either have to reconfigure the job duties or pay structure of the job, or it will have to determine what that employee’s regular rate of pay is (which will vary from week to week, depending on the number of hours the employee actually works) and then pay that employee additional compensation based on that regular rate, above and beyond the agreed-upon salary, for every hour worked above 40.

Employers affected by this change should consult with their attorney to determine what options may be available.

John J. Egbert is Chair of the firm's Labor and Employment Practice Group and serves as the firm's General Counsel. He assists employers with all types of employment litigation, including discrimination, wrongful discharge, wage and hour and non-compete agreements. Mr. Egbert also frequently advises clients on employment policies and procedures, and represents employers before administrative agencies.

Wednesday, March 12, 2014

Increase Research Funding for Arizona’s Public Universities



In a recent op-ed published by the Arizona Republic, Richard Silverman, with Jennings, Strouss & Salmon, discusses the importance of increased research funding for Arizona’s public universities. Silverman asserts that increased research funding will not only result in a 6-to-1 return on investment, but will make Arizona more competitive in the bioscience industry, which will ultimately attract more funding, research and industry partners. Jennings Strouss is equipped to support the needs of the biotechnology industry, providing legal expertise, as well as lobbying services through its affiliate, B3 Strategies. For more information, please visit www.jsslaw.com and www.b3strategies.com.