Creating certainty in the inherent uncertainty of the future is the name of the game when it comes to drafting commercial leases. When courts overrule provisions that the parties to the lease have agreed upon, however, that supposed certainty goes out the window. This fact pattern played out recently in Epochal Enterprises, Inc. v. LF Encinitas Properties, LLC (4th Dist., Case No. D079905) (“Epochal”), when the California Court of Appeal ruled that a limitation of liability clause in a lease that purported to release the landlord from liability for failing to disclose asbestos was against public policy and not enforceable.Continue Reading New Court Ruling Pokes Holes in Contractual Limitation of Liability Language in Commercial Leases
Recent Cases - Transactional
SCOTUS Declines to Review New York City’s Rent Stabilization Law
New York City’s rent-related laws have once again survived judicial scrutiny, and evaded Supreme Court review. In 74 Pinehurst LLC v. New York, a group of New York City landlords (“Petitioners”) filed suit in the District Court for the Eastern District of New York against the City and State of New York, the State Division of Housing and Community Renewal, New York City’s Rent Guidelines Board, and multiple state and New York City officials (“Respondents”), seeking a declaration that New York City’s Rent Stabilization Law, as amended in 2019 (“RSL”), violates the Fifth and Fourteenth Amendments of the United States Constitution. Respondents moved to dismiss, which the Eastern District Court granted. On appeal, the Court of Appeals for the Second Circuit affirmed the motion to dismiss, and on February 20, 2024, the Supreme Court denied Petitioners’ petition for certiorari, declining to review the RSL.Continue Reading SCOTUS Declines to Review New York City’s Rent Stabilization Law
Make No Mistake – Rent Control Laws Apply To Single-Family Homes
A recent California Appellate Court decision provided tenants with additional protections when it clarified that local rent control laws applied to a single-family home in which the landlord[1] rented rooms in the home to separate tenants despite the landlord’s belief that single-family homes were excepted from rent control laws. Specifically, in Owens v. City of Oakland Housing, Residential Rent and Relocation Board (“Owens”), Division Three of the First District of the California Court of Appeal clarified that the landlord’s argument that an exception to local rent control laws found in the Costa-Hawkins Housing Act (“Costa-Hawkins”) did not apply.
Continue Reading Make No Mistake – Rent Control Laws Apply To Single-Family Homes
Start Spreadin’ the News: California Court Says No to New York, New York; Rejects Forum Selection Clause
Sinatra may have found success in the city that never sleeps, but a California court has just made it more difficult for any party doing business with a California resident to do the same. At least, when it comes to resolving disputes without a jury in a New York courtroom, or in the courtroom of any other jurisdiction that enforces pre-dispute jury trial waivers. This case will be of major interest to commercial lenders, and other businesses, who prefer to use New York as their jurisdiction of choice for governing law and adjudicating disputes.
Continue Reading Start Spreadin’ the News: California Court Says No to New York, New York; Rejects Forum Selection Clause
Supreme Court Takes Back Takings: Knick v. Township of Scott
The Supreme Court recently issued its long-awaited ruling in Knick v. Township of Scott, concluding that a plaintiff alleging that local governments have violated the Takings Clause under the Fifth Amendment may seek relief directly in federal court, as a constitutional violation occurs at the time of the taking without payment, even if just compensation is subsequently paid.[1] In the 5-4 majority opinion, the Court overruled, in part, Williamson County Regional Planning Comm’n v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985), a 34-year old precedent that established a federal claim was not ripe until a state takings plaintiff exhausted its remedies under state law. The decision, among other things, eliminates the “Catch 22” dilemma created by Williamson in which a state judgment denying the takings claim precluded the federal claim from ever becoming ripe because of the preclusive effect of the state judgment under the federal full faith and credit statute (28 U.S.C. §1738). The ramifications of the decision remain to be seen, but property owners will certainly welcome the readier access to the federal courts for takings claims.
Continue Reading Supreme Court Takes Back Takings: Knick v. Township of Scott
Principal Architects on Residential Projects Liable for Construction Defects Outside Their Control; Developers and Owners May Pay the Price
Beacon Residential Community Assoc. v. Skidmore, Owings & Merrill, LLP (Cal. Supreme Court., 07/03/2014, S208173)
On July 3, 2014, the California Supreme Court decided the much watched case Beacon Residential Community Assoc. v. Skidmore, Owings & Merrill, LLP. The court held that the “principal architect” “owes a duty of care to future homeowners in the design of a residential building . . . even when they do not actually build the project or exercise control over construction.” (Emph. added.)Continue Reading Principal Architects on Residential Projects Liable for Construction Defects Outside Their Control; Developers and Owners May Pay the Price
The Covenant of Quiet Enjoyment – A Bang or a Whimper
Almost all commercial leases in the United States include a covenant of quiet enjoyment. At its simplest level, the protection afforded by the covenant to a tenant is straightforward: a landlord must not interfere with a tenant’s use and enjoyment of the leased premises. Tenants, however, have attempted to utilize the covenant in a more expansive way to make claims and obtain damages against landlords for various types of landlord behavior. The scope and nature of the landlord’s detrimental behavior are important factors in determining whether the tenant will have a potentially successful claim for the breach of the covenant of quiet enjoyment. But recent cases suggest that leases can be drafted to limit the scope of the covenant and/or the landlord’s liability for breach of the covenant.
Continue Reading The Covenant of Quiet Enjoyment – A Bang or a Whimper
Homeowner Associations and Members Not Necessarily Bound By Arbitration Provisions in CC&Rs or in Related Purchase Agreement Where Developer is Initial Declarant
By Michael Wilmar and Aaron Kleven
Homeowners and homeowner associations are not necessarily bound by arbitration provisions in a declaration of covenants, conditions and restrictions, or in a related purchase agreement, where the developer is the initial and only declarant. That is the implication of a July 30th ruling of the Fourth District of the California Court of Appeal. In Pinnacle Museum Tower Association v. Pinnacle Market Development (US) LLC, a homeowner association brought a construction defect suit on behalf of itself and its members for damage to common areas. The developer of the condominium project attempted to block the suit, claiming the plaintiff was bound to an arbitration provision recorded in the project CC&R’s. It argued the provision committed the Association to resolve all construction disputes through arbitration and waived the Association’s right to a jury trial. The purchase and sale agreements signed by the individual condominium owners also contained a jury waiver and a provision compelling owners to comply with the arbitration provision in the CC&R’s. But the court concluded that the provision in the CC&R’s did not constitute an agreement sufficient to wave the Association’s constitutional right to a jury trial. And it found the corresponding provision in the purchase and sale agreement unconscionable and unenforceable against the individual owners.Continue Reading Homeowner Associations and Members Not Necessarily Bound By Arbitration Provisions in CC&Rs or in Related Purchase Agreement Where Developer is Initial Declarant