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Annapolis Real Estate and Business Litigation Law Blog

Elements of a construction contract

Construction contractors and Maryland developersmay encounter some common issues with the construction contract. For example, the scope of the work should be clearly defined based on contract documents in addition to specifications and drawings. The responsibility for making up for any inconsistencies in these documents, such as a different quality of material, should be that of the contractor. Any changes should be documented.

It is also important to address potential legal issues. This includes an indemnification regarding defects caused by any willful or neglectful actions of the contractor and should cover expenses such as attorneys' fees, investigative and repair costs, and damages. Owners should retain the right to consequential damages and should refuse a mutual waiver since this benefits the contractor more. There should also be a specific process for dispute resolution and arbitration.

Considerations when purchasing a vacant lot

Maryland real estate investors who are considering purchasing a vacant lots should keep a number of points in mind. It is important to check the zoning for the lot and make sure that it has the right authorization for the investor's purposes. This means that for a business, it must have commercial zoning, and for a mixed business and residence, the zoning must be mixed use.

A vacant lot has no utilities and no services, so the potential buyer should make sure that it is possible and cost-effective to add them. Even with the right zoning and with utilities and services, there still might be issues with getting building permits. There could be an easement or some other type of restriction on the land.

Zoning trouble results in $60,000 fine for Maryland farmer

Maryland workers who are in the agricultural industry should be aware that Howard County zoning officials are cracking down on farmers who park commercial vehicles on their properties. The issue stems from agricultural zoning regulations that limit the number of commercial vehicles that can be parked on farms.

One farmer was fined more than $60,000 for parking truck tractors and grain hopper trailers on his property, which his family has farmed for over 50 years. Apparently, an officer from the Howard County Department of Planning and Zoning entered the property around early one morning to take photos of the vehicles while they were parked on the farm. A representative with the Howard County Farm Bureau said the zoning officer planned the early morning visit because the farmer typically parked the vehicles on his property after the zoning office had closed for the day. The vehicles are reportedly used to haul grain and Christmas trees.

CRE experts continue to worry about the retail sector

Financial experts and real estate investors in Maryland and around the country are becoming increasingly concerned about the beleaguered retail sector. Consumers primarily concerned with convenience, value and selection are being lured away from traditional brick-and-mortar stores by online retailers like Amazon, and empty big-box retail outlets and vacant shopping mall spaces are becoming increasingly familiar sights on the American landscape as a result.

Shifting consumer buying habits have already forced several major retail chains out of business, and hundreds of additional store closings have been announced by Sears and J.C. Penney in recent months. The reeling retail sector was shaken again on April 7 when the electronics chain H.H. Gregg announced that it had failed to find a buyer and would be filing for bankruptcy and closing all of its locations. Matters are made even more challenging for mall owners by a dearth of new retail clients willing to move into the spaces vacated by departing chains.

2 more interest rate increases expected in 2017

Studies suggest that business leaders in Maryland and around the country remain optimistic about the state of the economy. The Tennessee-based National Federation of Independent Business reported in February that optimism among entrepreneurs was soaring, and the Business Roundtable says that the CEOs of 100 large American companies also believe that growth will continue. Small business owners are said to be more bullish than they have been in decades, and CEOs are reportedly as enthusiastic as they were in late 2009.

However, these views are not shared by the Board of Governors of the Federal Reserve. When the Federal Reserve Chair Janet Yellen announced a quarter of a point interest rate increase on March 15, she told reporters that the nation's central bank did not believe that the pace of economic growth would continue to accelerate. The Federal Reserve is expected to announce two more rate hikes in 2017 to ensure that inflation does not creep above their 2 percent target.

CRE investors remain optimistic despite looming rate hikes

The looming threat of additional interest rate hikes does not appear to be enough to deter investors in Maryland and around the country from the commercial real estate sector. A presidential administration vowing to slash regulations and an economy that continues to grow are enough to assuage fears of higher borrowing costs according to a survey of investor intentions released by the CBRE Group. The Los Angeles-based organization reports that real estate investors today are slightly more optimistic than they were a year ago.

More than two-thirds of the investors polled said that they plan on purchasing more American real estate than they sell in 2017, and they told CBRE researchers that they are more concerned about a possible economic downturn than they are about rising interest rates. Investors also voiced concerns about the current market reaching its peak and bubbles developing in some sectors. While investors are expected to continue buying in the year ahead, the CBRE report suggests that they will be selecting their properties far more carefully.

Why sellers should not rely on buyers' real estate lawyers

When people are preparing to sell commercial real estate in Maryland, they should avoid relying on the buyers' attorneys to represent them through the transaction. Buyers' attorneys represent the interests of their clients and work to advocate for them. The interests of sellers are often different than those of buyers, and having separate representation is a good idea.

Getting legal help might be a smart choice before the commercial property is ever listed. Brokers present listing agreements to sellers, and the terms that are used in many of the agreements are often friendlier to the brokers than to the sellers. It is a good idea to carefully review the terms before signing listing agreements. In many cases, the terms may be negotiated to make them more favorable to the sellers.

Large investors are leaving the commercial real estate market

The volume of commercial real estate deals in Maryland and the rest of nation fell by 11 percent in 2016, something that has not happened since 2009. A recent Wall Street Journal report reveals that prominent real estate investors are cutting their holdings and withdrawing money from potential investments. This has led many to wonder why the significant players in the real estate market, such as asset managers at hedge funds, pension funds and private equity firms, are pulling out of the market.

Extremely low cap rates are one reason large investors are selling their commercial real estate assets. The cap rates in certain sectors are well below normal, and since this trend is unlikely to continue, many institutional and larger investors are withdrawing their money from real estate ventures.

How technology simplifies real estate investing

From property management platforms and big data analytics to lending and investment marketplaces, commercial real estate investing in Maryland and across the US is easier today than ever. With advancements made since 2015, such as process automation and smart cities, commercial real estate businesses are likely to grow.

Comprehensive property management is a platform that not only investors can enjoy, but it is also great technology for tenants, property managers and landlords. With the variety of companies that offer sophisticated platforms, investors can select the one that is most suitable for their type of business. These platforms allow them to keep track of many aspects of their investments, including conversing with tenants via their smartphones and keeping track of maintenance requests and rent rolls.

Obtaining real estate funding

Maryland commercial real estate developers may be able to obtain the funds they need from a startup located in the Washington, D.C., area. RealAtom is a web-based lending platform that offers services similar to those offered by LendingTree. LendingTree connects lenders with borrowers interested in obtaining credit cards or mortgages, and RealAtom is designed to connect individuals interested in borrowing money for commercial real estate with lenders.

An example of how the system works is that developers who are interested in financing for a new commercial construction project put their information into the system. Lenders can then see this listing, and RealAtom helps both lenders and developers by matching them up based on their loan requirements so that lenders aren't looking at a large number of financing requests that they won't be interested in.