Category: Real Estate

Property Insurance Coverage Pitfalls for Cannabis Businesses and Landlords

Nearly all Americans now live in a state where some form of cannabis is legal. Given that the cannabis industry is now valued in billions of dollars and has created hundreds of thousands of jobs across 39 of the 50 states, it requires the same range of insurance products that protect businesses in other sectors. This includes insurance for property owners that lease to tenants engaged in cannabis-related activities. Fortunately, common fact patterns have emerged that are instructive to cannabis businesses and property owners that wish to ensure they have effective coverage.

Where Liability Lies

It is not uncommon for a landlord to lease a property for a non-cannabis purpose, only to purportedly later learn that the tenant is using the property for an unpermitted cannabis operation. In such a case, the primary question is whether the landlord knew what the property was being used for and when. Mosley v. Pacific Specialty Ins. Co., 49 Cal. App. 5th 417 (2020) is instructive on this issue.

Mosley involved an action under a homeowners’ insurance policy, wherein the trial court granted summary judgment to the insurer on the basis that coverage was excluded for a fire that occurred after a tenant rerouted the property’s electrical system to steal power from a main utility line for a marijuana growing operation, causing a fuse to blow. The Court of Appeal reversed the judgment, finding that there was a triable issue as to whether the tenant’s actions were within the owners’ control (for purposes of determining whether the plant-growing exclusion applied). It was undisputed that the owners did not know about the operation or the alteration, and there was no evidence as to whether they could have discovered the operation by exercising ordinary care or diligence. The court explained in relevant part that “an insured increases a hazard ‘within its control’ only if the insured is aware of the hazard or reasonably could have discovered it through exercising ordinary care or diligence.”

A landlord’s knowledge of the operations is therefore relevant for several reasons. It may be relevant to a provision for increasing a particular hazard, as noted above. Equally important, it may be relevant to a provision in the policy for fraud or misrepresentation in the application or claims process. Many homeowners and commercial general liability policies contain a provision that the policy may be void or rescinded for fraud or a misrepresentation perpetrated in the application or claims process. Thus, if the insured property owner knew of the intended use, but misrepresented the nature of the property’s intended use, there may be no coverage for an insured’s loss.

Misrepresentation

Another common scenario involves the landlord or tenant misrepresenting the nature of the business at the insured location to obtain a better rate, to avoid mandatory inspections, or for other reasons. For example, an insured may state on the insurance application that it is a retail dispensary when in fact it manufactures cannabis using extraction machines and volatile solvents. Because the nature of the risk is substantially different for a retail dispensary than for a manufacturing operation, higher premiums and routine inspections may be required. A dispensary’s primary risk is theft whereas the use of solvents during extraction poses a risk of explosion.

Security Compliance

Failure to properly comply with security safeguard warranties and exclusions that are commonly found in cannabis commercial property policies has precluded coverage for many cannabis-related property claims, particularly those that involve theft and fires. For example, a common question is whether the storage of on-site harvested cannabis or finished stock complies with the Locked Safe Warranty provision that is required in most cannabis policies. Policy language varies, but most require harvested plant material or stock to be stored in a secured cage, a safe, or a vault room.

Definitions also vary between policies and it is important for the insured to pay close attention to the policy language to ensure that their business practice aligns with what is required under the warranty. It is common to hear an insured complain that it “complied with state regulations” with respect to the storage of cannabis, only to learn that the policy requires security that is more strict than applicable regulations.

The definitions and terms used within security safeguard warranties and exclusions in cannabis commercial property policies have evolved over the past few years to better align with the insured’s business operations, and to avoid ambiguity and unnecessary coverage disputes and litigation.

Examples of precise requirements for a compliant vault include:

  • Being located in an enclosed area constructed of steel and concrete with a single point of entry
  • A minimum steel door thickness of one inch
  • Continuous monitoring by a central station alarm, motion sensors, and video surveillance
  • A minimum of one-hour fire rating for all walls, floors, and ceilings
  • Procedures that limit access only to authorized personnel.

Similar coverage issues frequently arise regarding whether the insured has complied with other common security safeguards required by the policy, including specific requirements for what qualifies as a central station burglar alarm and the location of motion sensors and video surveillance equipment. Again, the cannabis business owner or landlord are often tripped up by the assumption that so long as they are “compliant” with state cannabis regulations, all will be well and they will be covered by their insurance policy.

This is frequently an incorrect, and ultimately expensive, assumption that may be avoided by closely reading the requirements of the policy to ensure that they align with actual business practices.

Conclusion

Cannabis businesses and property owners currently have a good selection of insurance options across multiple lines of coverage with reputable insurance companies. To avoid unnecessary coverage problems and expensive mistakes, however, it is important that the company or landlord work with an insurance broker who is familiar with the available cannabis-specific insurance forms and the common problematic factual scenarios, some of which are identified above.

© 2025 Wilson Elser
For more on Cannabis, visit the NLR Biotech Food Drug section

What’s in a Name Anyway? Trademark Basics for Community Associations

This article explores the essentials of trademark rights, their relevance for community associations, and the balance between protecting these trademarks versus respecting the free speech of homeowners.

I. What is a Trademark?

A trademark is a word, phrase, symbol, design, or any combination thereof that identifies and distinguishes the source of the goods or services of one party from the goods or services of another.

  1. Common Law Trademark Rights

    Common law trademarks arise from the exclusive, continuous use of a mark in commerce. It is not necessary to have a registration to use or protect these designations. However, rights in a common law (or unregistered) trademark are generally limited to the geographic area where the mark has been used. Trademark ownership is perpetual if the owner continues to use the trademark to identify its goods or services.

  2. Registered Trademark Rights

    Registered trademarks provide broader protection. There are two levels of trademark registration: state and federal.

    State registration provides protection within the boundaries of the state where the trademark is registered. This is a simpler and less costly process compared to federal registration, making it suitable for businesses that operate primarily within one state. For North Carolina, state trademark registration is done through the North Carolina Secretary of State.

    Federal registration, managed by the United States Patent and Trademark Office (USPTO), offers nationwide protection and several advantages, such as a legal presumption of ownership and the exclusive right to use the mark on or in connection with the goods/services listed in the registration.

II. Can a Community Association Have a Federally Registered Trademark?

Yes, a community association can register a trademark to protect its name, logo, or other identifying symbols for use in connection with the community association services offered.

  1. What is the Process?

    The process of registering a trademark involves several steps:

  2. Search: Conduct a trademark search to assess if the mark is available for registration.
  3. Application: File an application with USPTO, including a description of the mark, the goods/services it will cover, the dates of first use, and examples of such use.
  4. Examination: The office examines the application to ensure it complies with all legal requirements. If there are any issues, the applicant will receive an initial refusal (called an “Office Action”). There is a three-month window to respond or file a three-month extension to respond. If a Final Office Action is issued, the applicant has the option to request reconsideration and/or file to appeal the Examiner’s decision.
  5. Publication: If approved, the mark is published in the Official Gazette, allowing others to oppose the registration.
  6. Registration: If no opposition is filed, the mark is registered, and the owner receives a certificate of registration.
  7. How Time-Consuming is it?

The federal registration process typically takes about a year from filing, but the process can be longer if there are complications or opposition. State registrations are usually quicker, often taking a few months, but the resulting protection is limited to the state.

  1. What are the Benefits?

Trademarks offer several benefits to community associations. For example, the owner of a registered trademark has the exclusive right to use the mark in commerce. Therefore, the community association can prevent other community associations from using a confusingly similar mark and misleading prospective residents as to source, affiliation, or endorsement as a result. For further example, registered trademarks are listed in the USPTO database. A subsequent application for a similar mark for the same or related services will be blocked by the community association’s registration. Finally, the use of the registration symbol (“®”) acts as increased deterrence against other associations from using similar trademarks.

  1. What Does it Protect?

A registered trademark protects the association’s name, logo, and other branding elements from being used by others in a way that could cause confusion. It helps maintain the association’s reputation and ensures that its identity remains distinct.

  1. What Does it Not Protect?

Trademarks do not protect against every type of use. Notably, they do not protect against non-commercial commentary or criticism, which falls under fair use and is safeguarded by the First Amendment. This means that while trademarks prevent individuals or entities from misusing the trademark, they cannot stop individuals from expressing opinions or criticisms.

III. How does a Community Association Enforce its Trademark?

Enforcing a trademark involves monitoring its use and taking action against unauthorized usage.

  1. Monitoring: Keep an eye on how the trademark is used in the marketplace.
  2. Cease and Desist Letters: If unauthorized use is detected, a cease and desist letter can be sent to the infringing party to resolve the matter without litigation.
  3. Litigation: If the cease-and-desist letter is ignored, litigation may be necessary to

When it comes to property owners using the trademark of a community association, the line between trademark infringement and nominative fair use can be tangled. Property owners using the trademark to offer competitive services or confuse residents into thinking that their use is sponsored by the community association are examples of infringement. Only the community association can use its trademark to offer community association services. Only the community association can market the community to prospective residents. Finally, the community association must monitor and enforce against any uses of the trademark that could tarnish its valuable reputation.

Yet, while enforcing trademark rights is important, it is crucial to consider the potential backlash from property owners and the broader community. Even if there is a legitimate claim, aggressive enforcement actions may jeopardize community trust and invite public criticism. Such efforts, especially against gripe sites, can lead to stronger reactions and widespread publication of enforcement efforts online, further damaging the reputation. Put another way, a community association attempting to protect its reputation must consider if its enforcement efforts do the opposite.

Sometimes, directing energy elsewhere and addressing concerns through dialogue and engagement can be more effective and less costly than legal battles.

IV. Value Proposition for Community Association

Trademark rights are crucial for protecting the identity and reputation of a community association. They help prevent confusion among property owners and prospective residents by ensuring that the association’s name and symbols remain distinct. However, while trademarks are valuable tools for community associations to deter unauthorized use, they cannot be used to silence opinions or criticisms. Understanding this balance is essential for effectively managing and enforcing trademark rights in a manner that respects both legal protections and fundamental freedoms of the property owners.

© 2024 Ward and Smith, P.A.. All Rights Reserved.
For more on Trademarks, visit the NLR Intellectual Property section

Mass. Appeals Court Declares Winner in Longstanding Land-Use Dispute Between Northeastern University and Town of Nahant

The Nahant Preservation Trust, the town of Nahant, and certain Nahant residents have suffered another loss in their years-long legal battle to stop Northeastern University from expanding its Marine Science Center, located on East Point in Nahant. The Massachusetts Appeals Court recently affirmed the dismissal of the legal actions, finding that the plaintiffs had no reasonable expectation of proving that Northeastern dedicated the 12 acres of land at issue to the public for use as an ecological preserve.

The dispute – and the Appeals Court decision – required an analysis of the “public dedication doctrine” to determine whether the land was subject to Article 97 of the Amendments to the Massachusetts Constitution. Art. 97 provides, in part, that property “taken or acquired” for conservation purposes “shall not be used for other purposes” without approval by a two-thirds vote of each branch of the state legislature. In Nahant Preservation Trust v. Northeastern University (pdf), the Appeals Court concluded that the land at issue is not subject to Art. 97.

Land is dedicated to a public purpose when the landowner’s intent to do so is clear and unequivocal, and when the public accepts the dedication by actually using the land for the public purpose. In 2017, the Supreme Judicial Court (SJC), in Smith v. City of Westfield, expanded the reach of Art. 97 by concluding that municipal parkland may be protected even if not officially taken or acquired, as long as it was “designated” for an Art. 97 purpose.

The Nahant dispute arose when Northeastern announced plans to expand its Marine Science Center located on a peninsula known as East Point. The plaintiffs contended that Northeastern had permanently dedicated the 12 undeveloped acres of its land to the public for use as an ecological preserve and for passive recreation. Therefore, they argued, the land was subject to Art. 97 and the project could not proceed without legislative approval. The plaintiffs compiled and presented to the superior court judge a substantial record, including historical documents concerning Northeastern’s acquisition of the land, which had been used for military purposes by the United States Army and Navy in the 1940s and 1050s. The evidence also included documents that reflected the Town of Nahant’s decision in 1964 not to acquire the property, despite the conservation commission’s desire to have at least a scenic pathway along the shoreline of the property.

Although the summary judgment record contained conflicting evidence regarding the extent of public access and use of Northeastern’s property by town residents, the courts accepted that some town residents had used the area for general recreation over the years. There was evidence that Northeastern had permitted some recreational use of the land. The Appeals Court noted in its decision, however, that the plaintiffs must prove that the disputed land was actually dedicated to the public.

In rejecting the plaintiffs’ arguments, the Appeals Court stated that the public dedication doctrine requires a property owner’s acts and declarations to be “deliberate, unequivocal and decisive, manifesting a clear intention permanently to abandon his property to the specific public use.” The Court noted that the SJC’s finding in Smith that there had been a dedication was based on an acceptance of Federal funds to rehabilitate a playground with the proviso that the city was surrendering its ability to convert the playground to a use other than public outdoor recreation.

The Appeals Court parsed the evidence on which the plaintiffs relied to demonstrate that Northeastern had “clearly and unequivocally” intended to dedicate the disputed land to the public. The plaintiffs pointed to the public’s use of the land as evidence of Northeastern’s intent to dedicate the property. Citing precedent from 1873 to Smith, the Appeals Court stated that “public use, alone, is not enough to prove a public dedication, particularly in circumstances like those present [in Nahant].”

Based on its review of the extensive summary judgment record, in the light most favorable to the plaintiffs, the Appeals Court concluded that the plaintiffs had no reasonable expectation of proving that Northeastern dedicated the 12 acres at issue to the public for use as an ecological preserve. It appears that Northeastern may finally proceed with its plans announced in 2018 to build a new research facility at its Marine Science Center in Nahant.

©2024 Pierce Atwood LLP. All rights reserved.

by: Michelle N. O’Brien of Pierce Atwood LLP

For more news on Environmental Land Dedication Disputes , visit the NLR Environmental, Energy, & Resources section.

Massachusetts SJC Rules in Favor of Insureds for Ambiguous Insurance Policy Term

In Zurich American Insurance Company v. Medical Properties Trust, Inc. (and a consolidated case[1]) (Docket No. SJC-13535), the Supreme Judicial Court of Massachusetts ruled in favor of insureds in a dispute over an ambiguous term in two policies insuring Norwood Hospital in Norwood, Massachusetts. A severe storm with heavy rain caused damage to the hospital basement and to the hospital’s main buildings caused by seepage through the courtyard roof and parapet roof. The owner of the Hospital, Medical Properties Trust, Inc. (“MPT”) and the tenant, Steward Health Care System LLC[2] (“Steward”), both had insurance policies for the Hospital, MPT’s coverage being through Zurich American Insurance Company (“Zurich”), and Steward’s through American Guarantee and Liability Insurance Company & another (“AGLIC”). Both policies had coverage of up to $750 and $850 million but lower coverage limits for damage to the Hospital for “Flood” at $100 and $150 million (“Flood Sublimits”). Both Steward and MPT submitted proof of loss claims to their respective insurers that exceeded $200 million; the insurers responded that damage to the hospital was caused by “Flood”, which limits both MPT and Steward to their respective Flood Sublimits. The policy provision “Flood” is defined as “a general and temporary condition of partial or complete inundation of normally dry land areas or structures caused by…the unusual and rapid accumulation or runoff of surface waters, waves, tides, tidal waves, tsunami, the release of water, the rising, overflowing or breaking of boundaries of nature or man-made bodies of water.”

The insurers, and MPT and Steward had differing opinions on the definition of “surface waters.” Litigation commenced to determine the extent of coverage available to MPT and Steward for damage to the hospital. The parties agreed that the damage to the basement was caused by Flood, and therefore subject to the Flood Sublimits. However, the parties disagreed as to whether the damage caused by rain seeping in through the courtyard roof and parapet roof was caused by “Flood” because of ambiguity in the definition of Flood. The United States District Court for the District of Massachusetts held that the term “surface waters” in both policies’ definition of “Flood” included rainwater accumulating on the rooftop. The judge allowed an interlocutory appeal due to the substantial difference in opinion of the term “surface water” under the definition of “Flood.” The Court noted that case law across the country is divided on this issue. MPT and Steward appealed, and the First Circuit certified a question to the Massachusetts Supreme Judicial Court (SJC), “Whether rainwater that lands and accumulates on either (i) a building’s second-floor outdoor rooftop courtyard or (ii) a building’s parapet roof and that subsequently inundates the interior of the building unambiguously constitutes ‘surface waters’ under Massachusetts law for the purposed of the insurance policies at issue?”

The SJC concluded that the meaning of “surface waters” and the definition of “Flood” under the policies are ambiguous in regard to the accumulation of rainwaters on roofs, finding that ambiguity is not the party’s disagreement of a term’s meaning but rather where it is susceptible of more than one meaning and reasonably intelligent persons would differ as to which meaning is the proper one. The SJC noted there is no consistent interpretation in case law for “surface waters” to include rainwater accumulating on a roof. Reasoning that if the policy language is ambiguous as to its intended meaning, then the meaning must be resolved against the insurers that drafted the terms, as they had the opportunity to add more precise terms to the policy and did not do so.

This case is an example of the importance for all parties to closely review the language of their insurance coverage to ensure that coverage is consistent with their lease obligations. Additionally, this dispute also draws attention to the importance of casualty provisions in leases. It is important to negotiate the burden of costs in the event of caps or insufficient insurance, along with termination rights for each party.

[1] Steward Health Care System LLC vs. American Guarantee and Liability Insurance Company & another.

[2] Apart from this litigation, the future of Norwood Hospital as a hospital is uncertain as it has not been open for four years and Steward Health Care System LLC has filed for bankruptcy protection.

© 2024 SHERIN AND LODGEN LLP
For more news on Massachusetts SJC Rulings, visit the NLR Real Estate section.

The New Paradigm in Mexico for Damage Claims in Industrial Property.

The Federal Law for the Protection of Industrial Property, in force since the 5th of November of 2020, is distinguished from its predecessor, among other things, by the particularities in the claims of a compensation for damages caused by the infringement of industrial property rights.

Currently, individuals may claim a compensation for damages through the administrative venue, before the Mexican Institute of Industrial Property (IMPI), or through the civil venue before the corresponding Courts in the matter. This implies that the holder of infringed exclusive rights may opt for two procedures and authorities of different nature, which has its benefits and disadvantages.

Before the IMPI, the compensation action is exercised in an ancillary proceeding, provided that such authority has previously issued a declaration of administrative infringement that is enforceable. Alternatively, it is still possible for the action to be brought directly before the Civil Courts, once the resolution from IMPI is final.

Although the exercise of the action for compensation before the administrative authority implies that a specialized authority in the matter is to hear the case, it has the disadvantages that its ancillary proceeding requires the prior prosecution of an administrative infringement claim before the same administrative authority (IMPI) and the lack of experience to quantify damages and losses. Additionally, the time required for the enforcement of the resolution issued by the IMPI before the Federal Courts in Civil Matters must be added to the time required for the substantiation of the action.

Thanks to the entry into force of the new Law, individuals may also resort directly to the civil Courts to claim infringement of their industrial property rights and compensation for damages, without the need for a prior declaration of infringement by the IMPI. This implies that a Judge, an expert in civil law, will have to delve into complex, specialized and technical issues, specific to industrial property.

Additionally, it is provided that the proceeding of the civil action will be suspended if an invalidity claim is filed before the IMPI against the right basis the civil claim, as long as the administrative authority does not issue a final resolution to such nullity action. This counteracts the advantage of a civil proceeding whose resolution may be quicker than before IMPI.

The new landscape for the claim for damages requires a careful study of the particularities of each specific case to determine the suitability of each route, since this is influenced, among other factors, by the complexity, the sophistication of the counterparty, the causes and technical considerations of the violation caused, among others.

© 2005-2024 OLIVARES Y COMPAÑIA S.C.
For more news on Damage Claims in Industrial Property in Mexico, visit the NLR Real Estate section.

This Michigan Supreme Court Case Has the Potential to Guide Drone and Air Rights Law for the Nation

While at first glance the Michigan Supreme Court case of Long Lake Township v. Maxon, appears to be a simple zoning dispute with a Fourth Amendment twist, the real impact of the case may ultimately fall on drones and air rights law, particularly the rights of landowners to exclude drones from flying in the airspace immediately above their land, and relatedly the ability of state and municipal governments to regulate such flights.

The history of the case is straightforward. When the Michigan municipality of Long Lake Township sought to enforce a zoning ordinance against Todd Maxon, Mr. Maxon asked the trial court to exclude all evidence obtained by flying a drone over Mr. Maxon’s land. After the trial court refused to exclude the evidence on the grounds that the photographs did not violate the Fourth Amendment, an appellate court ruled that the Fourth Amendment issue was irrelevant because a legal proceeding to enforce a local zoning ordinance is not required to exclude evidence obtained in violation of the Fourth Amendment (the requirement to exclude such evidence is known as the “exclusionary rule”).

Now, we await the Michigan Supreme Court’s decision as to whether the exclusionary rule applies, and if so, whether the use of the drone to inspect Mr. Maxon’s land for zoning compliance violated the Fourth Amendment’s prohibition of unreasonable searches.

A decision on that second question will center on landowners’ right to exclude drones from the airspace immediately above their land, because a warrantless search violates the Fourth Amendment if there is a reasonable expectation of privacy in the searched area that society recognizes as reasonable. It follows then, that, if a landowner has no legal right to exclude drones from flying over his or her land, then it would be inherently unreasonable to expect privacy in portions of their property that can be observed from such public drone flight paths above their land, as courts routinely rule that there cannot be a reasonable expectation of privacy in land that can be observed from adjacent, publicly-accessible space.

As drone technology developed from a curious, niche hobby into a potential billion-dollar business with the ability to change the way packages are delivered to our homes and offices, legal debates quickly followed about whether all airspace above the blades of the grass constitutes “publicly navigable airspace” that is beyond the control of the landowners below, or if those landowners maintain some residual control over some airspace above their land. A decision from the Michigan Supreme Court on this issue would be one of the highest level state or federal courts to confront this question.

Hopefully, the exclusionary rule will not prevent a thorough analysis of the issue, as its resolution will ultimately be necessary to confirm the permissibility of local government regulation of the time, place, and manner of drone flights, and landowners’ airspace control rights, and only when those questions are resolved will drone technology be able to fully flourish in the United States as part of a legal regime that acknowledges and respects the traditional property rights of landowners.

This is a bellwether. This decision will affect the course of not just Michigan, but all of America about how it treats drone surveillance.
Copyright 2024 Goulston & Storrs PC.
For more news on Drone Air Regulations and Zoning Rights, visit the NLR Real Estate section.

Supreme Court Holds That the Eighth Amendment Does Not Prevent Enforcement of Local Camping Bans, Authorizing a Significant Shift in Local Policies on Homelessness

Until recently, local policies on homelessness have been guided by two controversial rulings from the Ninth Circuit Court of Appeals: Martin v. Boise (9th Cir. 2019) 920 F.3d 584 and Johnson v. City of Grants Pass (9th Cir. 2022) 50 F.4th 787.[1] However, the Supreme Court’s decision in City of Grants Pass v. Johnson(2024) 603 U.S. ____, is likely to transform local jurisdictions’ policy approaches to managing homelessness. In a 6-3 decision, the Supreme Court upheld the city’s ban on camping and parking overnight on public property.

By way of background, in Martin, the Ninth Circuit held that the Eighth Amendment’s restriction against cruel and unusual punishment barred cities from imposing criminal penalties for violations of public-camping ordinances whenever the number of homeless individuals exceeds the number of “practically available” shelter beds in a jurisdiction. In Johnson, the Ninth Circuit expanded on Martin and held that a city cannot enforce its camping ban or impose fines or civil penalties unless the city has enough shelter beds for its entire population. Since then, affected cities and states have widely criticized these two Ninth Circuit rulings, which effectively blocked the enforcement of local ordinances prohibiting or regulating camping and sleeping outdoors.

In the Supreme Court’s decision in Johnson, the Court rejected the Ninth Circuit’s rulings and held that ordinances prohibiting camping, overnight parking, or sleeping outdoors do not violate the Eighth Amendment’s protections against cruel and unusual punishment because these ordinances regulate “conduct” and “actions”, rather than “mere status.”

The Court focused on the practical implications of Martin and Johnson, finding that the Ninth Circuit created an unworkable and confusing test to evaluate public camping ordinances, based on subjective and vague determinations of who is “involuntarily” homeless. The Court also criticized judicial injunctions prohibiting the enforcement of public camping ordinances, finding that these determinations are “public policy responses” best handled by local governments and the legislature (not courts).

In doing so, the Court agreed with local jurisdictions that complained that the Ninth Circuit inappropriately limited available policymaking tools and “undermined” local efforts to address homelessness. The Court emphasized that local governments have “broad power” over the substance and enforcement of their laws and must be afforded “wide latitude” and “flexibility” to address homelessness.

Although the Court’s ruling authorizes the enforcement of public camping ordinances, it does not grant unfettered power to local jurisdictions. The Court acknowledges that public camping ordinances could still implicate other constitutional concerns, including potential violations under the Due Process Clause. The Court further notes that local governments are not required to adopt public camping ordinances, and may choose to narrow such laws by imposing relevant time, place, and manner restrictions.

Even with these limitations, the Court’s decision is likely to significantly alter the future of local policies on homelessness, especially throughout California. Local governments are now authorized to take more aggressive actions to enforce existing ordinances (or enact new ones) prohibiting or otherwise regulating overnight camping and parking on public property. Ordinances that include relevant time, place and manner restrictions (e.g., regulating when, where, and how people sleep in public) are likely to be particularly insulated from constitutional challenges.

We will continue to monitor updates to local policies on the homeless in response to this decision and provide updates as they become available.

FOOTNOTES

[1] See prior article here.

Listen to this post

Copyright © 2024, Sheppard Mullin Richter & Hampton LLP.

by: Alexander L. Merritt, Kathryn C. Kafka of Sheppard, Mullin, Richter & Hampton LLP

For more news on the Supreme Court’s decision in City of Grants Pass v. Johnson, visit the NLR Real Estate section.

Office Tenants: Do Due Diligence on Your Landlord

Office markets from coast-to-coast are struggling mightily, especially in major urban downtowns. Chicago’s downtown business district (i.e. the Loop) is no exception. Right now, Chicago’s Loop office vacancy rates are the highest since such rates have been recorded.

In April of this year, Crain’s Chicago Business reported that downtown office vacancy broke 25% for the first time on record, landing at 25.1%. This number reflects seven consecutive quarters of increasing vacancy.

What does this mean for tenants? Well…a lot.

It means opportunity as landlords feel pressure to fill vacant office space. Lease concessions that never would have been considered three years ago, might be available now. These days, on most office deals, tenants enjoy considerable leverage. While this market brings tenant’s many benefits, it also brings significant risks. Here are a few risks for tenants to consider before signing a lease:

1. Is your landlord in financial distress? Landlords will always vet an incoming tenant’s financial condition. The same often does not happen in reverse. Many office landlords face financial pressure now. If the landlord is at risk of foreclosure, or otherwise in financial peril, the tenant should have a number of concerns ranging from how well the building will be maintained to whether or not they will be staying in a bank-owned building soon. Tenants should fully inquire into landlord’s financial condition, especially if meaningful tenant allowances have been agreed to.

2. Subordination and Non-Disturbance Agreements are more important now than ever. “SNDAs” can go a long way towards protecting tenant’s lease rights in the event of a foreclosure.

3. Will “creative” uses come to the building? Never underestimate the ingenuity of the commercial real estate industry. All kinds of ideas have sprouted up as to what could be done to fill empty downtown office space. Indoor dog parks, pickle ball courts and the often tossed about notion of converting vacant office space into residential apartments are good examples. Tenants should find out before signing if the landlord has any designs on filling vacant space with uses that the tenant might find objectionable.

4. Co-tenancy provisions and the careful review of how operating costs will be allocated are critical. Who bears the risk of vacancy as to operating expenses? Tenants needs to know if fewer tenants means they will have a higher share of operating costs. Tenants also need to know if they have any way out of the lease if the building really struggles. No one wants to be alone in an empty tower.

© 2024 Chuhak & Tecson P.C.
For more on Office Tenants, visit the NLR Real Estate section.

New Florida Law Requires HOAs to Adopt Hurricane Protection Measures

Last week, Florida Gov. Ron DeSantis signed into law House Bill 293 in an effort to help protect Florida’s single-family homes. Effective immediately, all homeowners associations in the state are mandated to establish hurricane protection specifications along with any other pertinent factors as determined by the association’s board of directors. These specifications should be adopted to ensure a cohesive external appearance for buildings within the HOA – including considerations such as “color and style” – while adhering to relevant building codes and affording exceptional protection to Florida homes.

The primary objective of House Bill 239 is to safeguard the welfare and safety of the state’s residents, as well as to guarantee consistency and uniformity in the implementation of hurricane protection measures by parcel owners. It is imperative to note that, except in cases where violations to these specifications occur, HOAs are prohibited from preventing homeowners from installing or upgrading hurricane protection products. This legislation applies universally to all homeowners associations, regardless of when the community was created.

Hurricane protection products under House Bill 239, include but are not limited to:

  • Roof systems recognized by the Florida Building Code which meet ASCE 7-22 48 standards
  • Permanent fixed storm shutters
  • Roll-down track storm shutters
  • Impact-resistant windows and doors
  • Reinforced garage doors
  • Erosion controls
  • Exterior fixed generators
  • Fuel storage tanks
  • Other hurricane protection products used to preserve and protect the structures or improvements on a parcel governed by the association

Most weather analysts have projected an above average hurricane season for 2024, predicting one of the busier hurricane seasons on record. This increase in activity has been attributed to record warm water temperatures and the influence of La Niña. As such, it underscores the critical importance of proactive measures to safeguard property and ensure the well-being of residents.

It is strongly encouraged that all homeowners associations begin the process of considering the standards for hurricane protection that are right for their communities and adopt a resolution encompassing these guidelines immediately.

© 2024 Varnum LLP
For more news on Protecting Florida Homes during Hurricane Season, visit the NLR Real Estate section.

CFPB Launches Public Inquiry into Rising Mortgage Closing Costs and ‘Junk Fees’

Go-To Guide:
  • The Consumer Financial Protection Bureau (CFPB) has launched a public inquiry into rising mortgage closing costs, seeking to understand the reasons behind the increase, identify who benefits, and find ways to reduce costs for both borrowers and lenders.
  • This inquiry, part of a broader effort against “junk fees,” aims to gather public input on the impact of these fees on consumers’ financial health and the mortgage lending market, with a focus on third-party costs, fee beneficiaries, and the evolving nature of these expenses.

On May 30, 2024, the CFPB issued a new request for information (RFI) from the public regarding “why closing costs are increasing, who is benefiting, and how costs for borrowers and lenders could be lowered.”

As part of a wider effort targeting what both the CFPB and the Biden administration refer to as “junk fees,” the CFPB is focusing on evaluating how these fees affect consumers’ financial health and the broader impact on mortgage lenders. This follows the CFPB’s continued expression of interest in “junk fees,” on which GT reported in a May 2024 blog post.

“Junk fees and excessive closing costs can drain down payments and push up monthly mortgage costs,” CFPB Director Rohit Chopra said in a separate press release. “The CFPB is looking for ways to reduce anticompetitive fees that harm both homebuyers and lenders.”

The Request for Information

According to a recent CFPB analysis, mortgage closing costs surged by over 36% from 2021 to 2023. The CFPB alleges that these unavoidable fees can strain household budgets and limit the ability to afford a down payment, while also hindering lenders from offering competitive mortgage options due to the higher costs they must absorb or pass on.

The CFPB is seeking public input to address these concerns and make mortgage costs more manageable. Some key areas of interest include:

  • Competitive pressure. The CFPB aims to evaluate the extent to which consumers or lenders currently apply competitive pressure on third-party closing costs, seeking to understand market barriers that limit competition.
  • Fee beneficiaries. The CFPB aims to identify the beneficiaries of required services and determine whether lenders have control or influence over the third-party costs that are transferred to consumers.
  • How fees are evolving and their impact on consumers. The CFPB seeks details on which expenses have surged the most in recent years and the factors driving these increases, such as the higher prices for credit reports and credit scores. Additionally, the CFPB is interested in understanding how closing costs affect housing affordability, access to homeownership, and home equity.

Takeaways

The CFPB oversees numerous laws and regulations concerning mortgage lending and real estate settlement, such as the Truth in Lending Act, the Fair Credit Reporting Act, and the Real Estate Settlement Procedures Act. The insights gained from this inquiry are poised to shape rulemaking, guidance, and various policy initiatives moving forward.

The CFPB invites comments and data from the public and stakeholders within 60 days of the RFI being published in the Federal Register.

We have provided ongoing analysis and commentary on this issue as it has developed. See below more context on legislative and regulatory efforts to curb “junk fees”:

Zeba Pirani contributed to this article

©2024 Greenberg Traurig, LLP. All rights reserved.
For more on the CFPB, visit the NLR Financial Institutions & Banking section.