South Jersey Commercial Real Estate Today : New Jersey Commercial Real Estate Lawyer & Attorney : Chris Hogan Law Firm : Contacts, Liens, CRE : Philadelphia, Delaware, Cape May

I have to pass along a post by Elaine Misonzhnik over at TrafficCourt about Burger King's plan to open so-called Whopper Bars at certain tourist-friendly locales.  The Whopper Bars will sell beer!  (Along w/ special BK fare with premium toppings.)  It looks like the first beer-selling Whopper Bar is about to roll out in Miami Beach.  I guess BK decided that the coffee market was too rough-n-tumble for it.

Frankly, I am of two minds about this development.  On the one hand, as a guy who prefers BK and likes a beer w/ his cheeseburger every once in a while, the Whopper Bar is good news.  On the other hand, I share Elaine's concerns that the alcohol could serve to drive away more consumers than it attracts, especially at night, and where is the value in that? 

The Whopper Bar is a gutsy call, no question, but an understandable one.  The burger market is saturated, consumer spending is still down, yet BK still needs to find a way to increase market share.  When people do splurge, it is rarely at the same levels these days.  Sometimes, a tasty "gourmet" burger with a beer at a reasonable price will do the trick.  The Whopper Bar should be trying to reach consumers who can't or won't spend the time or money to grab a meal at a local restaurant, including chain restaurants like Friday's or Applebee's.

To me, the key will be in the execution by BK.  Can it successfully market the planned boutique-like feel of the Whopper Bar in such a crowded field?  If yes, fast-food and beer could be a formidable combination.

Anybody else thirsty?

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There was an interesting decision published by NJ's Tax Court the other day in the case of Princeton Alliance Church v. Mount Olive Township, Docket No. 014826-2009.  Here's the skinny:

PAC filed an Appeal claiming that a part of its property was exempt from taxation b/c its use was partially restricted by virtue of the fact that it is located within the Highlands Preservation Area as defined by NJ's Highlands Act.  (N.J.S.A. 13:20-1, et seq.)  Before the Appeal was heard by the Board, PAC's attorney submitted a brief which included both a statement of facts and legal argument.  In essence, PAC was arguing that the State has acquired a portion of its property by placing it within the Highlands Preservation Area so as to make that portion exempt from taxation under N.J.S.A. 54:4-3.3b.

Here's where things get interesting: on the date of the Hearing, PAC's attorney appeared w/o any witnesses to present.  Instead, he indicated that there were no contested facts and sought leave to present legal argument in support of the Appeal.  He was instructed twice to present his witnesses but, alas, he had none to present.  The Board then dismissed the Appeal for lack of prosecution.  PAC filed a timely appeal to NJ's Tax Court and Mt. Olive filed a Motion to Dismiss pursuant to N.J.S.A. 54:51A-1c.

In a well-reasoned decision, Judge Bianco denied Mt. Olive's Motion to Dismiss for lack of prosecution for several reasons:

1. Dismissal under N.J.A.C. 18:12A-1.9(e) for lack of prosecution was inappropriate b/c PAC's attorney had appeared for the Hearing.  Under the regulation, dismissal for lack of prosecution is only available when the taxpayer fails to appear at all, which was not the case.
2. Mt. Olive's reliance on caselaw requiring a taxpayer to present "some proofs as to true value" was misplaced b/c the issue at hand was not valuation but, rather, exemption which makes the holding inapplicable.  Moreover, even if valuation was at issue, the Board's dismissal for failing to call a witness would still have been unwarranted as there is no statute, regulation or caselaw that specifically requires a taxpayer to present witnesses in order to advance an appeal.  (The evidentiary "proofs" required on valuation cases can be presented via cross-examination and documents.)
3. The Tax Board had an obligation to hear the legal argument from PAC's attorney under the applicable circumstances: PAC's property was only assessed at $153,000.00 meaning that it could not take a direct appeal to the Tax Court under N.J.S.A. 54:3-21. (The assessed value has to be over $750,000.00 for a direct appeal.)  If the Board failed to hear legal argument on an exemption issue, PAC and similarly situated taxpayers would be left w/o a forum to contest its assessment because -- with an assessed value at $153,000.00 -- it could not be heard directly by the Tax Court.

PAC's decision not to present any witnesses was incredibly gutsy and ultimately rewarded.  I'm not sure that the merits of its exemption argument are going to be equally well received.

Here's the moral of the story, from my point of view: if your appeal includes issues of value, get yourself an expert witness and bring him/her to the hearing, for gosh sake; if you're arguing only exemption make sure that you submit a brief with undisputed facts and argument and bring a copy of the above case with you!

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NJ builders and developers can breath a small sigh of relief, as before leaving office former Governor Corzine saw fit to approve further extension of the deadline for expiration of permits and approvals covered by NJ's Permit Extension Act of 2008 (PEA).  The further extension was accomplished on 1/18/10 when Governor Corzine signed Bill A-4347 (PEA Amendment) in to law shortly before exiting stage left.

The PEA covers most but not all state, county and local permits and approvals in place and valid as of 1/1/07 and originally extended the deadline for expiration of covered permits and approvals until 7/1/10.  As amended, the PEA now pushes the expiration deadline back to 12/31/12.  [Under the tolling provision of the PEA (N.J.S.A. 40:55D-136.4), which remains in effect, some permits and approvals may be good until 6/30/13, depending on the circumstances.]  Also good news: the holders of covered permits and approvals are still allowed to seek further extensions beyond current PEA deadlines if authorized by other law.

Keep in mind that the PEA does not cover permits or approvals issued within an "environmentally sensitive area" among other exclusions.

Attached is a copy of the 1/25/10 Letter to Code Officials on the PEA Amendment from the DCA is attached.  It addresses UCC permits but still does a nice job of clarifying how/when the PEA applies with the new deadline of 12/31/12.  It could prove useful to owners and builders holding covered permits and approvals.

The extension to 12/31/12 is a good thing for beat-up developers and builders and responsible development needed to help NJ dig out from its current economic hole.

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 Here are a couple of articles from newspapers serving the South Jersey area that caught my eye over the weekend:

The first is by Diane Mastrull of The Philadelphia Inquirer about an upscale multi-family property in New York using a wastewater-recycling system designed, installed and managed by American Water, which is based in Voorhees, NJ.  The name of the property is the Visionaire, located in Battery Park, which opened in September/2008 with LEED Platinum certification, the highest of the U.S. Green Building Council's sustainability standards.

The information about American Water's efforts to become more efficient and green is interesting, but what caught my eye was the fact that the owner's decision to use the system at a cost of nearly $2 million was an incentive from NYC: a 25% reduction in water rates.  According to Russell Albanese of the Albanese Organization, developer of the Visionaire:

The city's rates have been increasing on average 11 percent a year, so the savings over time should become more significant.

The second article was from Erik Ortiz of The Press of Atlantic City about the generally still-bleak outlook for local malls and retail in Atlantic County, NJ.  What caught my eye was the efforts by the new owners of Heather Croft Square to increase occupancy which apparently will include new frontage.

The moral of the stories for me: sometimes you have to spend money to make money.

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By way of update on an earlier post, it appears that the NJ Legislature failed to reach Bill A-1628 on 1/11/10 and the 2009 legislative session closed w/o the act becoming law.  However, Senator Joseph F. Vitale has moved quickly to post Bill S-819, which is substantially similar to A-1628, although not identical, including some new definitions among other things.  A copy of A-1628 can be found here and a copy of S-819 can be found here for comparison purposes.

Here are some of the highlights from S-819:

• It specifically includes condominium and cooperatives as covered under the Bill.
• It requires installation of a "water conservation device" before an occupant can be billed separately for water or sewage.  It defines what constitutes a "water conservation device" for shower-heads, faucets and toilets. 
• The landlord/condominium/cooperative is responsible for reading the sub-meter and billing the occupant.
• The occupants are to be billed on same billing cycle as the provider bills the landlord, etc.
• The sub-meter must only measure consumption for the unit in question. In other words, the sub-meter can't measure any "common area" or like consumption.
• Landlords, etc. still can't charge an administrative fee for costs in billing.  Moreover, installation and set-up costs for the sub-meter also can't be charged to the occupant.
• An occupant who fails to pay the sub-metered bill w/in the specified payment period -- which can be no less than 28 days -- can be assessed a late fee up to $25.00.  (This is new.)
•  Water and sewerage charges subject to sub-metering are exempt from local rent control ordinances governing allowable increases.
• As in A-1628, a landlord has to respond to an occupant's report of a leak w/in 24 hours.  However, in a big change from A-1628, S-819 requires the landlord to repair the leak w/in 36 hours of notice.  Further, this provision could be read to mean that if the landlord fails to meet either of those deadlines -- 24 hours for response/36 hours for repair -- the occupant shall be entitled to a credit as spelled out in this provision.  (A-1628 gave the landlord up to a week to "substantially repair" the leak.)
• The "billing dispute resolution" provisions found in A-1628 are not included.
• On receipt of a sub-metered bill and w/in time for payment of same, an occupant may request that a person w/ expertise in installation and operation of sub-meters, and w/ no financial relationship to landlord, etc., test the sub-meter in question for accuracy. If the testing indicates that the sub-meter is inaccurate on the high side, the landlord shall pay for installation of a new sub-meter, pay for the cost of the test, and provide the occupant w/ a bill reduction and/or credit for the current and prior billing periods for the amounts overcharged. If the test of the sub-meter shows that it is accurate, the occupant must pay for the test and the landlord can charge him/her is occupant fails to pay for it.
• Contrary, to A-1628, there is no restriction on when sub-metered billing on units not subject to rent control can be implemented, other than notice to the occupant, installation of the sub-meter and water conservation device and adoption of applicable rules by DCA.  (A-1628 forced a landlord to wait until lease renewal.)  The restrictions from A-1628 concerning units subject to rent control are included in S-819.

We'll keep you up to speed on all developments concerning S-819.

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According to the Washington Post, the time has come for Washington, D.C., commercial landlords to begin complying with the District's Clean and Affordable Energy Act.  Under the Act, which was passed in 2008, starting in 2010 landlords overseeing more than 200,000 square feet of office space are required by law to record energy and water usage rates in accord with the benchmarks established under the EPA's "Energy Star" program and, by the end of 2013, all buildings over 50,000 square feet must be compliant. 

Under the Energy Star program, buildings are assigned a rating from 1 to 100 based on how their energy efficiency compares with similar buildings in the country.  A building's rating will eventually be posted online, but there is a 2-year lag so landlords that must start reporting in 2010 will not see building ratings posted until 2012.  The lag in posting is intended to afford landlords the chance to install energy-efficient technologies, if they wish.

According to Cliff Majersik, Executive Director of the Washington, D.C.-based Institute for Market Transformation, D.C. was the first area in the U.S. to enact such a law.  However, in December/2009 New York City passed a law that takes D.C.'s legislation even further by also requiring multi-family dwellings to record energy consumption rates.

Am I crazy for thinking that the required reporting and posting of energy ratings could be a good thing?  I am mindful of the cost involved, especially for older buildings.  However, if done right, can't some if not all of the money spent on improving energy efficiency eventually be recouped?  I would think that a good Energy Star rating would be yet another way to distinguish a property from its competitors and add value.

Like most things "green," I suspect that more municipalities are eventually going to jump on this trend.

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I recently had a client who allowed a commercial tenant to fall behind close to $100,000.00 on rent obligations before contacting my office to file an action for possession (eviction).  It was a classic albeit perhaps extreme case where the tenant's business had taken a bad turn, there was some money coming in on a sporadic basis and the tenant made repeated promises that it was going "to make things right."  (Unfortunately, proving the adage that "no good deed goes unpunished," the tenant has turned the eviction in to a federal case -- literally -- which is still ongoing, but that is a story for another time.) 

For many landlords, commercial and residential, deciding when to evict a tenant is more art than science. The existing tenant is the "devil you know," so to speak, and, like my recent client, many landlords are reluctant to let go.  Moreover, the people on the front lines for the landlord have a feel for the tenant, the current situation and whether the tenant can get up to speed.  However, there often comes a time when the cord must be cut.  The question is when?  A tough call, no question, since there is cost involved in finding a new tenant.

I encourage landlords to develop a hard/fast rule and live by it, e.g., file for eviction once tenant becomes "x" months late.  Take the "art" out of the equation and focus on the "science."  When setting the line before eviction, a landlord should figure out: how long the eviction process usually takes; and, the average length of time for finding a replacement tenant.  The higher that number is in terms of months, the shorter the line should be.

REMEMBER: a space occupied by a non-paying tenant is the same thing as vacant space!  The damage to the value of the property is the same.

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Bill #A1628, which would advance water conservation by allowing sub-metering of water and sewer service in rental housing across the state and has been long supported by the NJAA, has been posted for a vote in the New Jersey General Assembly for Monday, January 11, 2010.  In brief, the Bill would allow for installation of sub-meters and billing of tenants for water and/or sewerage service used by their unit.  Among other requirements, the use of sub-metering would have to be disclosed in the tenant's lease in a "clear and conspicuous" manner" and "in plain language" and the bills sent to the tenant would have to include certain specified information.  As it presently reads, the Bill is fair and comprehensive.  A copy of #A1628 in its present form can be found here. 

The NJ Legislature is currently in what is commonly known as its "lame-duck" session and the Assembly has a number of bills posted for consideration on 1/11/10 so it remains to be seen what, if any, action will take place on #A1628 on 1/11/10.  Yes, there would be an initial cost outlay.  However, passage of this Bill would be a positive thing for apartment owners and managers in the long run, as it would enable them to better monitor, control and recoup costs for water and sewer.  Let's hope that the Assembly gets to it and passes it and then it would be on to the New Jersey Senate.

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I ran across another post at Best Practices Construction Law blog that rings true for me.  It concerns the benefit of clear/concise legal writing but also touches on need for attention to detail and the benefit of having legal counsel review construction contracts before the job starts. (An "ounce of prevention is worth a pound of cure" is a truism that has stood the test of time and applies squarely to construction contracts.)  Matt touches on a couple of guidelines for drafting construction contracts and I agree with them all. One I would add: clearly define the draw schedule and documentation for same.  In addition, although not substantive in nature, here are a few pieces of information which every contractor should require in its contracts and which are very useful if/when lien claim or litigation has to be filed in NJ:

• Identify fully the contracting party on the other side and its interest in the property.
• Identify current/best address for the contracting party.  No PO boxes, if at all possible.
• Identify as best as possible the location of the property, including lot and block if available.

The above information provides a great start for research that may be necessary before filing a timely Construction Lien Claim against a commercial property in New Jersey.

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