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This blog focuses on real estate, land use and construction-related topics affecting Virginia and the Washington, D.C. metro area. With topics ranging from contract drafting and negotiation to local and regional land use project updates, the attorneys at Bean, Kinney & Korman provide timely insight and commentary on the issues affecting owners, builders, developers, contractors, subcontractors and other players in the industry. If you are interested in having us cover a specific topic, please let us know.

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The second headquarters for Amazon in Arlington, VA is obviously a hot topic in local commercial real estate. Much of the focus so far has been on projected residential price increases and increased commercial leasing. But, let’s not forget about the hotel industry. The forecast for much higher hotel traffic in the area was the reason the Transient Occupancy Tax was included in the incentive package negotiated by the state and local governments. 

As reported by the National Restaurant Association and other industry experts, there are over one million restaurants in the US, but the failure rate is very high (a majority close within three to five years). With online shopping and delivery becoming more and more prevalent, landlords of all types have faced increasing vacancies for traditional retail stores. As a landlord of an office, mixed use, shopping center or stand-alone retail pad seeking to fill a vacancy, there are five important factors to consider before marketing the property or executing a lease agreement with a restaurant.

Landlord Waiver Agreement in Favor of Tenant’s Lender

As noted in part 1 of this article, the tenant’s lenders will also want a security interest in the tenant’s personal property to secure the repayment of the tenant’s loan obligations, creating a conflict between the lien rights of the landlord and the lender. Because of this conflict, as a condition to the financing, a lender will typically request that the landlord execute a waiver of its security interest.

Banks that provide financing for commercial tenants and the real estate landlords for those same tenants both want additional security in the tenant's personal property located at the premises. The interests of the landlord and the lender are in conflict. The landlord is looking to secure the tenant's rental obligations by taking a lien against the tenant's fixtures, inventory, and equipment located in the space, which may be particularly valuable in the case of certain retail, restaurant or industrial tenants. At the same time, the tenant’s lender providing tenant improvement and/or working capital financing desires a security interest in the same property. A landlord’s lien may be created, depending on the state, under statutory lien rights, the common law, or by contract under the terms of the lease, and gives the landlord the right to levy the property located at the demised premises of a defaulting tenant.

In Part 1 of this series, the definition of guaranty and the means for landlords to enforce guaranties was discussed.

Recognizing that the guaranty is a condition to entering into a lease, and its leverage is limited, the guarantor would still like to limit its exposure under a long-term lease. At the same time, the landlord wants the security of an unlimited and unconditional guaranty, at least until such time as the tenant has a track record of success or can provide better financials. Because these competing interests are critical business terms, any attempts at limiting the guaranty need to be raised early in the lease negotiation process by tenant and preferably at the time of the negotiation of the letter of intent.

As a condition to entering into a new lease, landlords often require a guaranty of lease from a personal or corporate guarantor in connection with those tenant entities that do not have either a high enough net worth or annual revenue, or for whatever other reasons do not meet the landlord’s financial criteria. A guaranty of lease is a covenant by the guarantor to be responsible for the obligations of the tenant. For example, for a tenant business set up as a new limited liability company that has one or two principal owners, the landlord will likely require that the owners personally guaranty the tenant’s obligations under the lease since the limited liability company would have little or no assets and no track record. Or for a tenant entity that is a wholly owned subsidiary of a parent corporation, the landlord will likely require that the parent corporation serve as the guarantor.

The Arlington County Board held a work session on July 11th to review and provide feedback on the Residential Parking Working Group’s recommendations for parking minimums in the Rosslyn-Ballston and Jefferson Davis Highway corridors.

The group recommended establishing parking minimums in these corridors based on the residential project’s proximity to the Metro. The parking minimums are as follows:

  • 0.2 spaces per unit for buildings located up to 1/8 of a mile from the Metro
  • 0.3 spaces per unit for buildings located up to 1/4 of a mile from the Metro
  • 0.4 spaces per unit for buildings located up to 1/2 of a mile from the Metro
  • 0.5 spaces per unit for buildings located up to 3/4 of a mile from the Metro
  • 0.6 spaces per unit for buildings located in the Rosslyn-Ballston and Jefferson Davis corridors that are more than 3/4 of a mile from the Metro.

The Virginia General Assembly passed hundreds of bills signed into law by Governor McAuliffe during the 2017 legislative session, and all of these bills went into effect on Saturday, July 1st. Many of these laws touch on real estate, local government, and economic development-related issues, including a law extending the expiration date of certain land use approvals - site plans and special exceptions, for example - a law authorizing short term lodging (AirBNB), a law restructuring the Economic Development Authority, and a law establishing the Metro Safety Commission. Notably, numerous attempts to revise the 2016 proffer law all failed, although the General Assembly is likely to reignite the proffer fight again in the coming sessions. For more information on other high profile bills that went into effect on July 1st, click here.

On June 17th, the Arlington County Board approved an amendment to Arlington’s Zoning Ordinance allowing greater aggregate sign area for certain properties with retail.

The adopted amendment—which applies to buildings with comprehensive sign plans in commercial/mixed-use zoning districts—would increase the allowed aggregate sign area for retailers facing publicly accessible plazas. It would also increase the maximum size of blade signs.

April 3, 2017
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The Board for Architects, Professional Engineers, Land Surveyors, Certified Interior Designers, and Landscape Architects (“the Board”) is reopening its regulations for general review. The Board is only at the notice of intent stage of the process, so it is unclear at this time which regulations will be revised. The goal of the review is to “ensure the Board’s regulations are clearly written and easily understandable; reflective of changes in technology and training; and representative of current professional and industry standards.” We will continue to monitor these potential regulations, but please feel free to submit comments to Kathleen R. Nosbisch, Executive Director at apelscidla@dpor.virginia.gov by April 19th if you would like to participate in the process. For more information, you can visit the Virginia Register here.