Kristen Thall Peters was selected as the guest editor of the Real Estate Edition for the Contra Costa Lawyer Magazine which was published in June. Kristen is also the President of the Real Estate Section of the Contra Costa County Bar Association. A handful of experts in the real estate field in Contra Costa County were selected as contributors to the magazine, including, Cooper, White & Cooper’s own Kathleen Carpenter, Chairman of the Firm’s Home Builder Practice Group, who wrote an article entitled “Money Doesn’t Talk, it Swears: A Snapshot of How The Economic Stimulus Bill Impacts the Homebuilding and Construction Industries”. This is an excerpt of from Contra Costa Lawyer magazine.*
Last year, when the Real Estate Section sponsored its edition of the Contra Costa Lawyer, our contributing authors expressed concern over the state of California’s real estate market and the adverse impact it would have on our overall economy. Although the downturn was noted as unprecedented, although not wholly unexpected, the economic downward trend in the market was thought to continue through 2008, and possibly beyond.
Did any of us truly imagine how much further we would fall in this past year? In last year’s edition, we discussed that interplay between real estate, bankruptcy and foreclosure — as well as some more traditional remedies — can be used when property values decrease. But while bankruptcies continue to increase, fewer property owners find filing a productive method to keep their property since the value is not likely to increase, and may even decrease, during the stay.
In the past year, sales and leasing transactions have significantly slowed as a result of so many prospective purchasers and tenants waiting for the market to hit bottom. Unfortunately, many commercial and residential property owner clients are inclined to give the decreasing investment back to the lender in lieu of trying to hang on to the investment. Lenders are also inclined to lay low — partially because of having to reserve against their losses, and partially because of higher underwriting standards — further diminishing the ability to finance a transaction, even if a player were inclined to jump in.
Often, as the markets for transactions decrease, litigation increases. However, having heard from fellow members of our Bar Association, the trend is not occurring in this economy. Feedback from many clients indicates that litigation is an expensive risk, and they would rather walk away from a claim than pursue it with the uncertainty of obtaining an award…or of collecting on it.
Nevertheless, there are signs that a turnaround, albeit a slow one, may have finally arrived. As of April (when this edition was being submitted for publication), I have recently closed three industrial and commercial lease transactions, the sale of a communications tower facility, and the purchase of a landfill gas-to-power facility. Moreover, two separate national tenants are vying for lease of a client’s property, which has been vacant since Tower Records filed for bankruptcy two years ago. I have heard from other transactional attorneys that they, too, are starting to get busy. Hopefully, the litigators will soon follow.
This trend, and the stimuli behind it, creates unique challenges for the legal community at large in our county, and this edition features articles addressing the stimuli, trends and challenges from a local perspective. The effects of the American Recovery and Reinvestment Act of 2009 and other stimulus packages (collectively, the “Stimulus Acts”) are addressed in articles by Kathleen Carpenter and Jim Melino. Our members’ thoughts on whether the Stimulus Acts will work are detailed in Question Man, while commercial unlawful detainer actions are discussed in an article by Geoffrey Steele. Finally, as the market wakes up again, we will be faced with new disclosure laws as described in an article by Mailana Mavromatis. However, as noted by Kathleen, because the Stimulus Acts are so broad, the team to advise your clients needs to be experienced in a wealth of different areas. Fortunately, members of our bar are a group of both friendly and knowledgeable lawyers, making the task of developing alliances within our community an easy one.
In conclusion, I’d like to thank the contributing authors who have taken time away from their busy practices to contribute to what I believe is an interesting and thought-provoking edition of the Contra Costa Lawyer. I sincerely hope that you enjoy this real estate edition.
*This article originally appeared in the June 2009 issue of Contra Costa Lawyer, the official magazine of the Contra Costa County Bar Association. Reprinted with permission.