Tag Archives: Op-ed


Think before you ink a commercial lease

J. Phillip Glasscock, CPA and Attorney at Law

J. Phillip Glasscock, CPA and Attorney at Law

By J. Phillip Glasscock, CPA and Attorney at Law

If you are a commercial tenant, your business premises lease might represent your highest monthly expense and your longest business commitment. Before signing a commercial lease, a thoughtful exercise in “due diligence” can help protect you from getting burned. Here are some basic “dos and don’ts” for commercial lessees.

The Parties

It is important for you to know who owns the property. Is it a one-owner property, or will you have to get the approval of multiple owners for concessions, tenant improvements, subleases, and the like? If the owner’s lender takes over the property, will the lender honor your lease?

Knowing who you are leasing from is equally as important. The owner of the property is responsible to you for performance under the lease. Is the “landlord” a leasing company that does not own the property? It’s recommended that you make sure you are leasing from the owner.

The Premises

Investigate whether the premises, facilities, amenities and zoning meet all of your needs. Check out the zoning of the property to make sure you can operate your business there. Finally, always make sure to have an expert inspect the property for defects and make sure that mechanical, plumbing, electrical, phone, and internet access features meet your requirements.


Verify, verify, verify.

Before agreeing to any terms and signing on any lines, make sure to verify that the square footage of the premises in the lease is correct. Does it include unusable space such as common areas, elevator space, riser rooms or other space you can’t use? How is your share of building expenses calculated? Make sure you are only paying your fair share.

Leases typically list the types of expenses as “common area maintenance” (CAM) but do not limit the amounts charged. Get copies of last year’s charges. Look at the kinds of items charged and be alert to unlisted costs. Is the landlord is collecting reserves for future replacements? You don’t want to be surprised with a large expense for a new roof or repaving the parking lot if the landlord has not been reserving for these items.

After looking at the terms, you may find you want to “add-on” provisions? These might include sublease provisions (e.g., can you lease to a sub-tenant?), exclusivity clauses (do you want to prohibit the landlord from leasing space to your direct competitor?), and escape clauses.

Default Provisions

Know what will happen if you have a business reversal. Under what circumstances can you be locked out? What if you can’t pay rent?

Don’t Roll the Dice

By now you may have a new appreciation for the complexity of a commercial lease and the importance of due diligence before you sign it. Depending on the amount and type of space that you are leasing, and how you will be using it, you would be wise to ask an experienced real estate attorney to review your lease and help you identify issues that need to be resolved before you sign on the dotted line.

Whether you’re starting or growing a business, commercial leasing can be challenging. With these helpful tips, commercial lessees can rest assured they will know what they are getting themselves into when they rent space for their business.


SMACNA Arizona

Op-Ed: New ROC regulatory philosophy triggers need for self-audits

D. Kim Lough is a partner with the law firm of Jennings, Haug & Cunningham. He represents the construction industry, including owners, contractors and subcontractors in complex construction litigation, employment discrimination and other civil and administrative law. He can be contacted at: DKL@JHC-Law.com.

D. Kim Lough is a partner with the law firm of Jennings, Haug & Cunningham. He represents the construction industry, including owners, contractors and subcontractors in complex construction litigation, employment discrimination and other civil and administrative law. He can be contacted at: DKL@JHC-Law.com.

By D. Kim Lough, construction lawyer with Jennings, Haug & Cunningham

Contractors throughout Arizona are being blindsided by a new administrative oversight role undertaken by the Registrar of Contractors (ROC). The Registrar’s new prosecutorial philosophy toward investigating complaints against licensed contractors places contractors at risk of losing their license for minimal technical violations which may occur even when the contractor is unaware an issue exists. This sea-change warrants a self-audit of your business practices.

License Display Requirements
Contractors should make sure that their license number is prominently displayed as required by A.R.S. §32-1124(B):
•    Posted in a conspicuous place on premises where work is being performed;
•    Placed on written bids submitted by the company;
•    Placed on all broadcasts, publications, internet and billboard advertisings;
•    Displayed on letterhead and other documents used to correspond with customers or potential customers.

License number display requires it be preceded with “ROC,” and posting be visible in the following:
•    Any and all job sites
•    Every page of the company web site
•    Included in all email signature blocks sent by the company
•    Displayed on all contracts, invoices and company correspondence
Failure to display your license number in compliance with this statute is ground for disciplinary action, including license suspension.

Written Contract Form Requirements
Contract agreements with property owners must include the following minimum requirements of A.R.S. §32-1158(B):
•    Contractor name, business address and license number;
•    Property owner’s name and mailing address, and the job site address or legal description;
•    Date parties entered into contract;
•    Estimated date of completion of all work to be performed under the contract;
•    Description of work to be performed under the contract;
•    Total dollar amount to be paid to the contractor by the owner for all work under the contract, including all applicable taxes (the total dollar amount may be changed by change order executed in accordance with the contract);
•    Dollar amount of any progress payment and the stage of construction at which the contractor will be entitled to collect progress payments during the course of construction under the contract (incorporation of prompt pay statutes);
•    Upon signing the contract, the owner “shall be provided a legible copy of all documents signed and written and signed receipt” for any amount paid to the contractor;
•    The following legend must be prominently displayed in the written contract in at least a 10-point bold type:

“The owner has the right to file a written complaint with the Registrar for an alleged violation of §32-1154, Subsection A. Complaints may be filed with the Arizona Registrar of Contractors at 1700 West Washington Street, Suite 105, Phoenix, Arizona 85007-2812 (602)542-1525 (www.azroc.gov). Complaints, if any, must be filed not more than two years following substantial completion of the work.”

The statutes do not distinguish between commercial and residential construction with regard to the minimum elements of the contract. Therefore, a technical violation may exist if any of the above information is not included, even when dealing with a sophisticated owner.

The ROC also appears to be looking more closely into what a contractor does when its license is temporarily suspended. This can happen if there is a failure to timely renew a license bond. For example, the ROC has revoked a contractor’s license for performing work during a temporary administrative suspension of its license for lack of a bond.

Being diligent in ensuring your business practices comply with these statutes is more critical than ever. If there is a temporary lapse in your license, you will best avoid action by the ROC by refraining from bidding work, executing contracts or performing work until the suspension is lifted. Be sure to check with the ROC web site and your surety to ensure your mailing address is correct for sending renewal notices, and mark these renewal dates on your calendar.

A self-audit of these items is highly recommended. Legal counsel review of contract forms will best ensure compliance with the new statute.

PHOTO CAP: Lake Pleasant Water Treatment Plant, the city’s first design-build project.

Op-Ed: Alternative project delivery methods gain popularity

Justin Kelton is Vice President of McCarthy Building Companies leading the firm’s education, health care, hospitality, parking, and renewable energy teams. Reach him at jkelton@mccarthy.com.

Justin Kelton is Vice President of McCarthy Building Companies leading the firm’s education, health care, hospitality, parking, and renewable energy teams. Reach him at jkelton@mccarthy.com.

As a general contractor, one of the most critical roles we play is that of educator. Construction delivery methods are constantly evolving and expanding, and it’s our responsibility to stay abreast of the latest evolutions to inform our project owners so they understand all options available when planning for the design and construction of new projects.
This is especially true when it comes to public projects like schools, water and waste water treatment plants, aviation projects, roads and highways and prisons. These owners haven’t had as much experience with alternative delivery as private owners because legislation enabling this in the public sector is relatively new.
While owners’ needs haven’t changed during the downturn – they are still serving an ever-growing population but doing so on at-times drastically reduced budgets – what has changed is their ability to finance construction projects. Today, we have two construction delivery methods available to public owners that are well suited to help: design-build-finance and public-private partnerships (P3).
Design-Build-Finance: This is the most preferred mode of project delivery for an owner who acts as a third party responsible for providing the service, which is a common case with municipal institutions that operate water and wastewater treatment plants as an example, because it gives them a viable financing alternative without the huge capital investment typically associated with plant construction. Variations of this delivery method also include design-build-operate and design-build. The latter is the basis of these integrated models, which overlaps design and construction by hiring one design-build team to deliver the project requirements versus hiring an architect/engineer and contractor separately. This contracting approach solicits creativity from industry by providing integrated design and construction solutions and provides price certainty early in the life cycle of the project.
Public-Private Partnership: A public-private partnership involves a contract between a public-sector authority and a private party, in which the private party provides a public project and assumes substantial financial, technical and operational risk in the project. In some types of P3, the cost of using the facility is borne exclusively by the users and not by the taxpayers. Of all the delivery methods available today, P3 has the most potential to solve more problems and deal with the challenges associated with complex projects. As states continue to develop legislation to enable and support these types of partnerships, it will become a more viable and attractive option for owners. P3 enables the public sector to harness the expertise and efficiencies that the private sector can bring to the delivery of certain facilities that have been traditionally procured and delivered by the public sector. P3 is structured so that the public-sector owner seeking to make a capital investment does not incur any borrowing. Rather, the P3 borrowing is incurred by the private-sector vehicle implementing the project and therefore, from the public sector’s perspective, a P3 is an “off-balance sheet” method of financing the delivery of new or refurbished public-sector assets.
Today, the construction industry is doing a much better job allowing owners the flexibility of delivery methods. Of course, design-build-finance and P3 are just two of several alternative delivery methods available today.
Unfortunately, there is no “one size fits all” prescription when it comes to construction delivery. Each project is unique and often has a complex set of circumstances to consider before selecting a delivery method. It takes a lot of training, insight and experience to get it right. Owners should not be averse to opening up a dialogue with contractors and learning from their varied experiences – good and bad – with an array of owners.
For additional resources on construction delivery methods, visit the Alliance for Construction Excellence housed within the Ira A. Fulton Schools of Engineering at Arizona State University or the Construction Industry Institute.


Op-Ed: Slow and Steady Wins the Race for Phoenix Retail

Author: Dave Cheatham, President, Velocity Retail Group, LLC


Dave Cheatham

Dave Cheatham is an accomplished authority on retail real estate in the disciplines of brokerage, project leasing, development, consulting and advisory services. He is a senior advisor to merchants, entrepreneurs, investors and senior retail executives throughout the industry.

As we are nearing the end of 2013 there have been several positive trends and factors that have influenced the Phoenix retail real estate market. These factors are being recorded in economic improvement such as job growth, housing prices, and personal income increases as well as the retail real estate market’s increased leasing activity.

Velocity Retail Group has recorded a strong increase in big box leasing, with an increase of over 20% above last year. Our research department is predicting this trend to continue into 2014 and 2015. This increase will be evident by increased activity from many retailers who have been on the side lines for the past 4 or 5 years and are now gearing up to expand their store count. Value retailers, who have been very active during this past recessionary cycle, are still expected to show strong activity in the next twelve to twenty-four months. In addition, the Phoenix market should experience new retail concepts announcing expansion plans both regionally and nationally. These concepts have been unable to expand the last five years due to the economy, but they are now gearing up for growth. Velocity Retail Group is projecting strong leasing activity for year-end 2013 with nearly 2 million square feet absorbed. This amount of absorption will drive the vacancy down close to single digits by year-end.

This is supported by the 3rd quarter retail numbers from Velocity Retail Group’s research department when analyzing the big boxes in our market (those that are over 10,000 square feet). In fact, a greater number of big box deals have been completed during 2013 than we have had in four years. For 2013 there have been 39 big box deals completed. If this pace continues through the rest of the year we will be 20% above the leasing of last year, and nearly 75% above 2011. We are now at 297 vacant big boxes throughout metropolitan Phoenix.

We are forecasting a continued slow and steady improvement in our vacancy with the vacancy rate in 2014 breaking into the single digits. Leasing activity for the year is over 1.5 million square feet and on track to reach over 2 million square feet by year end.

Each of the regional areas in metropolitan Phoenix has shown significant improvement in vacancy since the beginning of 2013. In fact, at the start of the year all of the six regional trade areas had double-digit vacancy. Now, as of the 3rd quarter, four of the six regional areas have single-digit vacancy.

With three quarters of the year behind us we continue to see increased improvement in several key benchmarks for the Phoenix area:


  • Job Growth – Arizona heads the list of best states for expected job growth according to an article published by Forbes
  • Housing Prices – continued increase in the median home price, now at $192,000, which is a 30% year-over-year improvement
  • Personal Income – up over 5% since 2012
  • Retail Sales – up over 5.5% from 2012

These indicators solidify our projections of continued improvement in the retail real estate market in Phoenix. A rebound is under way and 2014 will be a pivotal year in laying the foundation for improved future growth, expansion and economic prosperity for Arizona.