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How Do You Hit A Real Estate Curveball?

July 08, 2016

By Chad Cooper
In baseball, there are many ways you can try to hit a curveball. There is plenty of advice about the best way to hit one but, since each one is different, the most important steps for every curveball are to quickly recognize it for what it is, confront it, and then decide how best to decisively attack it.
If your business owns or works with real estate, you are probably used to many of the common legal conflicts being predictable, and thus manageable. Mortgages, leases, zoning restrictions … they can all lead to different types of litigation. Real property law is intentionally stable. Much of the work of real estate lawyers could even be called routine, including the litigation. But what do you do if your real estate disputes stop being predictable? What if that curveball comes at you?
First, an example. Did you know that there are buildings in the state of Ohio with divided, piecemeal ownership, where the property line literally cuts through floors? The roof may belong to the owner of the top floor, and other floors or parts of floors to other entities, with no agreement governing the maintenance of common areas. The building’s uniform is a patchwork quilt, with no adherence to common standards or rules.
There is no Ohio case law determining the relative rights and obligations of each of the owners of such “Frankenstein” properties. If the roof and windows begin to leak, or the masonry is in need of repair, or the sidewalks must be cleared of snow and ice, the owners collectively are forced to “figure it out.” There is no guiding law.
I encountered such a conundrum. One of the nation’s largest banking institutions enlisted my help to resolve a dispute related to a retail branch located in the vintage, early 1800’s-era building in which they have done business for many generations. The lower floors originated as the bank’s, with the original safe still located in the building’s basement. The upper floors had been gently used. The building had never been converted to a condominium – as it would have if it had been built any time after the middle of the 20th century – and ownership of it was carved up like a turkey. For decades, the divided ownership was not a problem, but the owners of the upper floors wanted to sell. The new owners sought to build out the upper floors for a much heavier use. This spelled trouble for the bank. In the end, after using every tool in the litigation toolbox, we found a market-driven solution to the bank’s problem.
These are the times that require creativity.
The point of this piece is not to warn you about the perils of divided ownership of buildings. You may never have such a problem. The point is, the answer to this problem was not routine, and could never be found in any real property treatise or case report. Litigation of this matter on behalf of the bank required creative methods. A firm with the right experience is key to problems such as this.
For example, consider that the U.S. hospitality industry is undergoing unprecedented consolidation. The legal issues are global and complex, crossing the lines of many legal disciplines, including corporate, real estate, intellectual property, and antitrust. Hotel acquisitions are laced with the potential to blow up in unexpected and multifaceted ways. When deals like these deliver multiple curveballs, creative and experienced lawyering will connect with the ball for a better-litigated solution.
How do you know if you have your legal counsel can handle this type of unusual or complicated real estate litigation? A first sign is a depth of experience with myriad real estate issues. Deep familiarity with the most common legal issues and with the industry itself, forms the base upon which creative trial lawyers can find the best solution.
A second sign is a breadth of experience. The answer to your peculiar real estate dispute may have nothing to do with the rule against perpetuities or interpretation of standard lease terms. Your answer may come from trade secrets law or business torts or banking. Or the answer may come from a little bit taken from several buckets, combined to present the strongest solution.
A third sign is persistence and determination. The best solution, the most creative solution, is not always obvious right away. Oftentimes, the right answer only emerges after the hard work has been done to develop the facts and to consider those facts from a variety of different angles.
At Kaufman & Company, our litigators have the depth and breadth of experience, and the persistence and determination to find the best creative solution to even the most unusual real estate disputes.
Kaufman & Company, LLC