Is it illegal to resell your Washington Nationals World Series tickets for a profit?

Posted on October 18, 2019April 23, 2021 by admin

Is it illegal to resell your Washington Nationals World Series tickets for a profit?

The Washington Nationals on Thursday announced how the remaining tickets for D.C.’s first World Series games in 86 years will be distributed. The Nationals are the eighth major league franchise to be based in Washington, D.C., and the first since 1971. and Now Washington is guaranteed to host Games 3 and 4 of the Fall Classic on Oct. 25 and Oct. 26 against the winner of the American League Championship Series. to know more see the wikipidea page.

We did it!!! After fourteen seasons of existence, and for the first time since 1933, Washington DC, by way of the Washington Nationals, has made it to the World Series! The Nats will be hosting the winner of the ALCS for three home games the weekend of October 25th through October 27th, and tickets to those games are the hottest commodity in the DMV. This raises the question: is it illegal to resell tickets purchased from the team online for a profit?

The answer to this question is unclear to many, for good reason. If you have ever walked the streets surrounding Nationals Park before a game, then you may recall the police proclaiming through their bullhorns that it is illegal to resell tickets and that violators will be arrested. MLB and each team now publish pages and pages of fine print on their websites regarding the rules of resale. The current language in the rules reads in relevant part as follows:

“NO RESALE OF A TICKET IS PERMITTED VIA THE INTERNET OR ANY OTHER INTERACTIVE MEDIA, EXCEPT THROUGH THE OFFICIAL WEBSITE OF THE WASHINGTON NATIONALS (www.nationals.com) OR SITES AUTHORIZED BY THE WASHINGTON NATIONALS. NO OFFER TO RESELL OR RESALE OF THIS TICKET … IS PERMITTED TO THE EXTENT PROHIBITED BY ANY APPLICABLE FEDERAL, STATE OR LOCAL LAW OR REGULATION. ANY RESALE REFERENCED ABOVE WILL INVALIDATE THE LICENSE GRANTED BY THIS TICKET…WITHOUT ANY COMPENSATION TO HOLDER … ANY PERSON WHO SELLS OR OFFERS THIS TICKET … FOR RESALE AT ANY PRICE INSIDE THE BALLPARK WILL BE REMOVED … HAVE HIS/HER TICKET CANCELLED WITHOUT COMPENSATION, AND MAY BE PROSECUTED.”

DC UNITED clearly posts on their website the following warning: “TICKET SCALPING OR SELLING TICKETS AT MORE THAN FACE VALUE, IS A MISDEMEANOR UNDER DISTRICT OF COLUMBIA LAW, AND COULD RESULT IN ARREST AND CRIMINAL PROSECUTION … TICKET RESALE AT FACE VALUE OR LESS CONSTITUTES SOLICITATION AND/OR COMMERCIAL ACTIVITY, BOTH OF WHICH ARE PROHIBITED BY DISTRICT OF COLUMBIA LAW. SUCH CONDUCT COULD RESULT IN CITATION AND CRIMINAL PROSECUTION”.

This is certainly enough to deter a cautious person from attempting to resell tickets at the stadium as well as on the Internet. But we all know there is a thriving online resale market through websites such as StubHub, where thousands of tickets are bought and sold for each game. Could thousands of people be breaking the law? The short answer is that, for individuals residing in Virginia, Maryland or Washington, D.C., no, the act of reselling tickets online is not illegal.

There is no federal law that directly regulates the act of online ticket reselling, although federal laws do generally regulate the manner in which electronic devices can be used to engage in online commerce (mainly, to prevent fraud). Ticket reselling is regulated at the state level, and in some cases, at the local government level. The penalties for reselling tickets in violation of the applicable regulations differ from jurisdiction to jurisdiction, and range from small civil fines to possible jail time. In the majority of states, the laws applicable to ticket reselling are out-of-date and were enacted prior to the proliferation of online reselling.

In Virginia, ticket reselling is weakly regulated by the Commonwealth. The Commonwealth defers regulatory authority to local government per Virginia Code § 15.2-969, which provides as follows:

“Any locality may provide, by ordinance, that it is unlawful for any person, firm or corporation to resell for profit any ticket for admission to any sporting event, theatrical production, lecture, motion picture or any other event open to the public for which tickets are ordinarily sold, except in the case of religious, charitable, or educational organizations where all or a portion of the admission price reverts to the sponsoring group and the resale for profit of such ticket is authorized by the sponsor of the event and the manager or owner of the facility in which the event is being held. Such ordinance may provide that violators thereof are guilty of a Class 3 misdemeanor. This section shall not apply to any resale of a ticket that occurs on the Internet.”

Some localities, including the City of Richmond, have incorporated this language into their local ordinances (See Code of the City of Richmond, § 19-2, Scalping of Tickets to Public Events). Note, however, that the Virginia Code statute expressly excludes ticket resale on the Internet from the statute. Accordingly, in effect, the local ordinances are only applicable to hand-to-hand cash deals (i.e. traditional ticket “scalping”).

Moreover, in 2017, the Virginia Legislature passed the Tickets Resale Rights Act, Va. Code §59.1-466.6, which specifies that the purchaser of a ticket can’t be prevented from reselling the ticket on an Internet ticketing platform of the ticketing purchaser’s choice and that “[n]o person shall be … denied admission to an event solely on the basis that the person resold a ticket, or purchased a resold ticket, on a specific Internet ticketing platform.”

The State of Maryland does not regulate ticket reselling, other than boxing tickets. Local government does have the ability to regulate ticket scalping, as was the case for many years in the City of Baltimore. However, the Baltimore City ordinance prohibiting the sale of tickets for more than face value was repealed in 2013 in the wake of a lawsuit filed by a consumer against Ticketmaster for charging excess service charges (See Bourgeois v. Live Nation Entertainment, Inc., et al.).

Accordingly, in Virginia, Maryland and Washington D.C., the act of selling event tickets through online retailers is not, in and of itself, an illegal act.

That said, reselling tickets online also presents the question of civil liability. Like the Washington Nationals (see above), most teams and venues write on the face of the ticket that the ticket cannot be resold except through sites authorized by the team. While the primary goal of the team/venue is to deter online fraud and to keep ticket prices reasonable for “true fans” that want to attend the games, arguably, the team/venue is also creating a contract with the original buyer. If the original buyer breaches that contract by reselling the ticket, the team/venue can theoretically cancel the ticket and seek additional damages.

While such cancellation seems unlikely for major professional sporting events, many artistic performers and small venues actively oppose ticket reselling and do make efforts to enforce the “contract” created by the ticket. For example, some venues condition entry into the event upon the production of either photo identification that matches the name on the ticket, or the credit card that was used to purchase tickets.

To summarize, in Virginia, Maryland and Washington, D.C., there is nothing illegal about reselling your tickets online, provided that you do not engage in any fraudulent activity prohibited by other laws. Furthermore, while the team is very unlikely to take any civil action against you for violating the “contract” created by the ticket, in theory, it could. The reality is that no major professional sports team in the United States wants to roll back the clock and reignite the fight against online ticket sales. Rather, the teams, including the Nationals, are finding ways to participate in the secondary market by partnering with ticket brokers and adopting dynamic pricing models that track consumer demand.

GO NATS!!!!

This article is not intended to replace the advice of legal counsel.

THE OBSCURE COMMERCIAL REAL ESTATE BROKER’S LIEN ACT

Posted on July 15, 2019April 23, 2021 by admin

THE OBSCURE COMMERCIAL REAL ESTATE BROKER’S LIEN ACT

Many commercial real estate brokers and commercial property owners are unaware of a provision in the Virginia Code that allows a broker to record a lien for unpaid leasing commissions against the owner’s property. The Commercial Real Estate Broker’s Lien Act (the “Act”), which is codified as Virginia Code §55-526 and -527, can be a tremendous tool for brokers, and a tremendous headache for property owners.

In order to record the lien, the broker must have a written agreement signed by the owner for the payment of a leasing commission. This requirement applies to both the landlord’s broker and to the tenant’s broker. The lien is perfected by recording a memorandum of the lien in the clerk’s office of the circuit court of the county/city where the commercial real estate is located. The Act contains strict requirements as to what information must be included in the memorandum, and failure to strictly comply with the requirements can result in the filing of an invalid lien. Furthermore, the Act does not apply to residential properties.

Unlike some other liens in Virginia, the broker’s lien is not automatically created upon the occurrence of the transaction that gives rise to the lien (i.e. the execution of the lease). It only exists if the broker actually records the lien memorandum. In addition, unlike certain other liens in Virginia (e.g. mechanic’s liens), the lien does not expire if the broker fails to file a lawsuit to enforce the lien within a stated period of time. As such, the lien can remain a cloud on the owner’s title for an extensive period of time, without the requirement that the broker file suit for breach of the lease commission agreement. The broker must release the lien when the commission is settled/paid. If the owner denies that the commission is owed, the owner can petition the Circuit Court to remove the lien (thereby opening the door for potentially expensive litigation).

Interestingly, the existing four paragraph Act is quite brief and does not provide any parameters to control the process of enforcing the lien. Effective October 1, 2019, the Act will be repealed and replaced with Virginia Code §55.1-1101, but the new statute contains mostly minor grammatical alterations. As such, and continuing indefinitely into the future, the ability to record a lien remains an effective tool for brokers that are not paid leasing commissions. Property owners should be aware of this tool, and should take careful measures to enter into lease commission agreements that are exceedingly clear with respect to (a) when and how leasing commissions will be paid, and (b) how leasing commissions will be calculated.

GRDD Law wishes to thank renowned real estate broker/negotiator, Pauline Thompson, for inspiring this Article.

Trade Secrets Act Claim Against Competitor Can Proceed Even Though Claim Based On Violation Of Non-compete Agreement Is Dismissed

Posted on December 12, 2018April 23, 2021 by admin

Trade Secrets Act Claim Against Competitor Can Proceed Even Though Claim Based On Violation Of Non-compete Agreement Is Dismissed

The most recent edition of this newsletter discussed the 2018 case of Darton Environmental, Inc. v. FJUVO Collections, LLC, et.al. (U.S. District Court, Western District) (the “Darton Case”). See our article on the enforceability of non-compete agreements with a competitor. This article is the second in a series of three articles analyzing the Darton Case as an example of common business litigation involving non-compete agreements, torts and statutory claims.

Darton Environmental, Inc. (“Darton”) wanted to do business with FJUVO Collections, LLC (“FJUVO”), and for that purpose only showed its facilities to FJUVO. To assure that FJUVO would not steal its technology or compete based on what it learned from the tour, Darton had FJUVO execute a Non-compete and Confidentiality Agreement (“Non-compete Agreement”). Later, when Darton discovered that FJUVO established a competing business, Darton sued FJUVO and the individual agents of FJUVO who visited the facility (“Individual Defendants”). Defendants filed a motion to dismiss, which motion is the subject of this series of articles.

In our prior November newsletter, we discussed Darton’s allegation that FJUVO violated the Non-compete section of the Agreement. The claim based on that alleged violation was dismissed by Judge Moon who found that the Non-compete section of the Agreement was ambiguous and overly broad. In this issue, we discuss the Court’s analysis of the conversion and trade secret claims asserted in the Complaint.

Conversion and Trade Secrets Act Claims

Darton alleged that FJUVO converted its property interest in the Darton technology and misappropriated a trade secret when it set up a facility that processes recycled oil based on the Darton technology.

Judge Moon dismissed the conversion count of the Complaint. He found that the Virginia Uniform Trade Secrets Act (Code § 59.1-336) (“VUTSA”) preempted the conversion count because the conversion claim was “premised entirely on an alleged misappropriation of trade secrets.” Furthermore, the Court concluded that a claim of conversion must be based on conversion of “tangible property rights”; and, Judge Moon found that the Darton technology, as described in the Complaint, was an “undocumented intangible property right” (emphasis added).

It is noteworthy, however, that at this stage of the pleadings, Judge Moon ruled that the allegation of misappropriation of trade secrets under VUTSA could go forward to trial. He found that the Complaint sufficiently alleged that the Darton technology constitutes a trade secret as defined by VUTSA. The Complaint stated that the Darton technology “derives independent economic value…from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure of use” and that its technology is significantly less labor-intensive and less costly than the centrifuge method used by other refining systems. Furthermore, while the judge found the Non-compete section of the Agreement was not enforceable, that section of the Agreement put the Defendants on notice “of the sensitive nature of the Darton technology, and of Darton’s desire to maintain its proprietary nature”.

Judge Moon found that Darton plausibly alleged, as required by VUTSA, that each Defendant misappropriated the technology, knowing or having reason to know that the technology was a trade secret. Furthermore, Darton alleged that these Defendants used the technology for their own purposes. Because the Agreement was a negotiated document, FJUVO and the Individual Defendants understood that it was proprietary technology for which Darton intended to provide limited access.

Thus, the trade secret act claim was permitted by the Court to go forward. The next newsletter will discuss Judge Moon’s approach and rulings on Darton’s business tort claims of tortious interference in business expectancy and statutory business conspiracy. Business tort claims are commonly filed in business disputes, and, therefore, it is worthwhile to understand the law as it applies to these types of torts.

If you want to review other articles by our law firm on the topic of non-compete agreements, visit: https://grddlaw.com/case-example-non-compete-agreement-must-narrowly-tailored and https://grddlaw.com/non-compete-agreements-even-unenforceable-agreements-can-effective-virginia

Purchasing a Virginia Residential Rental Property at Foreclosure? You Need to Understand the Tenant’s Rights.

Posted on December 12, 2018April 23, 2021 by admin

Purchasing a Virginia Residential Rental Property at Foreclosure? You Need to Understand the Tenant’s Rights.

If you purchase a Virginia residential rental property at foreclosure, you need to understand the rights of the tenants occupying the property. In the wake of the 2009 foreclosure crisis, Congress enacted the Federal Protecting Tenants at Foreclosure Act (“PTFA”), which expired in 2014 but was permanently extended on May 24, 2018. The purpose of the PTFA is to protect tenants from immediate eviction after the homeowner defaults on the mortgage and the lender forecloses on the property. Virginia Code § 55-225.10, which went into effect on July 1, 2017 before the extension of the PTFA, also protects tenants from immediate eviction after foreclosure, but is less favorable to tenants than the PTFA. Since the PTFA is federal and it explicitly provides that states can only enact more protective state laws, it will presumably control over Virginia Code § 55-225.10 to the extent the two laws are inconsistent.

The key provisions of the PTFA are as follows:

1. “Bona Fide” tenants can remain in the property for at least 90 days after notice to vacate, or through the full term of a lease, whichever is longer. However, if the purchaser will occupy the property as a primary residence, the 90-day notice period will be effective even if there is a lease with a longer term. The only exception is for Federal- or State-subsidized tenancies, which afford tenants with longer time periods and additional protections provided by the terms of the subsidized housing program.

2. A “Bona Fide” tenant, as defined by the PTFA, excludes the “mortgagor or the child, spouse, or parent of the mortgagor”. The lease must be an “arms-length transaction” for “not substantially less than fair market rent”.

The PTFA and Virginia Code § 55-225.10 do not relieve the tenant of the obligation to pay rent to the new property owner, and do not preclude an eviction action for non-payment before the 90-day period expires. The PTFA does not clarify the extent to which the lease is terminated by the foreclosure. Under Virginia Code § 55-225.10, the lease terminates at the time of the foreclosure; however, that if the tenant elects to remain in the property, the terms of the lease will continue to control until such time as the new owner terminates the post-foreclosure tenancy. Presumably, this includes both the monetary and non-monetary terms of the lease. The tenant’s security deposit, however, remains the obligation of the original owner, and is typically lost in the foreclosure.

Gross & Romanick P.C. Changes Name Effective on January 1, 2019

Posted on November 16, 2018April 23, 2021 by admin

Dependable Lawyers. Effective Solutions.
We are happy to announce that, effective on January 1, 2019, Gross, Romanick, Dean & DeSimone, P.C. will officially change its name to Gross, Romanick, Dean & DeSimone, P.C. We will continue to offer the same high quality legal services upon which Gross, Romanick, Dean & DeSimone, P.C. has built its stellar reputation, but will do so with the addition of two named partners, A. Charles Dean and Christopher J. DeSimone. This name change reflects the expanded roles that Messrs. Dean and DeSimone have undertaken since becoming partners of the law firm in 2014. Please note that, as of January 1, 2019, our firm will have a new domain name: www.grddlaw.com

In addition, our attorneys will commence using new e-mail addresses to reflect the domain name change, as follows:

Edward Gross • egross@grddlaw.com
Jeffrey S. Romanick • jromanick@grddlaw.com
A. Charles Dean • adean@grddlaw.com
Christopher J. DeSimone • cdesimone@grddlaw.com

We wish you all the best for a happy and prosperous 2019!

Enforceability of Non-Compete/Confidentiality Agreements with Competitor

Posted on November 12, 2018April 23, 2021 by admin

Enforceability of Non-Compete/Confidentiality Agreements with Competitor

Obviously, it is not advisable to share proprietary and trade secret information with competitors or potential competitors, but business circumstances may dictate a need for such revelations, such as a possible merger, acquisition or future business arrangement. In these situations, the parties generally enter into a Non-disclosure Agreement (“NDA”) and should also consider a Non-compete and Confidentiality Agreement (“Non-compete Agreement”).

The 2018 case of Darton Environmental, Inc. v. FJUVO Collections, LLC, et.al. (U.S. District Court, Western District)(the “Darton Case”) illustrates the risks of revealing your secrets to a competitor, even with a Non-compete Agreement in place. If the situation turns bad, the August 1, 2018 opinion of Judge Moon is a useful summary of the various causes of action that are available in such circumstances. The opinion also highlights how the court will approach each available cause of action. The next several issues of this newsletter will be devoted to an analysis of Darton v. FJUVO.

Background

Darton Environmental, Inc. (“Darton”) refines cooking oils to sell as biofuel. FJUVO Collections, LLC (“FJUVO”) collects, refines and sells cooking oil. Three individual defendants in the Darton Case (Andy Chen, Daniel Zheng and Adam Zheng) inspected Darton’s facility on behalf of FJUVO for the sole “purpose of evaluating a potential business relationship”. Prior to the inspection, the parties executed Non-compete Agreements, as well as an agreement for the sale of oil by FJUVO to Darton at a reduced price. The sale of oil went well and is not a subject of the Darton case. However, Darton claims that FJUVO and the individual defendants used the information learned during the inspection to set up a competing refinery based on Darton’s technology.

Breach of Contract

The Court focused on two components of the agreement between the parties, first, the non-compete provision and, second, the confidentiality section.

Non-compete

The non-compete portion of the agreement states that FJUVO “shall not, in any manner, represent, provide services or engage in any aspects of business that would be deemed similar in nature to business of Darton..” and “directly or indirectly engage in any business that would be considered similar in nature to with [sic] Darton Environmental, Inc., its subsidiaries, and any current or former clients and /or customers.” and further not “solicit any client, customer, officer, staff or employee for the benefit of [itself] or a third party that is or may be engaged in a similar business.”

Judge Moon found the non-compete language to be unenforceable because it was ambiguous and overbroad. The Court noted that FJUVO was in the business specifically restricted by the agreement and that FJUVO would be forced to stop soliciting its existing customers the way the non-compete provisions were written. The Court concluded that this would improperly prevent FJUVO from engaging in its normal day-to-day business. Furthermore, the restrictions exceeded protection of Darton’s proprietary technology and if read literally, would limit conduct that is “similar” in nature. Finally, the Court refused to enforce the non-compete provision, finding that it lacked traditional geographic and temporal limitations.

Confidentiality

The Court pointed out the Virginia Supreme Court applies the same test to the confidentiality sections of the agreement as it does to the non-competition portion. Thus, with the same lack of temporal limitation and overbreadth, it was inevitable that the Court would strike the confidentiality provision in the agreement.

Other Causes of Action

The Complaint filed by Darton also included the following legal theories: conversion, tortious interference with business expectancy, statutory business conspiracy, common law conspiracy, and violation of Virginia Uniform Trade Secrets Act. The next issue of this newsletter will discuss the conversion and trade secrets claims.

Reservation of Rights Letters

Posted on August 27, 2018April 23, 2021 by admin

Reservation of Rights Letters

Have Your Cake and Eat It Too

A reservation of rights letter (a “RORL”) is a notice that one party to a contract or dispute (the “sender”) provides to the other party (the “recipient”) in order to preserve certain contract rights or remedies that might otherwise be deemed waived as a result of the sender’s actions. A typical RORL will include language that the sender’s performance of a certain act “is not a waiver of any of the sender’s rights under the contract and applicable law” and that the sender “reserves all of its rights and remedies under the contract and applicable law.” In Virginia, as in most states, RORLs are principally used by landlords and insurance companies.

Landlords

The most frequent use of a RORL in the leasing context occurs when a landlord receives a payment from the tenant for less than the entire amount owed. The landlord will send the tenant a RORL stating that the landlord accepts the payment but reserves its rights under the lease to recover the full amount owed and/or to recover possession of the rented property. In the residential eviction context in Virginia, Virginia Code § 55-248.34:1 requires the landlord to provide a RORL if the landlord wishes to accept partial payment of rent owed and still receive an order of possession for the property. Many judges will not permit eviction for non-payment of rent to proceed if a landlord has accepted partial payment from the tenant without sending a RORL. A landlord may also send a RORL to a tenant that is in non-monetary default of the lease if the landlord does not intend to take immediate action to enforce the lease, but wishes to reserve the right to take such action in the future. Ultimately, a court will decide whether the RORL effectively preserved the landlord’s rights.

Insurance Companies

Insurance carriers regularly use RORLs to preserve their rights to deny coverage. Virginia Code § 38.2-2226 requires an insurance company to provide notice to its insured when the carrier “discovers a breach of the terms or conditions of the insurance contract by the insured”. Failure to provide such notice within the time period specified in the statute can result in a waiver of the insurance company’s right to assert such breach as a defense to the insured’s claim. It is common for an insurance company to send a RORL when it has not yet determined whether it will pay the eventual judgment or settlement against the insured. In some cases, the insurance company will send a RORL but still provide a defense to the claim and wait to see how the claim is resolved.

Litigation

Opposing attorneys often use RORLs during litigation as they explore the possibility of settlement for their clients. An attorney may concede certain issues or disputed facts “for settlement purposes only” and subject to a written reservation that, if the parties are unable to settle the case, the attorney’s client reserves the right to assert all claims and defenses.

Summary

In summary, a RORL should be employed whenever a party to a dispute or contract intends to take action that could be deemed a waiver or concession of such party’s legal rights. The RORL will serve as evidence in court that no such waiver or concession was intended should the opposing party assert such a defense.

Why Do We Care About the Common Law of Old England?

Posted on July 12, 2018April 23, 2021 by admin

Why Do We Care About the Common Law of Old England?

When most people hear the term “common law” they think of “common law marriage” in which two individuals can be considered legally married even though they never formally wed. Virginia is one of a majority of states in which you cannot create a common law marriage. Although common law marriage is a very interesting topic, this article will not discuss common law marriage. Instead, it will provide a basic understanding of the common law and how it is relevant to our modern legal system.

A brief history of the common law: The foundations of the common law dates to the Battle of Hastings in 1066, when William I conquered England. William I was determined to create a system to centralize the resolution of disputes. Thus, began the tradition of creating law through argument in court and the legal opinions of judges. This system, known as the common law, remains a foundation of our current legal system. The common law system worked because of stare decisis, which is the obligation of judges to honor prior rulings as precedent.

The Code of Virginia (1-200) states that “[t]he common law of England, insofar as it is not repugnant to the principles of the Bill of Rights and the Constitution of this Commonwealth, shall continue in force within the same, and be the rule of decision, except as altered by the General Assembly.” This statute is a nice summary of the current status of the common law. Most states have enacted similar statutes. In Virginia, as in other states, when there is conflict between the common law and legislation passed by a governing body (“statutory law”), such as Congress or state legislatures, the statutory law overrules the common law.

It should be noted that, despite Virginia Code 1-200 and other similar state statutes, the courts of Virginia and all other states have selectively enforced the English common law; and have, over time, diverged significantly from English precedent. Furthermore, over time, courts of law effectively change the common law by deviating from the doctrine of stare decisis, in large part due to changes in public policy.

The tension and overlapping of the common law and statutory law is a feature of our legal system. Trial court judges are granted the responsibility of interpreting and enforcing statutory laws which may conflict with the common law. This partially explains why different courts can reach conflicting decisions on the same sets of facts. In theory, appeals courts (including the United States Supreme Court) resolve these conflicts.

The 2018 Virginia Supreme Court case of Cherry v. Lawson Realty Corp is an example of the intertwining of common law and statutory law. A tenant sued a residential landlord for mold problems, asserting claims under both the mold statute contained within the Virginia Code and several common law negligence theories. The trial court ruled that the mold statute precludes common law claims; and, therefore, dismissed the common law negligence claims. The Virginia Supreme Court reversed the trial court, finding that the common law survived the mold statute.

The role of the trial lawyer remains essential for the proper representation of clients and for the continued development of the American common law. Without definitive answers to every legal conflict, trial advocacy remains the bedrock of our legal system.

Assignment of Commercial Leases | Gross, Romanick, Dean & DeSimone, P.C.

Posted on June 20, 2017April 23, 2021 by admin

Assignment of Commercial Leases | Gross, Romanick, Dean & DeSimone, P.C.

In most business sale transactions, the buyer will want to operate the business at the current location(s) after the sale. As a result, the seller’s real property leases must be “assigned” to the buyer as of the closing date of the sale. A commercial lease is “assigned” when the buyer steps into the shoes of the seller and becomes the “tenant” under the lease. In the vast majority of cases, the written consent of the landlord must be obtained before the lease can be assigned to the buyer. One of the first things the buyer should do as part of its due diligence study is to determine whether a written lease agreement exists, and if so:

(a) whether the lease can be assigned;
(b) how many years remain in the lease term; and,
(c) whether the tenant has the option to extend the lease term. The buyer needs know that after the sale it has the right to operate the business it is current location(s) for an acceptable period of time.

For more information about reviewing commercial leases, check out our video at: https://grddlaw.com/commercial-lease-review-fairfax-virginia

Some commercial leases allow the landlord to unilaterally deny consent to a proposed lease assignment. Some commercial leases allow the landlord to deny consent unless certain conditions are met (e.g. the new tenant has a net worth equal to the current tenant, the new tenant will not change the use of the premises, etc.). Some commercial leases allow the tenant to assign the lease without the landlord’s consent in connection with a business sale.

Typically, the lease assignment is a condition precedent of the business sale (meaning, either party can walk away from the sale if assignment from the landlord is not obtained). The buyer should never assume that obtaining a lease assignment is an easy process. In fact, securing consent to assignment from the landlord can often be the most frustrating part of the entire business sale process. As an initial matter, most leases require the tenant to pay for the landlord’s review of the request, including attorney fees (which can be expensive if not capped). The buyer and seller must allocate responsibility for these fees in their purchase agreement. Some landlords tend to be non-responsive to review requests for various reasons, and some landlords arbitrarily deny consent without any legitimate business reason. In cases where the buyer requires an extension of an expiring lease, the buyer may have to negotiate new terms with the landlord, which can be a long and complicated process. In cases where the seller or its owners want to be released from any continuing obligations under the lease (which is not the norm), another separate negotiation may need to take place.

For these reasons, it is almost always a good idea to start working on the lease assignment as early as possible in the sale process so that it does not delay the sale. It is customary for the buyer’s attorney to contact and push the landlord in order to keep the assignment process moving forward.

If possible, business owners should try to include “permitted transfer” clauses in their commercial leases allowing for assignment without the landlord’s consent in connection with a business sale. Many landlords will agree to include such language in the lease, typically subject to some conditions being met (e.g. net worth threshold for the buyer and its owners). This will make the business more attractive to potential buyers, and can save the parties a lot of time, effort, and money during the sale process.

Conclusion

The attorneys of Gross, Romanick, Dean & DeSimone, P.C. have substantial experience assisting business owners with regard to buying and selling small and medium-sized businesses. Representative businesses include medical, dental, and veterinary practices, restaurants, information technology firms, construction firms, government contracting firms, moving companies, and many other types of service providers. The buy/sell process can be relatively simple or it can be very complicated depending on a variety of factors unique to each transaction. Our attorneys understand the competing interests that buyers and sellers have, and we know how to efficiently achieve our clients’ goals while protecting their interests.

Asset Sale or Equity Sale? | Gross, Romanick, Dean & DeSimone, P.C.

Posted on June 20, 2017April 23, 2021 by admin

Asset Sale or Equity Sale? | Gross, Romanick, Dean & DeSimone, P.C.

There are two primary methods for buying or selling an existing business:

(1) The asset purchase and,
(2) The equity purchase. The advantages and disadvantages of each method should be assessed in every business sale. The purpose of this article is to explain in very general terms how these two transactions differ.

In the equity purchase, the buyer acquires an ownership interest in the business that is sufficient to control the company. If the business is a corporation, the buyer purchases stock in the corporation from the existing shareholders. If the business is a limited liability company (LLC), the buyer purchases a membership interest in the company from the existing members. The equity purchase is typically used when the existing business has valuable contracts or licenses that cannot be transferred or assigned due to legal or business reasons. The debts and liabilities of the business are not affected, and the buyer inherits responsibility for the satisfaction of these obligations, including potential legal claims that have not yet been asserted. Equity sales can be attractive to the buyer in that they generally allow for an easier transition with employees, vendors, and customers of the business, as the business operations do not cease and certain contracts may not have to be assigned. However, it can be highly risky for a buyer to agree to inherit the existing and unknown liabilities of the business.

In the asset purchase, the buyer purchases the existing assets of the business, but does not purchase any ownership interest in the seller’s business entity. Oftentimes, the selling entity will be terminated after the asset purchase. The asset purchase allows the buyer to acquire the business without assuming the debts and obligations of the seller. In some cases, the trade name of the seller is one of the assets purchased by the buyer, and after the sale the buyer will operate under the same name the seller used before the sale. This process allows the buyer to purchase the brand and existing goodwill of the seller, without assuming the selling entity’s liabilities. Asset sales are attractive for this reason, but can also require significant legwork on the part of the buyer to allow for a smooth transition at closing (e.g. setting up a new payroll system, entering into new agreements with employees, vendors, and customers, securing assignments of business contracts, obtaining required licenses, etc.).

In every sale, the parties should consider the advantages and disadvantages of both methods. Typically, the buyer will choose the method of purchase after completing a due diligence investigation of the business and discussing the tax implications of each method with a CPA. A proper due diligence investigation will reveal the legal structure and business registrations of the seller, the specific assets owned by the seller, the existing contracts and obligations of the seller, and the history of seller’s taxes, liens and legal disputes. This information will assist the buyer in determining how best to proceed. A more detailed explanation of the issues a buyer should investigate before choosing the preferred structure of the sale can be found below and here.

Most buyers prefer asset sales for both tax reasons and liability reasons, and most sellers prefer equity sales for tax reasons and liability transfer reasons. However, every business sale is unique, and the two sides will need to align on the structure and economic/tax consequences of the transaction in order for the deal to consummate.

For more information about buying and selling a business, check out our videos at: https://grddlaw.com/need-lawyer-buying-selling-business-fairfax-virginia and https://grddlaw.com/buying-selling-restaurant-fairfax-virginia