April 2019 Monthly Letter

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April 2019 Monthly Letter
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“The difference between death and taxes is death doesn’t get worse every time Congress meets.” – Will Rogers

april 2019 monthly letterApril Fool’s Day also called All Fool’s Day, dates back to 1582 when France changed from the Julian calendar to the Gregorian calendar. People who were slow to adapt or get the news that the new year had moved to January 1st were celebrating the last week of March through April 1st became the butt of jokes and hoaxes.

However, the original “fake news” started in 1973 when Joseph Stalin created the first Disinformation Office. The idea was to provide false information with the intent to deceive public opinion. Stalin would say, “Flood the people with false info so they won’t know or believe the truth.”

True to the Will Rogers quote above, our state legislature has been hard at work. The sheer volume of new laws is staggering! In total, 1016 new laws will take effect in California in 2019. Amongst those, only milk and water will be published as beverage options on kid’s menus in sit down restaurants. Obesity is an epidemic, but I am not sure this solves the problem. Similarly, restaurants will no longer automatically offer you plastic straws when you order a drink. We’ll save the environment but sicken society by putting our mouths on questionably clean glasses.

I can’t say that I have reviewed the over 1000 new laws but the folks at Kimball, Tirey & St. John LLP have, and I have culled their list for laws affecting commercial real estate that are worthy of your review and understanding;

AB 2173 Commercial Property: Abandoned Personal Property: This bill increased the threshold amount for personal property abandoned in a commercial property to the great of (1) $2,500 or (2) one month’s rent. This bill does not change existing law with regard to the valuation of residential abandoned property. An article with information about the abandoned personal property in commercial property is available at https://www.kts-law.com/abandoned-personal-property-left-by-a-former-commercial-tenant/.

AB 2343 Calculations of 3-Day Notices and Summons: This bill amends Code of Civil Procedure Sections 1161 and 1167 to extend the waiting period for summons and some notices, effective September 1, 2019.

California Landlord/Tenant Law previously allowed weekends and holidays to count towards the three (3) day notice period but prohibited a notice from expiring on a weekend or holiday. Code of Civil Procedure §1167 has been amended to specifically exclude “Saturdays and Sundays and other judicial holidays” when calculating the notice period for notices to pay rent or quit or notices to perform covenant or quit. It does not exclude these days when calculating expiration periods for 30, and 60-day termination notices and notices to quit based on unauthorized assignment, subletting, nuisance, and waste.

AB 2847 Abandoned Commercial Property: creates new law regarding abandoned commercial property. Previously, the law specified that rent had to be unpaid for 14 days before a Notice of Belief of Abandonment could be served on the tenant. Effective July 16, 2018, new California Civil Code §1951.35 changes the 14-day period to the time period specified in the lease for the landlord to declare a rent default (if the lease is silent, it is a 3-day period. Leases sometimes provide for other time periods, such as 3 business days, 5 days or 10 days). AB 2847 also slightly modified the residential Notice of Belief of Abandonment form.

SB 745 Water-Conserving Plumbing Fixture Replacement (2014): Originally passed in 2014, and codified in Civil Code §1101.5, it requires water-conserving plumbing fixtures to be installed in property constructed before January 1, 1994. To be compliant, plumbing fixtures may not use more than the following amounts of water:

  • Toilets – 1.6 gallons per flush
  • Urinals – 1 gallon per flush
  • Shower heads – 2.5 gallons per minute
  • Interior faucets -2.2 gallons per minute

Beginning on January 1, 2014, noncompliant plumbing in multifamily and commercial property were required to be replaced in certain situations.

By January 1, 2019, multifamily and commercial properties must be in full compliance. An article with information about water-conserving plumbing fixtures required in California is available at https://www.kts-law.com/water-conserving-plumbing-fixtures-required-in-california/.

SB 1397 Automated External Defibrillators: Health and Safety Code §19300 previously required automated external defibrillators (AED) be installed in properties constructed on or after January 1, 2017. The law will now require that specific residential and commercial properties built before January 1, 2017, to install automated external defibrillators if the structure is modified, renovated or tenant improved, as specified, on or after January 1, 2020. An article about AEDs in commercial properties is available at https://www.kts-law.com/aed-devices-in-commercial-properties/.

Proposition 65: Proposition 65 requires businesses with 10 or more employees to provide warnings when they cause significant exposure to specific chemicals. Proposition 65 requires disclosures by employers who have 10 or more employees and who may expose their employees or the public to specific listed chemicals. There are more than 850 chemicals listed. Some of the environmental hazards are contained in items common in commercial, such as building materials, cleaning materials, car exhaust, and tobacco smoke.

For some time, landlords have been uncertain about how to comply with their Proposition 65 obligations. “Clear and reasonable” warnings must be given. Generally, in an effort to comply with Proposition 65, landlords have posted signage on their properties. Some also have also included Proposition 65 warnings in their leases. For more information about the new Proposition 65 warnings, see https://www.p65warnings.ca.gov/new-proposition-65-warnings .

I told you there were a lot of laws!

Well, we are at the stage of having a lot of good news and a lot of bad news going on. The good news is we had a great year and made money last year, the bad news is we paid a lot of taxes. The good news is we paid less than we would have under the previous year’s rates.

In February, the economy added a meager 20,000 jobs, well below the 180,000 expected. But the number of employed Americans – 156,959,000 has never been higher. The unemployment rate has dropped to 3.8 percent from January’s 4.0 percent.

The Fannie Mae Home Purchasing Sentiment Index (a measure of the current mood of the market) was 83.5 – a 3 year low and well below the May 2018 reading of 92.3 – a seven-year high. This is typically a sign of a reversal in the housing market.

In the leasing market, we are having a tough time finding the space tenants are looking for and at the same time we are finding some tenants getting conservative/cautious about their plans (shortening lease term, etc.). We have also seen multiple mortgage and escrow companies close or downsize.

I will say I am very concerned about the inversion of the yield curve. This is a pretty strong predictor of a recession. However, waiting for a recession is not a good investment strategy.

I still hold that we are in a lull window with some things tearing forward and some pulling back. At this point, it might be a soft landing or better yet a touch and go.

Finally, with the Mueller report out and election season kicking off, expect more talk and less action out of Washington.

Well, with all the information already disseminated I thought you would just like a little more as your story…


How Can You Possibly Live Without Knowing These Things?
  • In general, men can read smaller print than women can, but women can hear much better than men.
  • Coca-Cola was originally colored green.
  • It is impossible to lick your elbows.
  • The percentage of Africa that is wilderness:28% (now get this…) The percentage of North America that is wilderness: 38%.
  • Each king in a deck of playing cards represents a great king from history: Spades-King David, Hearts – Charlemagne, Clubs – Alexander the Great, Diamonds – Julius Caesar.
  • If a statue in the park of a person on a horse has both front legs in the air, that person died in battle. If the horse has one front leg in the air that person died as a result of wounds received in battle. If the horse has all four legs on the ground, that person died of natural causes.
  • Hershey’s Kisses are called that because the machine that makes them looks like it’s kissing the conveyor belt.
  • What day are there more collect calls made than any other day of the year? Father’s Day.
  • What is the most ironic trivia fact about Mel Blanc (voice of Bugs Bunny)? He was allergic to carrots.
  • What is an activity performed by 40% of all people at a party? Snooping in your medicine cabinet.
  • In Shakespeare’s time, mattresses were secured on bed frames by ropes. When you pulled on the ropes the mattress tightened, making the bed firmer to sleep on. Hence the phrase “goodnight, sleep tight”.
  • It was the accepted practice in Babylon 4,000 years ago that for a month after the wedding, the bride’s father would supply his son-in-law with all the mead he could drink. Mead is a honey beer and because their calendar was lunar based, this period was called the honey month we know today as the honeymoon.
  • In English pubs, the ale is ordered by pints and quarts. So, in old England, when customers got unruly, the innkeeper would yell at them mind their own pints and quarts and settle down. It’s where we get the phrase “mind your P’s and Q’s”
  • Many years ago, in England, pub frequenters had a whistle baked into the rim or handle of their ceramic cups. When they needed a refill, they used the whistle to get some service. “Wet your whistle” is the phrase inspired by this practice.
AND FINALLY,……………………………………
At least 75% of people who read this will try to lick their elbow! —April Fools!
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About the Author – Don Zech, President at CDC Commercial, Inc.
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