Who Let the Dogs Out?

One of the secrets to success for legendary real estate agent Grant Chappell? The cute factor.
Here he is with Dixon, his Borador puppy, demonstrating his sales technique:

 

Grant Chappell is the Senior Vice President of NAI Northern California and specializes in East Bay multifamily properties.

On Site Managers

You Can Pay Them (Right) Now, Or You Can Pay Them (A Lot!) Later

by Joby Tapia

INTRODUCTION

One of the most important people involved in the success of your property’s performance is the on-site manager (Resident Apartment Manager). This person is often the face of your property in your absence and may even be THE face of the property. The duties of this individual can range from that of a ‘key-holder’ to that of a full blown property manager that collects rents, performs maintenance and leases vacant units. When it comes to compensation, there are myriad ways that these individuals are paid; cash, rent credit, partial rent credit, bonuses, or some combination thereof, etc. However, in the eyes of the law, there are only two ways that the resident apartment manager can legally be compensated without putting the owner in danger of a wage claim suit. These suits are starting to gain some traction in California, especially San Francisco, with several resulting in six-figure payouts to the (former) employee.

THE LAWS

The regulations regarding the compensation of resident apartment managers are not easily located in the Civil Code. In fact, the only reference that is readily found in the California Code of Regulations on the topic of resident apartment managers is Title 25 section 42: [Caretaker (25 CCR § 42)]A manager, janitor, housekeeper, or other responsible person shall reside upon the premises and shall have charge of every apartment house in which there are 16 or more apartments, and of every hotel in which there are 12 or more guest rooms, in the event that the owner of an apartment house or hotel does not reside upon said premises. Only one caretaker would be required for all structures under one ownership and on one contiguous parcel of land. If the owner does not reside upon the premises of any apartment house in which there are more than four but less than 16 apartments, a notice stating the owner’s name and address, or the name and address of the owner’s agent in charge of the apartment house, shall be posted in a conspicuous place on the premises. This is the part of the law that we’re all familiar with; any building with 16 or more units must have a responsible person living on the premises. However, there are Labor and Wage Code Orders that fill out the rest of the picture when it comes to crediting rent against the earned wages for labor performed.

SO HOW DO YOU PAY THEM?

When it comes to compensation, the body that governs how you pay resident apartment managers is the Industrial Welfare Commission. Resident apartment managers are considered part of the public housekeeping industry. In its directive to govern the public housekeeping industry, Industrial Welfare Commission issued Order No. 5-2001, the Section 10 that provides:

10. Meals and Lodging

(A) “Meal” means an adequate, well-balanced serving of a variety of wholesome, nutritious foods.

(B) “Lodging” means living accommodations available to the employee for full-time occupancy which are adequate, decent, and sanitary according to usual and customary standards. Employees shall not be required to share a bed.

(C) Meals or lodging may not be credited against the minimum wage without a voluntary written agreement between the employer and the employee. When credit for meals or lodging is used to meet part of the employer’s minimum wage obligation, the amount so credited may not be more than the following: Apartment – two-thirds (2/3) of the ordinary rental value (emphasis added), and in no event more than $451.89 per month (one employee); where a couple are both employed by the employer, two-thirds (2/3) of the ordinary rental value, and in no event more than $668.46 per month.

(D) Meals evaluated, as part of the minimum wage, must be bona fide meals consistent with the employee’s work shift. Deductions shall not be made for meals not received nor lodging not used.

(E) If, as a condition of employment, the employee must live at the place of employment or occupy quarters owned or under the control of the employer, then the employer may not charge rent in excess of the values listed herein.

So as of January 1st, 2008, the maximum amount of rent which may be credited against wages is $451.98 per month (or $668.46 if a couple is employed as the resident apartment managers), but may not exceed 2/3rds of the market rate of the unit. That is an important fact to consider if you have a couple in a studio and the market rent is not at least $1,002.69 or more. Also consider the minimum wage in your city; in San Francisco, the minimum wage is $10.74 per hour, so if $451.98 of rent credited against wages per month, the maximum number of hours the on-site employee can work is 42 hours during the period. If the employee works more than that, there is risk that the employee is making less than minimum wage!

To wit, California Labor Code section 1182.8 provides that:

No employer shall be in violation of any provision of any applicable order of the Industrial Welfare Commission relating to credit or charges for lodging for charging, pursuant to a voluntary written agreement, a resident apartment manager up to two-thirds of the fair market rental value of the apartment supplied to the manager, if no credit for the apartment is used to meet the employer’s minimum wage obligation to the manager.

This means that in order for you to credit any rent against wages OR charge any portion of rent, that it is mandatory to have a ‘voluntary written [employment] agreement’ and that there is an explicit amount of rent credited or charged. You also have to ensure that you are meeting the minimum wage obligation with the rent credited.

Many landlords and their agents still rely on both informal and non-compliant agreements with their on-site staff. Recently, there has been an uptick in back wage claims (including a major class-action suit in San Francisco against a well known owner), where aggrieved former or current on-site staff have sought damages in the way of unpaid or underpaid wages (including overtime) and any credits taken as well as the one month delay penalty. Given the employee friendly nature of California laws, without extensive documentation and compliance, an owner could face thousands, if not tens of thousands in back wages and penalties.

EMPLOYMENT AGREEMENTS, TIMESHEETS

So, from the legalese above, we can see the most critical element in employing a resident apartment manager – the Written Employment Agreement. This document is required to be compliant with Wage Order 5 and Labor Code 1182; there is a case (Brock v. Carrion, Ltd. (2004)) where a resident apartment manager and an owner ‘agreed’ to value an apartment at a certain rate and to compensate the employee at the same rate. Missing was a written employment agreement that defined the terms and duties; the decision of the court left owner unable to credit any rent against wages in the labor dispute. The employment agreement is your touchstone document. It should clearly delineate what the expected duties are to be performed, excluding anything not clearly written in the agreement or subsequently assigned in writing. It should also include the expectation of how many hours per month or pay period the tasks should take and what the compensation will be. Since any agreement that would result in the employee being compensated less than minimum wage in violation of Labor Code 1194(a) and would be void, this is an extremely important exercise to complete, especially if crediting rent against wages. The lesson here is to always memorialize your employment agreement with duties and compensation in writing.

Furthermore, the employee(s) must be required to turn in periodic timesheets that they sign and date each pay period. If the employee is entitled to actual wages above and beyond the rent credit, you must pay the employee (at least minimum wage) for all the hours claimed to have worked. If you have a question if the employee actually worked the hours recorded, you should seek advice from an employment attorney or HR consultant to navigate through this tricky situation. Even if you dispute the hours worked, you will still have a record of paid hours in order to limit back pay issues.

What isn’t mentioned in the Wage and Labor orders is the companion document that is STRONGLY recommended: the License Agreement. This document is very important in controlling tenancy in the unit that the on-site staff uses as a condition of employment. Since the license is revocable when employment is terminated, the former employee has a pre-defined period of time to vacate the unit. This will avoid a costly eviction of the former employee; in rent controlled districts, this document will avoid granting tenancy rights to the employee. Always use a license instead of a lease as it will better protect your rights. You can always convert an ex-employee to a tenant, but if you write a lease with below market rates as the compensation, you are stuck with that rate for a minimum of 60 days (if more than 10% under market) and potentially for life if in a rent-controlled district.

CONCLUSION

Where California law requires a responsible person to live on-site, it is important to ensure that any terms of employment are in writing and clearly defined. When it comes to compensation, it is extremely important that the resident apartment manager is legally compensated to avoid putting the owner in danger of a wage claim suit. There has been increasing numbers of wage claim suits filed against owners; with some relatively simple documentation, you can reduce exposure to large settlements and protect your rights as an owner. Just remember that when it comes to on-site managers, you can pay them (right) now or you can pay them (a lot!) later.




Joby Tapia is a Senior Associate
at NAI Northern California. He can
be reached at jtapia@nainorcal.com
or 415-329-4623.



Disclaimer: The information contained in this article is general information and should not be construed as or relied upon for legal or tax advice in any particular circumstance or specific factual situation.

NAI Global Ranked Among Top 5 Commercial Real Estate Brands

San Francisco, CA – March 6, 2014: NAI Global, the world’s largest, most powerful network of owner-operated commercial real estate firms, earned the top five spot in the 2014 Lipsey Survey of Top 25 Commercial Real Estate Brands. The survey was conducted among 100,000 commercial real estate professionals using a combination of ballot voting, phone interviews, and focus groups to identify the top global brands. NAI Global is the only commercial real estate network represented in the top five brands. NAI Northern California is a member of NAI Global.

NAI Northern California is proud that the strength of the NAI Global network is reflected in the results of this year’s Lipsey survey. In partnership with our global management team, we look forward to using the NAI brand to help our clients strategically optimize their real estate assets.

The survey is conducted by The Lipsey Company, a leading training and consulting firm specializing in the commercial real estate industry to equip organizations and their practitioners with the skills necessary to succeed in today’s competitive environment. The 2014 survey results can be found here.

About NAI Northern California

NAI Northern California is a progressive full service commercial real estate firm serving the Bay Area. We provide comprehensive brokerage services, advisory services for corporate end users, property owners, developers, investors, and financial institutions. By staying in touch with all aspects of the real estate market, we are able to add value to any transaction within our area of expertise. Our agents each have their own niche focus, both with respect to geographic area and product type, enabling them to truly be experts in their respective fields. Our membership in NAI keeps our firm on the leading edge of the industry, while allowing us to maintain our local ownership and hometown loyalty. NAI is the largest brokerage affiliation in North America, and is rapidly growing to become the largest in the world.

Visit nainorcal.com to learn more about our unparalleled services.

About NAI Global

NAI Global provides a full-range of corporate real estate services, including brokerage and leasing, property and facilities management, real estate investment and capital market services, due diligence, global supply chain consulting, and related advisory services. NAI Global Member firms, leaders in their local markets, are actively managed to work in unison and provide clients with exceptional solutions to their commercial real estate needs. Founded in 1978, today NAI Global Member firms span 55 countries, with 400 offices and more than 5,000 local market experts on the ground, completing $55 billion of transactions annually. Supported by the central resources of the NAI Global organization, member firms deliver market-leading services locally and combine their in-market strengths to form a powerful bond of insights and execution for clients with multi-market challenges.

NAI Global was acquired in 2012 by C-III Capital Partners, a commercial real estate services company engaged in a broad range of activities, including primary and special loan servicing, loan origination, fund management, CDO management, principal investment, title services, and multifamily property management.

Find out more at naiglobal.com.

Jeff Gates Named NAI Northern California Top Producer 2013

NAI Northern California is pleased announce that Vice President Jeff Gates was our Top Producer in 2013. Since joining NAI in March 2013 as a nationwide Net Leased investments specialist, he has closed thirteen transactions for a total consideration of nearly $27,600,000.

 

As for 2014, Jeff is already off to a great start. His newest listing is an Outback Steakhouse in Tuscaloosa, Alabama. This property is priced at $1,905,000 with a CAP rate of 6.75% and 11.5-year lease term.

Recent transactions include a Buca di Beppo restaurant in St. Paul, Minnesota for $4,880,000, Springhill shopping center in Vallejo, CA for $3,400,000, and Citibank in Citrus Heights, CA for $3,000,000.

NAI NorCal’s Douglas Sharpe featured in CP Executive article

NAI Northern California’s Managing Director/Senior Vice President Douglas Sharpe was recently featured in the Commercial Property Excecutive article “MWest Spends $200M for 825 KSF Office, R&D Portfolio in Silicon Valley.” He operates out of our San Jose location and specializes in South Bay office properties.

MWest Properties’ Silicon Valley footprint just grew by 825,000 square feet. The company, a year-old venture comprised of DivcoWest, Ivanhoé Cambridge and TPG Real Estate, has acquired a three-campus portfolio encompassing 12 R&D and corporate office buildings in San Jose, Calif., for approximately $200 million. Carr Properties was the seller.

From the perspective of hopeful buyers, MWest is in an enviable position. “The Class A and nicely-positioned properties in Silicon Valley are very difficult to find right now,” Douglas Sharpe, a director with commercial real estate services firm NAI Northern California, told Commercial Property Executive.

MWest’s newly acquired portfolio consists of BayTech Business Park, Valley Technology Centre and the building at 3025 Orchard Parkway. It also includes a notable tenant roster featuring the likes of Boston Scientific, Taiwan Semiconductor Manufacturing Co., which maintains its North American headquarters at 2585 Junction Ave. within Valley Technology Centre, and Tessera Technologies, headquartered at 3025 Orchard.

“These are quality, well-managed assets with good credit tenancies in place in a market which has seen rental increases and improved vacancy rates and which continues to experience strong employment growth,” Justin Wesley, managing director at MWest, said in a prepared statement. “The addition of these assets creates tremendous synergies within our existing platform and significant value-add opportunities.”

Everyone wants a piece of Silicon Valley, and MWest grabbed a huge chunk of it with its creation; the venture was formed in December 2012 to acquire the majority of assets owned by Mission West Properties. The transaction gave MWest a portfolio of 73 buildings containing 6.4 million square feet of leasable space in one fell swoop.

“There’s no shortage of appetite for investors looking go get into Silicon Valley, that’s for sure,” Sharpe said. However, while multiple offers are commonplace and price tags are growing bigger, investors are still keeping their heads.

“They haven’t completely lost their minds in the sense of taking on speculative risks, even in Silicon Valley,” Sharpe added. “So we’re seeing as much attention being paid to the financial stability of the groups that are the tenants in the buildings.”

Source: Commercial Property Executive

By Barbra Murray, Contributing Editor

Oakland, CA – Our New Office and Address

Oakland, CA – As of August 2013, our Oakland office has a new location!

This location is a class A building with a brand new build out at city center, just steps away from BART. Our new space includes: double door entry off the elevator, private kitchen, copy room, large conference room, small conference room and larger working areas! We are excited to be here!

You’ll see this address updated in our emails, on the website, and in our other communications.

New Address:

475 14th Street, Suite 700

Oakland, CA 94612

http://goo.gl/maps/RoNPW

About the Team

Our Investment Specialists include:

Gary Aulakh: specializing in multi-family

Ethan Berger: multi-family focus in Contra Costa & Solano Counties

Kent Mitchell: facilitates apartment transactions in central areas of Berkeley and Oakland

Grant Chappell: specializes in multi-family and retail properties in the East Bay.

Industrial Specialists include:

Dante Guazzo and Allen Valdellon

Office Specialists include:

Douglas Sharpe and Patrick Shurr

For more information on our team you can visit:

https://www.nainorcal.com/Default.aspx?tabid=10869

Hope to see you at our new location!

Remember to like us on Facebook https://www.facebook.com/NAINorthernCalifornia
and follow us on Twitter https://twitter.com/NAINorCal

Broker Associate, Jason Keith, Closes on San Francisco Apartment Portfolio

NAI Northern California would like to congratulate Jason Keith on the recent success of a four building apartment portfolio in San Francisco; with the last property due to close in mid February. Although the properties were sold off market, Mr. Keith achieved an aggressive sales price for the portfolio by discreetly shopping the properties, both as a portfolio and individually, to various extremely active San Francisco apartment building buyers.

The three buildings that have closed were a 6-unit property in Cow Hollow, a 6-unit property in Russian Hill and a 15-unit property in Nob Hill, totaling $7,500,000. The average parameters of the three deals were $320,382 per unit; 13.52 GRM; $385 per square foot and a 4.78% cap. rate. For further details, please contact Jason Keith at 415-226-2028 or by email at jkeith@nainorcal.com.

Santa Clara moves child services to big space at Ridder Park

The county of Santa Clara’s Department of Child Support Services is on the move.

The county has signed a 10-year lease for 83,841 square feet at the Ridder Park Technology Center at 880 Ridder Park Drive in San Jose. The department, which occupies 152,000 square feet at 2851 Junction Drive in San Jose, is slated to take occupancy on Nov. 1.

It’s the second big chunk of space to go at five-building Ridder Park this year. Expression College for Digital Arts signed for a 64,893-square-foot R&D/office building at 1751 Fox Drive and was slated to move in this month.

Asking rents in the area for this type of space are in the $1.25 to $1.95 per foot range, said Douglas Sharpe, managing director/senior vice president for NAI Northern California, who represented the county. According to public records, the county will pay $1.45 per square foot with 2.5 percent annual increases and will pay no rent the first 10 months.

Sharpe said the county was attracted to the property because it is located close to public transit and freeway access. “And it’s not too far away from other county functions, which was important to them because of the children’s services,” he said.

Steve Horton and Kelly Yoder with Cassidy Turley, in collaboration with Sherman Chan and Jeff Houston of CBRE, represented the landlord, Hines, a Houston-based real estate developer, in the transaction.

Three blocks of space remain at Ridder Park totaling about 250,000 square feet, said Horton of Cassidy Turley.

“We have good activity on the balance of the project,” he said.

The county’s former site at Junction Drive is being marketed for sale or lease by Phil Mahoney and Jesse Millman of Cornish & Carey Commercial Newmark Knight Frank.

Silicon Valley / San Jose Business Journal
http://www.bizjournals.com/sanjose/blog/real-estate/2012/09/county-moves-child-services-to-big.html?ana=e_bay_real&s=newsletter&ed=2012-09-27

NAI Secures 83,841 SF / Ten Year Lease for the County of Santa Clara

August 14, 2012, San Jose, CA – Douglas Sharpe, Senior Vice President and Managing Director of NAI Northern California, San Jose Office, has assisted the County of Santa Clara’s Department of Child Support Services in the acquisition of their newest home at 880 Ridder Park Drive in San Jose.  The 83,841 square foot, 10 year lease, with Hines Interests L.P. Property Management Group was officially approved by the County Board of Supervisors on August 7, 2012.  The approval came just in time for the full scope of tenant improvements to be made to the property for the scheduled November 1st, 2012 move in. The Department of Child Services is currently located in a 152,000 square foot building at 2851 Junction Drive in San Jose, CA.

Douglas Sharpe, MCR, LEED AP, joined NAI Northern California in March of 2012 as the Senior Vice President and Managing Director of the newly established San Jose office. His experience with major projects for public organizations, private high net worth individuals, government, and Fortune 500 Companies shines through with his leadership and was clearly demonstrated with this recent industry high transaction.

“Since joining NAI Northern California in March 2012, Doug Sharpe’s positive contributions to both his clients and NAI were immediately apparent. Transactions of this size and complexity demand a high degree of integrity, experience, and leadership”, James Kilpatrick, President.

About NAI

NAI Northern California is full service commercial real estate services firm in the San Francisco Bay Area and part of NAI Global, the largest managed network of Commercial Real Estate Brokerage Service firms in the World. Recognized as one of the Top 25 Commercial Real Estate Firms by the East Bay and San Francisco Business Times, NAI Northern California provides comprehensive brokerage, leasing, debt, advisory, and property management services for corporate end users, property owners, developers, investors, and financial institutions.

Newest Addition to the NAI Kilpatrick Office Team

NAI Kilpatrick is proud to announce and welcome Paul Adelman to the Office team as a Senior Associate in the firms Oakland Office.  Paul specializes in Investment sales of commercial properties in Alameda & Contra Costa counties. Knowledgeable in all aspects of Commercial Real Estate, Paul is able to leverage his previous experience related to acquisitions and dispositions. Welcome to the team Paul!

 

In our San Francisco Office, Matt Brasler, Senior Vice President, recently completed a 16,206 square foot sublease at 201 Mission Street on behalf of a growing social media analytics company, Kontagent, Inc. At $17 psf, this sublease is the lowest rent per square foot achieved in the marketplace this year.  Matt also recently listed 394 Pacific Avenue for lease, a brick and timber construction, beautifully restored historic building in a prime Jackson Square location.

 

For more information on all our other property listings, please click here.