Monthly Archives: March 2017

Copyright Problems for the Unwary Real Estate

Real estate lawyers take head. Waiting in the tall grass of your client’s real estate development project may be a thorny copyright issue that could cost your client all of the profit it earned on the project, and would probably buy you a serious malpractice claim.

In the course of developing a real estate project, whether it is a residential community or a commercial project, a central component of the project is the architectural plan. Unless the developer (and the developer’s counsel) are aware of how the Copyright laws affects what the developer can (and more importantly, can’t) do with the plan, the developer may find itself on the receiving end of a Copyright infringement lawsuit. Why? Because an architectural plan, as well as other architectural works, are protected under Copyright laws, and these laws govern who owns the plans and what can and can’t be done with the plan.

Scope of Protection Granted Architectural Works

In 1990, Congress enacted the Architectural Works Copyright Protection Act (the “Act”). The Act increased the scope of protection architectural works are entitled to under United States Copyright laws. The Act was passed in efforts to make United States Copyright laws more compatible with the Berne Convention For The Protection of Literary And Artistic Works.

According to a report prepared by the then Register of Copyrights, pre Act copyright laws provided adequate protection for architectural blueprints, plans, drawings and models. However, the adequacy of protection under Berne Convention standards for the constructed design of architectural structures was in doubt. Although the Act, when it was in Bill form, was intended to address this perceived gap, the legislative history provides us with insight into the intended scope of protection accorded to architectural works, including blueprints and plans.

The Act amended the definition section of the Copyright Act (17 USC 101) by adding the following definition of “architectural works:”

An ”architectural work” is the design of a building as embodied in any tangible medium of expression, including a building, architectural plans, or drawings. The work includes the overall form as well as the arrangement and composition of spaces and elements in the design, but does not include individual standard features.

The House Report on the Copyright Amendments Act of 1990 (which includes the Act) (the “Report”) provides a section by section analysis and discussion of the Act. In discussing the definition of architectural works, the Report identifies the elements of a protected architectural work. The Report states that “protection does not extend to individual standard features, such as common windows, doors and other stable building components.” The Report makes clear, however, that the provision is not intended to “exclude from copyright protection any individual feature that reflects the architect’s creativity.”

Commenting on the meaning of “arrangement and composition of spaces and elements in the design” the Report noted that this phrase recognizes that creativity in architecture frequently takes the form of selection, coordination or arrangement of unprotectable elements into an original, protectible whole, and that a architect may incorporate new, protectible elements into standard features that might not otherwise be protectable and create an original, protectible whole.

The Report sets out a two step analysis to be engaged in when determining the scope of protectability for an architectural work.

First, an architectural work should be examined to determine whether there are original design elements present, including overall shape and interior architecture. If such design elements are present, a second step is reached to examine whether the design elements are functionally required. If the design elements are not functionally required, the work is protectible without regard to physical or conceptual separability.

Protection would be denied for the functionally determined elements, but would be available for the nonfunctional elements. The Report states that courts must be free to decide the level and scope of protection, and evidence that there is more than one method of obtaining a given functional result may be considered in evaluating the scope of protection. The Report notes that the Act incorporates the general standards of originality applicable for all other copyrightable subject matter, and the determination of infringement is to be made according to the same standard applicable to all other forms of protected mater.

How Issues of Infringement Can Arise and How to Avoid Them

Poor planning and a lack of understanding can lead to a developer finding itself in hot water with regard to architectural plans. Just because a developer paid an architect to come up with drawings does not mean that the developer can do whatever it wants with the drawings. Granted, case law has held that in certain circumstances the developer may have an implied license to perform the acts that are the subject of the infringement suit. However, defending an infringement claim can be quite expensive. Preventing the situation from arising will be much easier on the pocketbook.

Anytime your client is working with an architect, make sure that there is an engagement letter in place and it is clear on exactly what can and can’t be done with plans or other drawings created by the architect. Also, make sure that the engagement letter is crystal clear on exactly who owns the plans. I have seen engagement letter from architects that state that the architect is the owner of the copyright in the plan and that any contributions by the developer to the plan is a work made for hire and made on the architect’s behalf. As long as the developer understands the implication of these provisions, major problems can be avoided. Representing developers, I would rather have my client own the rights to its contributions. I can just imagine the horror a developer would experience upon finding out that the architect he worked with in developing a completely unique floor plan is now selling the plans to all the other major builders in the area.

Developers can find themselves facing copyright infringement issues if they change architects mid project and continue to use the drawings created by the first architect. To preserve the right to do this, the developer should make sure that this right is specifically reserved in the engagement letter. Usually most reasonable architects will allow the developer this right in exchange for being indemnified against any claims related to work performed by the new architect.

Some engagement letters I have seen from architects allow a developer to freely reuse a plan or other drawing without having to pay a reuse fee as long as it is being used for the same development. If a developer wishes to reuse a drawing for multiple developments, the developer should bring that up as soon as possible and make sure that it finds its way into the engagement letter.

The real estate developer and his counsel should give serious consideration of how to incorporate the requirements of the Copyright laws into the company’s best practices. While hand shake deals are still commonplace in the real estate and construction industries, they just won’t cut as far as the Copyright laws are concerned.

Lucrative Real Estate Options

Real estate boom in India has activated many dormant areas to become super- active. Surajkund is currently going through this phase of activation and is ready to cross the threshold in order to emerge as a real estate destination. This boom is further strengthened by the relaxation of Foreign Direct Investment (FDI) in the real estate and construction sector. Additionally, the retail segment has opened the doors for the commercial real estate sector of India. Faridabad is fast becoming the next hot destination for expanding developmental activities. The pace of real estate growth is expected to prosper well as more and more companies are now choosing to opt for Surajkund. The city has become a prominent investment destination due to its proximity to Delhi and also because of the rising values of the real estate in Gurgaon and Noida.

Faridabad has traditionally been an industrial city, with 300 large and 10,000 small scale units and the Haryana Government’s new Industrial Model Township. However, the industrial town of Faridabad is now noticing new residential developments, especially in Surajkund village that spans across 30 acres. Surajkund, already known for its international Mela, is now a residential delight for many. The Surajkund mela was launched in 1981 by the Haryana Tourism and is held in the month of February from 1st-15th every year. This craft Mela (fair) serves as a meeting ground for talented artists, painters, weavers, sculptors and craftsmen from all over India who display handicraft products in the typical setting of a rural Indian market place. The place is visited by number of domestic and International tourists and the foot-falls seems to be multiplying every year.

Green Environment

Away from the hectic and congested life, Surajkund offers an environment like no other place in Delhi. The place displays a sense of peace and traditional touch which is envied by every Delhiite. People are opting for Surajkund for its peaceful natural surroundings. Renowned developers are coming up with township projects in and around localities of Surajkund. The first township project near Surajkund is Charmwood Village by the Eros Group covered in the area of 65 acres. Omaxe, Ansals are also setting up their residential projects.

These attractive townships are sufficient to satisfy the needs of people. Bungalows, apartments and villas are available here with all the modern amenities. The rates of residential properties range between Rs 6,500-Rs 8,000 per sq ft. The rent is around Rs 20,000 for 2 BHK flat and varies on the bases of size and type. Ansal and Crown Plaza have lavishly designed malls catering to children’s entertainment and hospitality, along with other commercial and residential projects. Numbers of other residential projects are in pipeline and soon going to be launched.

Infrastructural developments

Social infrastructure is also developing at the fast pace to support the physical infrastructure in Surajkund. All the national and international based schools and educational institutes have come up in the periphery to benefit the students with a pollution free atmosphere. MNV public school, Delhi Public School and Manav Rachna School are to name a few. Transportation is also improving by and by with Delhi’s bus stand just 1 km from the Surajkund. Local rickshaws and autos are also available for intra-city connectivity.

The property price of Surajkund has increased three times in last couple of years. Planned infrastructure, township projects of big brands, proposed Metro in main Faridabad and rise in the prices of real estate property of other cities, involvement of Haryana government in the overall development of Surajkund make it a good choice for real estate investors.

Simple Things Real Estate Agents Should Know Before Referring a Contractor

As a real estate agent you have probably been bombarded with numerous requests by your clients for the names of contractors; floor guys, cabinet guys, tile guys, plumbers, electricians, handymen, etc. Before you refer any contractors or any vendors to your clients it is important to make sure you know who they are. Agents should seriously consider asking the following simple but extremely important questions below before referring contractors or vendors to their clients.

Contractor and vendor referrals can and will reflect your own professional judgment and probably will affect the most important stream of future business in your career. Agents are also fiduciaries and they must put their client’s interests and concerns above all else, and ultimately make the best available recommendations. Referring clients to a contractor or a vendor just because another realtor or friend says, “Oh, I’ve used them for years” is not advisable. You should always get to know the contractor or vendor before you refer them.

The following simple questions should be considered before you refer someone new:

1. What is the Contractor’s Background, Experience, and Time in Community?

Agents must know how long a contractor has been in business, their work experience, including how long they have been located in the area, and what licenses and types of insurance they possess. Also, it is important to know how long this particular contractor has lived in your community. A long time resident contractor is less likely to damage his/her reputation if they plan on staying in their long-term community. Moreover, ask for a list of references to call before you make the referral.

2. Does the Contractor Have Commercial General Liability Insurance?

CGL insurance is not required for contractors to be in business. Although this may seem odd it is a fact and a majority of smaller contractors do not carry CGL insurance. CGL insurance would be effective if a contractor caused property damage or personal injury on a client’s property during their work. This question is an absolute must prior to hiring a contractor.

3. Does the Contractor Use A Valid Construction Agreement?

In my experience 8 out of 10 construction contracts I read do not comply with the minimum state and contractor’s licensing law requirements. Typically, contractors unknowingly fail to leave out the important consumer protection provisions like mechanic’s lien notices, insurance clauses, three-day right to cancel requirements, and similar provisions. The best practice before you refer a contractor is to have them submit to you a sample contract such that your client has an opportunity to review it with counsel should they so choose.

4. Is the Contractor Adequately Capitalized?

In the last few years the number of contractors who end up on the wrong side of litigation, file for bankruptcy protection, or are judgment proof has skyrocketed. I always remind my clients that “there is a high price to the low bid,” in that it makes economic sense on all sorts of levels to do business with financially sound contractors even if they are initially more expensive. Most litigation against smaller contractors forces them into insolvency. A reputable well established contractor, with roots in the community and a stable balance sheet would be the wiser choice 9 out of 10 times. Don’t hesitate to ask the contractor how they are doing financially. The worst they could do is refuse to tell you and then you have somewhat of an idea of what they are about.

The Bottom Line

Ideally, your clients wouldn’t ask you for the referral in the first place, but that is not a reality and you are quite possibly the most knowledgeable person about real estate and construction they know. Your job prior to referring a contractor is to find out the answers to these questions such that you are well-informed and make the best possible referral to your clients you can. Doing your homework will give you an edge on your competition and your clients will think of you when someone asks them, “Do you know a realtor I could use?”

Resistance to the New Marketing in Construction and Real Estate

Marketers advocating social media marketing in many real estate and construction companies face an uphill battle because few companies in the industry are taking advantage of this new marketing based on information obtained from MorganSullivan’s 2008 social media survey. Let’s be honest, social media marketing represents change and that’s not easy in many construction and real estate company cultures where traditional marketing has worked for many years. Here are a few ways to lobby those resistant to the new marketing.

Baby steps. It took years before people started using telephone answering machines, but eventually people adopted the technology. It’s best to start in little increments and understand that people will not necessarily buy into your way of thinking overnight. Begin a campaign to communicate the potential benefits of social media marketing and use examples to back up your case.

Show sensitivity to people who feel strongly about traditional methods of marketing. Many CEO’s and senior managers in construction and real estate enjoy seeing their company name featured in commercials, advertisements, sponsorships, etc. Some of these old ways of marketing still work and asking them to change is probably a battle not worth fighting in most cases. Listen to management concerns and identify areas of common ground when advocating for social media as part of the overall marketing strategy.

Make comments to blogs and online media publications and communicate the results. Making comments to blogs and then making note of how often your company shows up on search engines like Google after making these comments can be very persuasive when lobbying people in your company of the potential marketing benefits available through social media.

Use examples of social media marketing to make your case. Highlighting examples where construction and real estate companies are using social media will give you more credibility with management. Perini is one construction company linking social media sites in their press releases and Century 21 is a great example of a real estate company benefiting when David Meerman Scott wrote a blog posting about the company and created enough buzz to get the Century 21 listed on the first page of the Google search engine.

Start a blog and communicate success stories to persons of influence within your organization. According to the survey, most construction and real estate companies have web sites, but do not have blogs. It is difficult to see any benefit from blogging without having a blog. Start a blog and post regularly. Link to relevant blogs and communicate your activities to key people within your company. Make sure you talk about the results you’re getting i.e. comments, traffic to your blog, new inquiries, etc. Eventually, people will begin to notice and you’ll start to build allies within the organization.

Don’t forget to communicate the costs of your online efforts. It’s one thing to communicate success stories i.e. getting published, increased web traffic etc., but having the ability to demonstrate the benefits versus the costs can go a long way when making your case for the new marketing. Social media marketing is not free, but it is often much less expensive than other forms of marketing like advertising or direct mail. Track the costs required to get additional web traffic and PR from social media marketing and you will begin to make a good case for incorporating social media marketing into the companies’ overall marketing strategy.

Miami Real Estate

A loan on secured by Miami real estate collateral is typically known as a mortgage. This is the most popular form of real estate investment loan used by investors. Miami real estate investments provide an opportunity to generate cash flow. Apart from commercial banks, savings banks, savings and loan associations, credit unions, real estate investment loans can also be obtained from insurance companies, mortgage bankers, mortgage trusts, investment trusts, pension funds and finance lenders. Private individuals sometimes offer real estate investment loans as well.

There are two types of Miami real estate investment loans, namely, residential loans and commercial loans. Property that is solely used for business purposes like malls or industrial parks would be termed as commercial real estate. Commercial loans include buildings, warehouses, and stores. These properties are generally five or more units. Property that is solely used for single unit housing purposes is termed as residential real estate. Residential loans include those properties that are bought for rental income and future appreciation. The borrower initially receives a lump sum from the lender, which has to be paid back in installments. Purchasing a Miami real estate residential property involves having significant funds. Before qualifying for an investment loan, three main factors are considered: investor’s income, credit scores and reserves. In order to qualify for a loan, there are five basic essentials: interest rate, terms, payment, final value and principal. Loans can carry a fixed interest rate or rates that vary with market conditions. Some loans have negative amortization periods; investors should be cautious of such loans.

Miami real estate investment loans comprise of interim loans, short-term loans and long-term loans. Apart from commercial and residential loans, the other types of loans that are offered are construction debt, permanent debt, equity financing, structured financing, interim financing, mezzanine financing, foreclosure investor money, hard money loans and residential repair funding.

Investors may not need perfect credit scores to qualify for real estate investment loans. Bad credit real estate loans are designed for those individuals who have a less than perfect credit report. It is a type of sub prime mortgage and is a higher risk to the mortgage lender because of the past credit history of the borrower. Bad credit loans allow individuals to obtain a mortgage for buying real estate when other more conventional mortgage lenders or banks may have turned them down.

The longer the tenure of a loan, the higher the interest rate will be. A 30-year fixed loan will have a higher interest rate than a 2-year fixed loan. But people generally opt for a loan with a shorter-term fixed option, as the rate of interest is lower and hence the monthly payment is lower. To get a loan there are no pre-determined limits set for the real estate investor.