Hogan Lovells Advises VICI Properties on $2.5B Credit Facility
Hogan Lovells Advises VICI Properties on $2.5B Credit Facility. Global law firm Hogan Lovells has advised VICI Properties Inc. (NYSE: VICI) on securing a US$2.5 billion multicurrency revolving credit facility for its subsidiary, VICI Properties L.P. The deal strengthens VICI’s liquidity and provides flexible financing options as the company continues to grow its expansive portfolio. […]
Dewberry Group, Inc. v. Dewberry Engineers Inc. (No. 23-900)
The federal Lanham Act provides that a plaintiff who prevails in a trademark infringement suit is sometimes entitled to recover the “defendant’s profits” derived from the infringement. But does the “defendant’s profits” look only to the named defendant, or can it consider the profits of separately incorporated affiliates that were not parties to the lawsuit? In Dewberry Group, Inc. v. Dewberry Engineers Inc. (No 23-900), a unanimous Supreme Court held that district courts may “award only profits properly ascribable to the defendant itself” absent some legal basis (like veil piercing) for looking beyond the named defendant to related entities.
The case began with a trademark infringement suit between two real-estate companies: Dewberry Engineers and Dewberry Group. (As the Court’s opinion acknowledged, any summary of the facts was itself likely to create confusion because there were “too darn many Dewberrys.”) After Dewberry Engineers emerged victorious, it sought to recover the “defendant’s profits,” as authorized by the Lanham Act. But the only named defendant was Dewberry Group. Unfortunately for Dewberry Engineers, Dewberry Group has no profits: It provides various business services at below-market rates to separately incorporated companies also owned by Dewberry Group’s owner, thus operating at a significant loss. And while those affiliates earn millions of dollars in profits, those profits go to the books of the affiliates alone, not back to Dewberry Group. No matter, said the District Court: It would look to the “economic reality” of the situation and treat the affiliates and Dewberry Group “as a single corporate entity” for purposes of calculating the “defendant’s profits.” It therefore awarded $43 million to Dewberry Engineers, an award (and methodology for calculating it) that the Fourth Circuit affirmed.
In a unanimous opinion by Justice Kagan, the Supreme Court held that the District Court and Fourth Circuit had erred by including the affiliates’ profits in the calculation of the “defendant’s profits.” Kagan began by noting that the ordinary legal meaning of the term “defendant” refers only to the entity actually sued—here, Dewberry Group alone. And while Dewberry Engineers could have added the affiliates as defendants, for whatever reason, it hadn’t. Kagan then turned to “background principles of corporate law,” which generally prohibit courts from treating separately incorporated affiliates as a single legal entity absent some recognized exception. Piercing the corporate veil is one such exception, but Dewberry Engineers had never tried to establish the facts required to pierce Dewberry Group’s corporate veil and reach its affiliates. For these reasons, the lower courts “were wrong to treat Dewberry Group and its affiliates as a single entity in calculating the ‘defendant’s profits.’”
Justice Kagan then turned to an alternative argument raised by Dewberry Engineers to defend the lower courts’ award: Another sentence of the Lanham Act provides that, “[i]f the court shall find that the amount of the recovery based on profits is either inadequate or excessive[,] the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances.” Kagan rejected Dewberry Engineers’ reliance on that provision, observing that neither the District Court nor Fourth Circuit had based the award on this “just-sum provision.” Instead, the decisions below reasoned only that the courts could disregard the affiliates’ legally separate status. The Court therefore vacated and remanded the case back to the district court for a new award proceeding. Those new proceedings could include consideration of this “just-sum” provision. They could also involve an analysis of whether corporate-veil piercing was an available option. And the lower courts could take up the suggestion of the United States Government as amicus curiae that in calculating a the named defendant’s profits, courts can “look behind” the defendant’s books to identify “the defendant’s true financial gain,” i.e., that Dewberry Group may effectively be earning a profit on its infringing activities even if its books don’t say so.
Justice Sotomayor briefly concurred. She agreed that “principles of corporate separateness,” as well as the Lanham Act’s statutory text, “forbade the lower courts from attributing to Dewberry Group all the profits of its affiliates, absent veil piercing.” But she also noted that such legal principles “do not blind courts to economic realities” or “force courts to accept clever accounting, including efforts to obscure a defendant’s true financial gain through arrangements with affiliates.” She reasoned that there were still “myriad ways” by which courts could consider arrangements with affiliates when calculating the “defendant’s profits.” In particular, she opined that courts could take into account “a non-arm’s-length relationship with an affiliate that effectively assigns some portion of its revenues to the latter,” as well as “evidence that a company indirectly received compensation for infringing services through related corporate entities.”
BREAKING: Rocket to Acquire Redfin for $1.75 Billion!
In very big news today, the Rocket Companies announce plans to acquire real estate brokerage giant Redfin for $1.75 billion of equity value.
While this is obviously huge news in the mortgage/real estate space, how does this affect the lead gen market as a whole?
One, it gives Rocket a better and potentially easier entrance to the purchase mortgage market which the company has historically struggled with. Rocket is a master at refinance lead gen and they drive huge numbers both organically and through third party lead providers. However, their share of the purchase market has not kept up with their share of refinance. There is a lot of reasons for this, but this acquisition should help bolster growth there.
Two, it will be interesting to see how this affects lead generators, such as LendingTree, Zillow and other platforms. Does Rocket and their loan officers pull off of any advertising they are doing on these platforms to focus on Redfin? Can Redfin take advantage of the Rocket marketing machine to grow their own marketshare and therefore, use the newfound leads to supply Rocket with the leads they need to continue at their current or prospective level?
Three, it’s a clear sign that Rocket is not content to rest on its laurels. The company has had six consecutive quarters of YOY growth. This is a growth play and with an estimated $200 million in runrate synergies, it could be huge.
Very interesting to watch how this ripples out into the ecosystem.
And, oh yeah, Rocket is still appealing the LMB TCPA class action with briefs filed last week. So, those “synergies” could be very helpful in the future.
Owning Real Property Near Military Bases: Considerations for Buying, Selling, and Developing Land in an AICUZ
You have found the perfect spot for a new neighborhood, office complex, or retail center—only to discover it’s within an Air Installations Compatible Use Zone (AICUZ).
Suddenly, noise levels, building heights, and safety concerns pose unexpected restrictions. An AICUZ is designed to protect both communities and military operations, but it also brings unique challenges for development.
What is an AICUZ?
To promote the health, safety, and welfare of those in the vicinity of airbases and to protect the operational capability of air installations, an AICUZ restricts the types of buildings and activities that can occur around air bases. The creation of an AICUZ typically begins when the Air Force presents an AICUZ study to a local government for its use in land use planning efforts. These studies include detailed analyses of current and future base operations, accident potential, aircraft noise, and land-use compatibility. The local government then implements AICUZ study findings through the adoption of local land use mechanisms, such as zoning, building codes, and comprehensive plans.
Locating Property in an AICUZ
To find out if your property, or a property you hope to purchase, is in an AICUZ, a helpful first step is to check your county’s tax map, which is often accessible via the county’s Geographic Information System (GIS). Searching these online records may indicate where an AICUZ is located and if an AICUZ disclosure statement is associated with your property. GIS information can also show details like accident potential zones and specific noise exposure risks for your property.
Common Compliance Issues with an AICUZ
In AICUZ-designated areas, land use restrictions impact a wide range of property uses and aim to limit incompatible activities. For example, schools, hospitals, and high-density residential buildings may be restricted within an AICUZ to reduce the risk of large gatherings of people or the impact of the associated air noise. Instead, these areas may be more suitable for light industrial, agricultural, or recreational uses that have fewer people on-site and are more resilient to noise.
Once a desired land use is deemed consistent with the AICUZ, various regulations typically apply to the land. Take, for example, someone who plans to develop a shopping center within an AICUZ and intends to sell or lease individual units within it. From the outset, the developer may be required to comply with specific minimum building-to-lot area ratios, which could vary based on the type of business the tenant operates. Then, the developer may need to provide disclosure statements to prospective buyers or tenants, along with a written acknowledgment confirming their awareness of the AICUZ location. Failing to provide these notices can result in civil fines.
Additionally, local governments with an AICUZ may require those expanding existing buildings or constructing new ones to go through a special building plan review process. In the shopping center scenario, the developer must check local ordinances to understand the application process and adhere to any special building requirements, which might include restrictions on building height and types of approved construction materials. Developers may also find that to comply with AICUZ provisions, projects are required to include soundproofing features such as enhanced insulation, specialized windows, and noise barriers – all of which can increase construction costs.
To determine which restrictions apply in your specific AICUZ, consult your city’s or county’s development ordinance for the “table of uses.” This table typically details which residential and commercial developments are acceptable or restricted based on the AICUZ zone the property is located in.
Conclusion
Development on property located in an AICUZ is not impossible, but following the right procedures from the start will help ensure your development plans are ready for takeoff
Maryland OFR Responds to Market Concerns Over Licensing Requirements for Mortgage and Installment Loan Assignees
On February 18, the Maryland Office of Financial Regulation (OFR) issued an alert to address industry concerns regarding its January guidance on licensing requirements for assignees of residential mortgage and installment loans. In response to market pushback, the OFR has proposed new legislation to exempt certain entities from licensing requirements and has extended the enforcement deadline to allow for further regulatory clarity.
Background: Initial Licensing Guidance and Market Response
On January 10, the OFR issued formal guidance (previously discussed here) stating that assignees of residential mortgage loans—including certain passive trusts—must obtain a Maryland Mortgage Lender license before April 10, 2025, unless expressly exempt under Maryland law. The guidance also extended licensing obligations to assignees of installment loans that fall under the Maryland Credit Grantor provisions.
Following this announcement, the market reacted with significant concern. Some industry participants temporarily halted purchasing Maryland mortgage loans, while others questioned the feasibility of requiring passive trusts to obtain state licensing.
OFR’s Recent Actions to Address Concerns
On February 17, two identical bills—Senate Bill 1026 and House Bill 1516—were introduced under the Maryland Secondary Market Stability Act of 2025. If enacted as proposed, the legislation would exempt assignees of mortgage loans from Maryland’s Mortgage Lender Law, provided they do not engage in loan origination, brokering, funding, or servicing. Similarly, the Installment Loan Act would not apply to assignees of installment loans if they neither originate loans nor engage in loan servicing or collections. These provisions would exclude passive trusts from the licensing requirements, addressing one of the industry’s primary concerns.
Extension of Enforcement Deadline and Additional Clarifications
On February 18, the OFR also issued an alert, extending the enforcement deadline for its licensing guidance from April 10, 2025, to July 6, 2025. The extension should allow affected entities to assess the outcome of the legislative efforts before incurring licensing costs.
The OFR also clarified that commercial lenders making loans solely for business purposes under Maryland’s installment loan statutes are not subject to the new licensing requirements. This exemption aims to ensure that business lenders are not inadvertently swept into the expanded regulatory framework.
Previous OFR Clarifications Regarding Federal and Governmental Entities
These developments follow an earlier clarification issued by the OFR regarding the application of its guidance to government-sponsored entities. In a January 31 update, the OFR confirmed that the new licensing requirements do not apply to Fannie Mae, Freddie Mac, Ginnie Mae, or other corporate instrumentalities of the federal government. The exemption also extends to trusts engaged in mortgage loan acquisitions under federal, state, or local government programs. This aims to ensure that federally backed secondary market participants remain unaffected by the licensing changes.
Putting It Into Practice: These recent actions highlight the evolving interpretations of Maryland’s Mortgage Lender Law and Installment Loan Law as they apply to assignees of covered loans, including passive trusts. Industry participants should remain vigilant in tracking these developments to ensure they are prepared to comply with any legislative changes and licensing requirements enacted by the OFR or other state regulators.
Navigating Houston’s Unique Port, Rail, and Industrial Distribution Market: A Legal Perspective
Houston, Texas, is a powerhouse of industrial distribution, boasting one of the most dynamic logistics and transportation infrastructures in the United States. The city’s strategic location, access to global markets, and robust regulatory framework make it a critical hub for businesses involved in trade, shipping, and industrial operations. As the Port of Houston, extensive rail networks, and inland logistics infrastructure continue to fuel economic growth, the region presents unparalleled opportunities for developers, investors, and businesses seeking to optimize their supply chains and expand market reach.
However, Houston’s unique characteristics—marked by rapid growth, a diverse logistics ecosystem, and the absence of traditional zoning laws—also pose distinct legal challenges. Navigating this evolving landscape requires a comprehensive understanding of the city’s regulatory environment, environmental compliance requirements, and the increasingly complex negotiations surrounding land transactions and leases.
Notably, as land scarcity intensifies and transaction volume begins to moderate, legal practitioners have observed a significant increase in the length and complexity of negotiations. With greater competition for prime sites and heightened regulatory scrutiny, meticulous legal planning has become more essential than ever for achieving sustained success in Houston’s dynamic industrial market.
Current Market Trends and Legal Impacts
Shifting Construction DynamicsThe recent surge in industrial construction has given way to a more balanced market. Reports from industry sources indicate a slowdown in new project starts. This shift is prompting more detailed negotiations around project timelines, self-help rights, and liquidated damages provisions, particularly as developers and tenants seek to mitigate risks associated with supply chain disruptions. Force majeure clauses and escalation provisions have also taken on heightened importance as parties attempt to allocate risks arising from unforeseen delays. Careful drafting and negotiation of these provisions are critical to avoiding disputes and preserving project viability.
Port of Houston: A Hub of Opportunity and Regulatory ComplexityThe ongoing expansion of the Port of Houston continues to fuel demand for logistics hubs and intermodal facilities. As one of the busiest ports in the United States, the Port handled a record‑breaking 53.07 million tons of cargo in 2024, a 6% increase over 2023. Its diverse cargo mix—including bulk commodities, breakbulk, and containerized goods—gives Houston a competitive edge over ports like Los Angeles, which primarily handle containerized shipments.
However, port-related development requires navigating a complex web of environmental regulations, including wetlands protections, air quality standards, and stormwater management requirements. Developers must engage experienced legal counsel to ensure compliance and mitigate potential liabilities.
E-Commerce and Last-Mile Logistics: Urban Planning ConsiderationsThe rise of e-commerce continues to drive demand for last-mile distribution centers, particularly in densely populated urban areas. However, the siting of these facilities presents unique legal challenges. Local ordinances, traffic flow considerations, and community impact assessments all play a crucial role in project feasibility.
Compared to markets like Los Angeles and Chicago, Houston benefits from fewer regulatory constraints and lower development costs. However, developers must conduct thorough due diligence to secure necessary permits and address potential community opposition.
Vacancy Rates and Lease Agreements: The Art of NegotiationHouston’s industrial sector experienced a continued decrease in overall vacancy rates in Q4 2024, falling to 5.6%. This tightening market is reshaping lease negotiations, with landlords seeking longer lease terms, higher rents, and more stringent indemnity provisions. At the same time, tenants are pushing for greater flexibility through termination rights, rent abatement clauses, and detailed service level agreements.
As land becomes more scarce, parties are also placing greater emphasis on access easements, shared infrastructure agreements, and self-help provisions—further contributing to the increasing length and complexity of negotiations.
Investment Sales: The Importance of Comprehensive Due DiligenceDespite market fluctuations, industrial property sales remain a significant component of Houston’s real estate market. However, in a shifting economic climate, thorough due diligence is more critical than ever. Title examinations, environmental assessments, and reviews of existing encumbrances are essential to identifying potential legal risks.
With competition intensifying for prime sites near logistics hubs, investors are spending more time negotiating detailed representations, warranties, and indemnity provisions—adding further complexity to transaction timelines.
Legal Considerations in Houston’s Industrial Development
Navigating Houston’s industrial real estate landscape requires a keen understanding of the city’s unique regulatory environment.
Absence of Traditional Zoning LawsHouston distinguishes itself from other major markets by operating without traditional zoning laws. Instead, development is governed by a combination of subdivision regulations, deed restrictions, and local ordinances. This unique framework requires developers to take a more proactive approach to site selection, easement negotiation, and community engagement.
Environmental and Community ConsiderationsEnvironmental considerations remain paramount, particularly for projects near the Port of Houston or in environmentally sensitive areas. Recent disputes underscore the importance of thorough environmental compliance and community engagement. Developers must work closely with legal counsel to obtain necessary permits, mitigate community concerns, and ensure compliance with federal and state environmental regulations.
Permitting ProcessThe Houston Permitting Center oversees commercial plan reviews and permitting processes for new industrial developments. Developers must navigate these processes carefully to avoid delays and ensure projects comply with applicable building codes and safety standards.
Proactive Strategies for Sustained Success
To effectively navigate Houston’s evolving industrial and logistics landscape, developers and investors should adopt the following strategies:
Engage Experienced Legal CounselCollaborating with legal professionals who understand Houston’s unique regulatory environment is essential to navigating permitting processes, negotiating contracts, and ensuring compliance.
Conduct Comprehensive Due DiligenceThorough investigations of potential development sites, including title examinations, environmental assessments, and existing encumbrances, can help preempt future challenges.
Prioritize Environmental ComplianceEngaging environmental experts and legal counsel early in the development process can mitigate legal risks and foster positive community relations.
Leverage Economic IncentivesHouston offers various economic incentives, including tax abatements and grants, to attract industrial development. Legal counsel can assist in identifying and securing these incentives.
Conclusion
Houston’s industrial and logistics market presents unparalleled opportunities for developers, investors, and businesses seeking to optimize supply chains and expand market reach. However, as land becomes more scarce and regulatory scrutiny intensifies, legal negotiations have grown increasingly complex.
By proactively addressing zoning, environmental, and contractual considerations—and engaging experienced legal counsel—stakeholders can position themselves for sustained success in this dynamic market.
San Francisco v. EPA: Supreme Court Strikes Down EPA’s “End-Result” Permit Requirements
On March 4, 2025, the U.S. Supreme Court issued a 5-4 decision in City and County of San Francisco v. Environmental Protection Agency, narrowing the Environmental Protection Agency’s (EPA) authority under the Clean Water Act (CWA) to impose outcome-based permit conditions—termed “end-result” requirements by the Court—on entities discharging pollutants into U.S. waters. The majority held that the CWA does not authorize the EPA or states to enforce permit provisions that make permittees responsible for the quality of receiving waters absent specific, quantifiable effluent limitations. This decision has immediate implications for the National Pollutant Discharge Elimination System (NPDES) permitting framework, particularly regarding the enforceability of narrative water quality standards.
Legal Background
Enacted in 1972, the CWA establishes a comprehensive framework for regulating the discharge of pollutants into U.S. waters, primarily through the NPDES permitting program. Under the CWA, EPA and authorized state agencies issue permits that impose “effluent limitations”—specific, quantifiable restrictions on the “quantities, rates, and concentrations” of pollutants discharged by permit holders. These permits also typically include monitoring, recordkeeping, and reporting requirements, as well as best management practices designed to minimize pollution. Notably, the CWA’s “permit shield” provision protects permittees from liability under the Act, provided they comply with their permit terms.
This case addressed the validity of “end-result” requirements, which condition a permittee’s compliance on the quality of the receiving water rather than on adherence to specific effluent limitations. These provisions effectively impose liability for water quality standard exceedances whether or not a permittee’s discharge is the proximate cause of a violation.
Factual and Procedural Background
San Francisco operates two combined sewer systems: the Bayside facility, which discharges into San Francisco Bay, and the Oceanside facility, which empties into the Pacific Ocean. The Oceanside facility occasionally overflows during heavy rainfall, releasing untreated wastewater, including raw sewage, into the ocean. In 2019, the EPA incorporated two end-result requirements into the Oceanside facility’s NPDES permit: (1) a prohibition on discharges that “contribute to a violation of any applicable water quality standard,” and (2) a ban on discharges that “create pollution, contamination, or nuisance” as defined by California law. San Francisco challenged these provisions, arguing that they imposed vague and unattainable obligations, exposing the city to enforcement actions for water quality standard exceedances beyond its control.
San Francisco appealed these provisions to the EPA’s Environmental Appeals Board, which upheld them, and then petitioned for review in the U.S. Court of Appeals for the Ninth Circuit. A divided panel of the Ninth Circuit deferred to the EPA’s interpretation of the CWA, holding that Section 301(b)(1)(C) authorizes the agency to impose “any” limitations necessary to achieve water quality standards. The Supreme Court reversed.
The Court’s Opinion
Writing for the majority, Justice Samuel Alito, joined by Chief Justice Roberts and Justices Thomas, Kavanaugh, and, in part, Neil Gorsuch, held that the CWA does not authorize the EPA to impose end-result requirements. The Court’s analysis rested on the statutory text, legislative history, and the overall regulatory framework. The Court focused on Section 301(b)(1)(C), which authorizes “any more stringent limitation” necessary to meet water quality standards, concluding that this provision requires EPA to include specific, quantifiable effluent limitations in discharge permits rather than open-ended directives tied to ambient water quality. Justice Alito reasoned that end-result requirements undermine the CWA’s objective of providing clear, ex ante compliance obligations by exposing permittees to liability for conditions beyond their control, such as pollution from upstream sources.
The Court also examined the evolution of federal water pollution regulation, noting that Congress deliberately rejected the pre-1972 framework, which held permittees liable for water quality exceedances, in favor of a discharge-based regulatory system. The majority concluded that end-result requirements effectively reintroduced the discarded approach Congress sought to eliminate. Finally, the Court identified two structural features of the CWA that conflict with end-result requirements: (1) the permit shield provision, which would be rendered ineffective if permittees could be held liable for water quality violations despite full compliance with permit terms, and (2) the absence of a statutory mechanism for apportioning liability among multiple dischargers contributing to water quality exceedances.
Justice Amy Coney Barrett, joined by Justices Sotomayor, Kagan, and Jackson, dissented. While acknowledging the importance of regulatory specificity, Barrett defended the EPA’s use of narrative standards as a necessary “backstop” when precise effluent limitations alone fail to protect water quality. She cautioned that the majority’s decision could constrain the EPA’s ability to craft effective permits, particularly in cases where permittees fail to disclose critical discharge data.
Implications
The ruling has significant implications for the EPA, regulated entities, and broader water quality enforcement efforts. Industry groups and municipal authorities hailed the decision as a win for regulatory certainty, as it requires the EPA to establish clear, quantifiable permit conditions rather than ambiguous, outcome-based standards. This shift may mitigate compliance risks and reduce regulatory exposure for businesses and municipalities. Conversely, environmental advocates have expressed concerns that the decision could weaken the CWA’s ability to protect water quality, particularly in complex, multi-discharger scenarios. The ruling could also lead to delays in the permitting process, as EPA will need to compile more detailed discharge data to establish specific effluent limitations.
Looking ahead, the EPA and delegated states must replace vague “don’t violate water quality standards” directives in CWA permits with specific technologies and conditions necessary to meet water quality standards during the five-year permit renewal cycle. Whether the EPA can muster the resources for this demanding task remains unclear. Entities with NPDES permits should examine their permits to identify any problematic “end-result” provisions.
Important Negotiating Points in Commercial Real Estate Purchase and Sale Contracts Negotiating the Letter of Intent
In our latest upcoming series of blog posts, we will look at several key points to consider when negotiating commercial real estate purchase and sale agreements from the perspectives of buyers and sellers.
The first post in our series offers suggestions for negotiating the letter of intent. The letter of intent, although usually non-binding, is an important first step in the commercial real estate contract process. It makes the agreement as to business terms clear, sets expectations of the parties, and serves as a guide for the contract negotiation process going forward.
The following are the key points to address in the letter of intent (the “LOI”):
Purchase Price: The LOI should specify the purchase price and how the purchase price shall be paid. The Seller and Buyer should consider the amount of the deposit and whether there will be an additional deposit after expiration of any due diligence period. In addition, the Seller and Buyer may agree to a purchase money note at closing, rather than cash due at closing. In such cases, the terms of such purchase money note and any security should be specified in the LOI.
Deposit: Issues to consider include the dates upon which the initial deposit and any additional deposits are due, the party who will hold the deposit, whether the deposit will be refundable, and whether it will become non-refundable at a certain point or under certain circumstances. The parties in commercial real estate transactions often agree to have the buyer’s title company hold the deposit.
Due Diligence Period: The LOI should make clear the timing of the diligence period and scope of diligence activities.
Financing: The terms of any financing contingency should be addressed in the LOI, including the timing and expiration of the financing contingency period, acceptable forms and term of financing, and Buyer’s termination rights.
Title Insurance: The LOI should address whether the parties agree to any permitted encumbrances, Seller’s obligations to deliver clear title at closing, any Seller cure rights with respect to any encumbrances, and which party will obtain and pay for the title commitment and title policies (which is often based on custom in the area in which the property is located, but can be negotiated by the parties).
Closing Costs. Responsibility for common closing costs that should be covered in the LOI include title company fees for settlement services and disbursements at closing, realty transfer fees, document preparation fees, and recording fees. As with responsibility for payment of title insurance searches and premiums, these costs are also usually based on custom in the location where the property is located but can certainly be negotiated.
Purchasing Entity: If a Buyer anticipates creating a new entity for the purpose of taking title to the property after the contract is finalized, Buyer should include in the LOI Buyer’s right to assign the contract to such entity prior to closing.
Closing Deliverables and Conditions: The LOI should list the Seller’s and Buyer’s deliverables and conditions to closing. A Buyer will also want to obligate a Seller to provide tenant estoppels if there are leases being assigned at closing, Subordination Non-Disturbance and Attornment Agreements if required in connection with financing the purchase, and any other documents reasonably required by Buyer or its title company.
Closing: The LOI should specify the closing date and location. It should also state any adjustments to be made at closing, including prorations for utilities, taxes, any applicable association fees, and any applicable tenant rents. Buyers may seek to include a right to extend the closing date, although depending on the circumstances of the transaction, both parties may benefit by building in an extension right.
Miscellaneous: The LOI should also include any notice and cure periods for defaults, time of the essence clauses, 1031 exchange cooperation, any other contingencies such as zoning approvals.
This series of blog posts will explore each of the foregoing points in more detail. In our next blog post, we will examine the importance of negotiating purchase price and deposit provisions and will offer suggestions as to how a buyer and seller might each optimize their positions.
If You Wanted Heat, You Should Have Put It In The Lease
A D.C. hospital operator’s effort to get its HVAC system upgraded has backfired in nightmarish fashion for the operator.
Hospital operator DCA leased its Northeast D.C. premises from Capitol Hill Group starting in late 2014.
Shortly before the lease was signed, Capitol Hill Group had broken off a portion of the building as a residential property and decoupled the existing HVAC system, which involved installing HVAC components in the remaining hospital premises. The DCA lease acknowledged that Capitol Hill Group “has installed a new HVAC system within the [b]uilding.”
Upon occupying the premises, DCA came to believe that this “new HVAC system” did not adequately heat, cool, and ventilate the hospital. The alleged inadequacy related to the fact that Capitol Hill Group had installed only new boilers, chillers, and pumps, not new distribution components (i.e., air handlers and fan-coil units).
After fruitlessly complaining to Capitol Hill Group about the alleged inadequacy of the HVAC system, DCA began to withhold rent payments over the issue (and other issues not relevant here). This led to litigation, initially filed by Capitol Hill Group to recover the unpaid rent.
The lawsuit turned on whether the lease required Capitol Hill Group to install new distribution components as part of the “new HVAC system.” The courts – ultimately including the D.C. Court of Appeals, in an opinion decided March 6, 2025 – concluded that the lease did not require new distribution components. This holding was based on, among other things, the fact that the “new HVAC system” statement in the lease simply acknowledged what was already in place. Both parties knew what that was – and it did not include new distribution components. And nothing in the lease entitled DCA to something more.
Perhaps the worst part of the result for DCA is that it must pay $2.7 million in attorney fees to Capitol Hill Group as the prevailing party in the case.
So in the end – DCA is operating with (so it says) an inadequate HVAC system; is out of pocket for its expenses relating to the alleged inadequacy of the system; must pay late fees and interest on the rent it withheld over the HVAC issue; had to pay its lawyers to handle a lengthy lawsuit over these issues; and now must pay the fees of its landlord’s lawyers, as well.
All of which could have been avoided had DCA not signed a lease containing no assurances about HVAC distribution components or, indeed, the adequate functioning of the HVAC system in general.
If you need it, put it in the lease. And, if you don’t put it in the lease – think twice before playing hardball to get it.
Supreme Court Says EPA Has No Authority to Impose “End-Result” Requirements in Clean Water Act Permits
On Tuesday, March 4, 2025, the Supreme Court issued an opinion in City and County of San Francisco, California v. Environmental Protection Agency, U.S. No. 23-753 in which the City and County of San Francisco (San Francisco) challenged certain provisions in the Clean Water Act (CWA) National Pollution Discharge Elimination System (NPDES) permit for its Oceanside wastewater treatment plant (WWTP) that conditioned compliance on whether the receiving water body met certain water quality standards. Among other requirements and restrictions, the NPDES permit at issue prohibited the WWTP from 1) making any discharge that “contribute[s] to a violation of any applicable water quality standard,” and 2) performing any treatment or making any discharge that “create[s] pollution, contamination, or nuisance as defined by California Water Code section 13050.”
According to San Francisco, these permit requirements created significant uncertainty for the compliance status of its Oceanside WWTP by holding petitioner responsible for a condition it could not directly control—the quality of the oceanwater into which the WWTP discharges. The EPA, on the other hand, argued that it needs the authority to impose these “end-result” permit requirements when the regulated entity does not provide the agency with adequate information to craft more specific requirements that will be adequately protective of receiving water quality.
Justice Samuel Alito delivered the opinion of the Court, which held in a 5-4 opinion that the CWA provisions authorizing the EPA to impose “effluent limitations” (33 U.S.C. § 1311) in NPDES permits do not authorize such “end-result” requirements that “condition [permittees’] compliance on whether receiving waters meet applicable water quality standards.” In other words, the EPA cannot impose requirements that “simply tell[] a permittee that a particular end result must be achieved and that it is up to the permittee to figure out what it should do.” Justice Amy Coney Barrett, joined by three justices (Sotomayor, Kagan and Jackson), argued in dissent that there is nothing in the “straightforward statutory language” of the CWA that distinguishes “end-result” permit requirements from other requirements the majority found to be acceptable.
A driving concern for the majority was the potential hole that “end-result” requirements could create in CWA Section 1342(k), which deems a permittee to be in compliance with the CWA if it is in compliance with its permit. This “permit shield” provision offers certain legal assurances to permittees that would otherwise be exposed to harsh civil and even criminal penalties for violations of the CWA that are ultimately outside of their control. The Court found that “end-result” permit requirements, by “making the permittee responsible for any drop in water quality below the acceptable standard,” would potentially swallow the protections offered by Section 1342(k) and result in significant civil and criminal exposure for permittees, even when they comply with all the other terms of their permits.
A second key issue for the Court was the lack of any mechanism in the CWA for apportioning liability where multiple permittees, each with “end-result” permit requirements, discharge into the same water body. In such a case, the EPA would have to “unscramble the polluted eggs after the fact” to determine which permittee was liable. According to the Court, it was exactly this backwards-looking convoluted enforcement scheme that Congress sought to abandon when it amended the Water Pollution Control Act in 1972 to create the modern Clean Water Act.
Notably, the Court upheld “narrative” permit terms, such as requirements to implement best management practices without specifying the exact practices to implement in every given situation. In doing so, the Court rejected San Francisco’s argument that “all limitations” imposed under CWA Section 1311 must qualify as “effluent limitations” and upheld conditions that “do not directly restrict the quantities, rates, or concentration” of pollutants that a permittee may discharge.
The Court’s holding impacts NPDES permits throughout California and across the country. “End-result” permit requirements in the form of receiving water limitations are commonly found in general NPDES permits, including California’s Construction General Permit and Industrial General Permit, as well as site-specific NPDES permits. The Court’s holding also may impact pending regulatory and citizen-suit enforcement actions, at least to the extent such actions are based on “end-result” permit requirements similar to the ones rejected by the Supreme Court.
Property Resilience Assessments and ASTM Standard (E 3429-24): A Potential New Due Diligence Option for Real Estate Transactions
In order to address the growing challenges posed by escalating climate uncertainties in the real estate sector, ASTM International (ASTM) published in October 2024 the “Standard Guide for Property Resilience Assessments,” Standard E 3429-24 (Standard E 3429-24). Standard E-3429-24 is designed to assess how properties withstand and adapt to evolving environmental threats. By way of background, for over a century, ASTM has created and published various consensus standards that guide “best practices” in industries such as construction, real estate, engineering and environmental management. These standards are widely used in regulatory compliance, contractual agreements and industry best practices, with the aim of ensuring a consistent and reliable framework for evaluating risks and assessing performance. Real estate industry professionals have long relied on ASTM’s Standard E 1527-21 for Phase I Site Assessments to ensure that “all appropriate inquiries” are met under environmental statutory requirements. Standard E 3429-24 is intended to constitute a forward-looking “resilience assessment” for a property and to provide a new tool known as “Property Resilience Assessments (PRAs).” A PRA is intended to assess potential climate-related threats, evaluate a property’s vulnerabilities and recommend strategies to enhance resilience.
In practice, a PRA may be organized into up to three distinct stages:
Stage 1 – Hazard Identification: This stage identifies potential natural hazards that may affect a property. The PRA process includes evaluating a broad range of hazards and risks that may affect the property, including, among others, (i) extreme temperature fluctuation, (ii) geologic phenomenon such as earthquakes and coastal erosion, (iii) flood or drought conditions, (iv) wildfires and (v) wind related threats, including tropical cyclones, tornadoes and hurricanes. The findings are intended to provide a qualitative assessment of risk levels associated with each applicable hazard (e.g., an indication of severity and relative frequency of each identified hazard).
Stage 2 – Risk Evaluation: This stage evaluates the risks posed by the hazards identified in Stage 1. It includes an assessment of potential safety concerns, structural vulnerabilities and functional recovery time. The analysis incorporates both qualitative assessments (e.g., damage risks can be expressed on a multi-level system of “high, medium or low”) and quantitative assessments (e.g., damage risks can be expressed on the potential monetary value of repair or ratio of damage to the overall property) of potential harm that could be caused by such risks.
Stage 3 – Resilience Measures: This stage identifies conceptual resilience measures to enhance property-level performance and recovery. In Stage 3, information from Stages 1 and 2 is analyzed to identify potential measures to enhance a property’s ability to endure the risks identified in Stages 1 and 2, and to provide certain resilience measures that may be taken by the property owner, broken into three distinct categories: (i) Accommodate (e.g., elevate buildings and mechanical systems), (ii) Protect (e.g., build seawalls around the subject property), and (iii) Retreat/Relocate (e.g., remove or relocate a building and related infrastructure).
Importantly, ASTM clarifies that the development and use of PRAs is intended to provide a “flexible approach” to facilitate property-level decision-making, rather than prescribe a particular course of action with respect to the subject property. In contrast to traditional due diligence tools used in real estate transactions that assess pre-existing property conditions, such as a Phase I or a Property Condition Report, a PRA offers a forward-looking perspective that is inherently more subjective. The subjectivity of the PRAs may lead to additional negotiations among the parties involved with a property transaction (e.g., a borrower and its lender), but the PRAs will provide all parties with a more comprehensive understanding of future property risks and therefore enable more informed decision-making regarding investments in the property.
While the application and use of PRAs and Standard E 3429-24 have not yet been widely adapted as market standard in the real estate industry, a growing number of third-party providers are actively marketing services to produce these reports. Some providers note that the anticipated cost for a PRA is similar to that of a Property Condition Assessment, although it varies based on the size of the property, complexity of the asset and the number of hazards that are being considered. Standard E 3429-24 recommends that these providers possess a professional designation in architecture, engineering or science, along with three to five years of experience in building performance, natural hazard mitigation or resilience fields, applicable to the subject property.
As PRAs become more commonplace, they could be of assistance and provide guidance for real estate professionals who look to participate in transactions in markets that face perceived environmental threats or hazards, and if a particular property faces potential future environmental risks.
A link to ASTM’s Standard E 3429-24 may be accessed here.
Landlord’s Failure to Return Security Deposits: Legal Consequences in Florida
In Florida, receiving a security deposit back is a crucial concern for many tenants after moving out. Landlords are required under Florida law to return security deposits within 15 days if no claims are being made against them. If deductions are intended, landlords must provide a written notice within 30 days detailing the reasons for […]