M id A tlantic Real Estate Journal — Brokerage Directory — July 28 - August 10, 2017 — 3C


B rokerage D irectory

By Neil Andrew Stein, Esquire, Kaplin Stewart Brokers Beware – There’s Trouble In River City


n Broadway, “TheMu- sic Man” cautioned against “trouble in

commercial real estate deals. While any real estate pro- fessional is familiar with cus- tomary construction defect, environmental and breach of contract claims, more complex financial fraud and securi- ties cases are being brought against these third parties. This evolution in strategy is occurring because the na- ture and complexity of real estate investment continues to evolve. Real estate deals have matured, from individual holdings to 1031 exchanges, tenant-in-common vehicles and now real estate invest- ment trusts and crowdfunding.

These transactions may, ex- plicitly or implicitly, constitute the sale of a security or other form of financial instrument. So, when considering the form of investment vehicle, a third party must anticipate being named in a complaint alleging financial misman- agement, securities fraud and breach of fiduciary duty. Prudent third parties must seek to minimize these expo- sures through properly draft- ed transaction documents which include appropriate disclosures. Consideration must also be given in docu- ments to forum designation,

choice of law and the selection of arbitration or litigation remedies. Some may naively believe that a civil lawsuit for a failed real estate venture is the worst-case scenario, but this is simply not the case. Due to the frequency of investors seeking retribution after los- ing money, like Mr. Berger, any third party in a real estate transaction is at risk. Risk may not come just from a lawsuit, but may stem from the government inserting itself. The SEC remains ac- tive in the enforcement of securities and financial fraud

laws and a change in the oc- cupancy of the White House may not matter. In any event, state attorneys’ general would likely fill any void in federal enforcement. A prepared third party will ensure that it is aware of these issues and will take all neces- sary precautions if, in fact, there is trouble in River City. Neil A. Stein, Esquire is a principle of Kaplin Stew- art Meloff Reiter & Stein, P.C. and a member of the Land Use, Zoning & Devel- opment and Real Estate, Business & Finance Trans- actions Departments. n

River City.” In a pend- ing lawsuit, Berger et al v. Cushman & Wakefield of Pennsyl- vania Inc. et al, case num- ber 2013-cv-

Neil Stein

05195, the U.S. District Court for the Eastern District of Pennsylvania is examining trouble from River City; an 8.2-acre parcel along Phila- delphia’s JFK Boulevard, marketed as a 12 million s/f mixed-use development, in- cluding 600-foot skyscrapers. Berger’s lawsuit accuses Cushman & Wakefield of recklessly overvaluing the de- velopment and claiming that zoning changes - which were pending before city council at the time - would not affect the development. However, the project was dashed in part be- cause of a pending ordinance to restrict building height. The development was marketed by Charles M. Naselsky, a now convicted former real estate partner at both Blank Rome and Cozen O’Connor. As a result of Naselsky’s involve- ment, both law firms have been named as defendants. A discussion of the lawsuit, still mired in preliminaries, is beyond the scope of this article. The point is that with alarming frequency, seem- ingly innocent third parties such as law firms, appraisers and real estate brokers are being named as defendants in lawsuits stemming from failed

Firmly Rooted in the Law and in the Community We are well grounded in every facet of real estate law, from acquisition to construction. We are committed to serving the needs of our clients and our communities.

Brokerage Directory

a section of the Mid Atlantic Real Estate Journal 350 Lincoln Street Suite 1105, Hingham, MA 02043 781-740-2900 fx: 781-740-2929 MARE journal.com Section Publishers Linda Christman lchristman@marejournal.com Kimberly Brunet kbrunet@marejournal.com

Contact: NEIL A. STEIN • nstein@kaplaw.com Kaplin Stewart Attorneys at Law

910 Harvest Drive, Blue Bell, PA 19422-0765 • 610-941-2469 • www.kaplaw.com Visit our Real Estate Blog: www.philadelphiarealestatelawyer.com Visit our Construction Blog: www.pennsylvaniaconstructionlawyer.com Other Offices: Cherry Hill, NJ 856-675-1550& Philadelphia, PA 215-567-3120

Section Editor Karen Vachon kjoy@marejournal.com

Made with FlippingBook HTML5