Tread carefully

Understanding several crucial legal issues from the perspective of the independent hotelier

by CARTER DAVIS

Operating an independent property can simultaneously be an exhilarating and terrifying experience. On one hand, you have the latitude and flexibility to make decisions unencumbered by brand oversight. However, that brand oversight can sometimes provide comfort and shelter from larger problems that might plague properties with fewer resources at their disposal.

For example, while the brands aren’t lending their own legal teams to fight, say, single-property ADA lawsuits, many offer legal consultation to their franchisees, thus providing a bit of a safety net and guidance. Though it may be tempting for independent operators to forgo retaining legal counsel, it can often be more important for them to do so when compared against their branded competitors.

Here, we’ve gathered a small handful of the many amazing legal experts within the AAHOA ranks to offer a bit of big-picture industry insight on common issues affecting the market as a whole and independent hoteliers specifically.

Independent hoteliers and their rights and responsibilities during the financing process

by PIMAL A. PATEL, ESQ.

Securing financing for independent hotels involves a thorough understanding of the financing process and your rights and responsibilities. Consulting with a real estate attorney who has experience in the financing process for independent hotels can help you find information on your rights and responsibilities during the financing process. Additionally, government agencies such as the Small Business Administration (SBA) and the Federal Deposit Insurance Corporation (FDIC) provide information on various types of commercial real estate financing, and industry associations such as AAHOA also provide education and resources. Online resources such as financial news websites and industry blogs can also provide valuable insights into current market conditions, trends, and changes in regulations that may impact the financing process.

While utilizing publicly available resources can assist you in understanding your rights and responsibilities, it is essential that you identify your needs, know your available options, and are informed about the current market conditions and interest rates. To the right are some quick points that are crucial to know during the financing process.

1. IDENTIFY YOUR FINANCING NEEDS AND LIMITATIONS

Understand your business goals, the amount of financing you require, and the type of financing that best suits your needs. Marking your preferred terms on a term sheet or loan commitment can be a helpful guide.

2. RESEARCH THE VARIOUS FINANCING OPTIONS AVAILABLE

Compare interest rates, repayment schedules, collateral requirements, fees, and other features of each option to determine which one is most suitable for your needs.

3. UNDERSTAND LEGAL AND REGULATORY REQUIREMENTS

Consulting with professionals who have experience in the financing process – including real estate attorneys, accountants, and financial advisors – can help you understand the requirements and limitations for your unique situation.

4. STAY INFORMED ABOUT MARKET CONDITIONS AND INTEREST RATES

Regularly monitor market conditions and interest rates to secure the best possible financing terms. Stay up-to-date with changes in the lending market, as well as changes in local real estate and economic conditions that may impact your ability to secure financing. By following these steps and educating yourself on the financing process, you better help yourself find the funds you need to achieve your business goals and work toward the long-term success of your independent hotel.

Pimal A. Patel, Esq., is the managing partner of Patel Anderson LLP, routinely representing borrowers, sponsors, and franchisees in a wide variety of business transactions and litigation matters. Recently, Pimal has earned an “AV Preeminent” rating from Martindale-Hubbell and has been designated as a “Rising Star” by SuperLawyers from 2019 to 2023 for his real estate practice. He can be reached at [email protected].

Life is unpredictable – protect your assets

by POOJA PATEL, ESQ.

You’ve invested significant time, money, and effort into building your multi-million-dollar business. But, this sacrifice will be lost without a plan for your assets. We often assume that we have plenty of time for our future, but life is unpredictable. To shield our families from unforeseen circumstances, we must take matters into our own hands and ensure our intentions are in writing. This is called estate planning.

Executing a comprehensive will and trust protects your assets, and ensures your beneficiaries aren’t burdened financially or emotionally. For independent hoteliers, you only stand to benefit from this process. Here’s why this matter is of vital importance.

1. MINIMIZE TAXES FOR YOUR BENEFICIARIES

Without a will or trust, estate taxes are hefty. This significantly reduces the amount of wealth passed down to heirs. Business owners can instead maximize their estate funds by taking advantage of tax strategies such as gifting, trust creations, and tax-exempt transfers.

2. DETAILED SUCCESSION PLAN

At the core of estate planning is a succession plan – this is especially crucial for hoteliers whose families are involved in the business. Attorneys who understand your business can help you navigate decisions such as how the business will be transferred, who will oversee operations, who will be the decision maker, and what decisions beneficiaries are allowed to make.

3. AVOID PROBATE COURT

If you leave without a will or a trust, you are relinquishing control to a probate judge. You’re giving a judge full power to decide the future of your assets, and you’re putting your family in jeopardy of not being able to touch your assets or any money until the court decides three years down the road.

4. MITIGATE RISK OF LOSS AND LIABILITY

Your wealth and your business are essentially one in the same. Without a trust, you expose your hotels to the risk of loss due to unanticipated events such as bankruptcy, legal action, or death. Estate planners can advise you on the best approach to mitigate these threats.

5. MAKE DECISIONS NOW FOR LATER

You’re currently in the state of mind to make health decisions. Decide what will happen when you aren’t physically or mentally able to do so later. Decide now what will happen to your house, pets, and personal belongings.

If you’re a business owner without an estate plan, you must act now. There are significant advantages to executing a comprehensive trust; without these documents, your family is vulnerable to dire consequences. Take the time to protect your legacy and hard work. Reach out to an experienced estate planning attorney who has worked with hotel owners to guarantee a sound strategy and approach.

Pooja Patel, Esq., is the managing attorney for DPA Attorneys at Law, a California-based firm specializing in numerous areas of expertise, including ADA issues, contract review and drafting, employment litigation and compliance, franchise litigation and negotiations, real estate transactions, and more. She is a defense attorney who fights for business owners alongside the team at DPA Attorneys at Law. With hotel operations and development background, her practice areas include franchise negotiations, employment disputes, real estate, ADA defense, and contract review/drafting.

ADA lawsuits and independent hoteliers

by SARAH GULATI, ESQ.

ADA lawsuits can cause enormous problems for independent hoteliers if their properties are found to be in violation of ADA regulations. The Americans with Disabilities Act is a federal law that requires public accommodations, including hotels, to be accessible to individuals with disabilities. This means hotel owners must ensure their properties are designed and operated in a way that provides equal access to individuals with disabilities, including accessible entrances and exits, accessible guest rooms, accessible common areas, and compliant ADA websites.

ada lawsuits and independent hoteliers If an independent hotelier is found to be in violation of ADA regulations, they may be subject to legal action, including lawsuits with hefty damage claims. The cost of defending against an ADA lawsuit can be significant, including legal fees, costs, expert fees, and potential fines. In addition, if the hotel is found to be in violation, they may be required to make costly renovations to bring the property up to ADA standards and hire accessible experts to assist.

Here are two key questions to consider when it comes to ADA lawsuits and independent properties.

1. ARE INDEPENDENT PROPERTIES MORE OR LESS SUSCEPTIBLE THAN BRANDED HOTELS TO ADA LAWSUITS?

Independent hoteliers may be more susceptible to ADA lawsuits than flagged hotels because they may have less access to the resources and expertise that flagged hotels have. Franchised properties typically are part of a larger chain or brand and may have access to legal and accessibility experts who can help ensure that their properties are ADA-compliant. Additionally, flagged hotels also may have more resources available to make necessary renovations or upgrades to bring their properties up to ADA standards.

Independent hoteliers, on the other hand, may have fewer resources available to devote to ADA compliance, and they may not have the same level of expertise in-house to ensure their properties are fully compliant with all applicable ADA regulations. This can make them more vulnerable to ADA lawsuits, which is a trend many lawyers will encounter when representing independent hoteliers.

2. DO ADA LAWSUITS AFFECT INDEPENDENT OPERATORS DIFFERENTLY THAN BRANDED PROPERTIES?

There are some reasons why independent hoteliers may be more susceptible to ADA lawsuits than branded hotels.

Firstly, independent hoteliers may have less access to resources to ensure compliance with ADA regulations. Branded hotels often are part of larger companies or chains, which may have more resources to devote to ensuring compliance with ADA regulations. They also may have access to legal and accessibility experts who can help ensure that their properties are fully compliant with all applicable regulations.

Secondly, independent hoteliers may have more difficulty responding to ADA lawsuits, particularly if they’re facing financial challenges or other operational issues. Many times, an ADA case on an independent property will need to be settled on a payment plan. Branded hotels may have more resources available to defend against lawsuits, more protective insurance, and may be better equipped to make necessary renovations and upgrades to bring their properties up to ADA standards.

However, it’s important to note that both independent hoteliers and flagged hotels can be subject to ADA lawsuits if they’re found to be in violation of ADA regulations. It’s essential for all hoteliers to take proactive steps to ensure their properties are ADA-compliant and to seek the guidance of legal and accessibility experts to ensure they’re in compliance with all applicable regulations. By doing so, they can reduce their risk of facing legal action related to ADA violations.

Sarah Gulati, Esq., is an attorney and counselor at law with Gulati Law, P.L., a Florida-based firm specializing in real estate and business law. She is a member of the Florida Bar and the Federal Middle District of Florida, and she has worked diligently to help facilitate the purchases of restaurants, hotels, gas stations, retail stores, medical practices, medical offices, and more. She can be reached at [email protected].

Understanding several crucial legal issues from the perspective of the independent hotelier

Independent hoteliers and their rights and responsibilities during the financing process

by PIMAL A. PATEL, ESQ.

by POOJA PATEL, ESQ.

by SARAH GULATI, ESQ.

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