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Subordination and Attornment in SNDA Agreements - What Every Commercial Tenant Should Know - Gottlieb Law
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Subordination and Attornment in SNDA Agreements: What Every Commercial Tenant Should Know
Subordination and Attornment in SNDA Agreements: What Every Commercial Tenant Should Know 998 665 Gottlieb Law

Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any action in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.


An SNDA isn’t just legal jargon buried in the fine print — it’s a vital agreement that can mean the difference between business continuity and unexpected disruption. Whether you’re a commercial tenant investing heavily in your space or a landlord securing financing, understanding the dynamics of Subordination, Non-Disturbance, and Attornment (SNDA) is essential. These agreements set the rules for what happens to your lease if the property changes hands or the landlord defaults on a loan — balancing the sometimes competing interests of tenants, landlords, and lenders.

In this article, we take a closer look at two critical components of every SNDA: subordination and attornment. You’ll see how these provisions work together to protect a lender’s priority while ensuring your lease can survive a foreclosure. More importantly, you’ll learn why negotiating clear, fair terms is a strategic advantage for all parties — and how Gottlieb Law can help you secure your lease rights with confidence. Read on to protect your lease, safeguard your business, and negotiate from a position of strength.

The Role of SNDA Agreements

Commercial leasing is often more than just signing a lease and paying rent. Hidden in the fine print are agreements that safeguard all parties involved—landlords, tenants, and lenders—against potential risks. A critical yet often underappreciated document in commercial leasing is the Subordination, Non-Disturbance, and Attornment Agreement (SNDA). This comprehensive legal safeguard plays a pivotal role in defining the relationship between tenants, landlords, and lenders when ownership shifts or financial difficulties arise.

Why SNDA Agreements Are Essential

An SNDA agreement establishes a legal framework to address what happens to a tenant’s lease in challenging scenarios, such as foreclosure or property sale. While tenants typically focus on rent, terms, and renewal clauses, the SNDA ensures their right to remain in the leased space isn’t jeopardized by external circumstances beyond their control. Without it, tenants face uncertainty that could disrupt their operations, putting their businesses at risk.

An SNDA serves three key functions, each reflected in its main components:

  • Subordination: Establishes that a tenant’s lease holds a lower priority compared to the lender’s mortgage. This provision ensures the lender’s interests come first, often as a condition for financing the property.
  • Non-Disturbance: Provides reassurance to tenants that, even in the event of foreclosure, they can continue their lease without interruption.
  • Attornment: Ensures tenants honor their lease terms with a new property owner, maintaining stability even if ownership changes hands.

Together, these clauses balance the interests of all parties involved, protecting the lender’s financial investment, the landlord’s property value, and the tenant’s business operations.

A Vital Tool for Stability

For landlords, an SNDA agreement is often necessary to secure financing or refinancing. For lenders, it provides peace of mind that their investment is protected and tenants will continue honoring their leases. For tenants, it ensures business continuity—a critical factor for commercial operations that rely on predictable costs and uninterrupted access to their leased space.

SNDA agreements are especially significant in long-term leases or leases tied to specialized spaces, like retail outlets, restaurants, or industrial facilities. The stakes are high for these tenants, who may have invested heavily in customizing their space or building a customer base in a specific location. A well-negotiated SNDA helps ensure that tenants aren’t left in limbo during ownership transitions or foreclosure proceedings.

Spotlighting Subordination and Attornment

While the non-disturbance clause is often highlighted for its tenant protections, the subordination and attornment provisions are equally critical. These elements work together to protect the lender’s interests while ensuring the tenant remains operational. Subordination adjusts the lease’s priority relative to the lender’s mortgage, and attornment obligates the tenant to recognize a new owner as their landlord, ensuring continuity.

Understanding the finer points of subordination and attornment is essential for any commercial tenant seeking to protect their rights. These provisions, when negotiated effectively, can provide a layer of stability in an otherwise unpredictable leasing landscape.

What Is Subordination in an SNDA Agreement?

Subordination refers to the tenant agreeing that their lease will rank below the lender’s mortgage in terms of priority. If the property is foreclosed, the lender’s claim to the property takes precedence over the tenant’s lease rights unless the SNDA includes a non-disturbance clause. This clause ensures the tenant can continue operating without interruption, even in the event of foreclosure.

Why Subordination Exists

Lenders often require subordination because a commercial mortgage represents a significant financial investment. They need assurance that their interest in the property will take priority over existing leases, giving them confidence that they can recover their investment in case of default. For landlords, agreeing to subordination facilitates obtaining or refinancing loans, as lenders are more willing to provide funding when their rights take precedence over tenant agreements.

Subordination is also essential for maintaining the property’s financial viability. Without subordination, a lender might hesitate to extend financing, potentially jeopardizing the landlord’s ability to maintain or improve the property, which could indirectly affect tenants as well.

Tenant Implications

While subordination might initially seem like a disadvantage for tenants, it is a standard practice in most commercial leases and part of the give-and-take required to secure space in a competitive market. When paired with a strong non-disturbance clause, subordination becomes less concerning, as tenants gain a measure of protection for their leasehold rights even in a foreclosure scenario. This combination reassures tenants that they can continue their business operations with minimal disruption, regardless of ownership changes.

Negotiating Favorable Subordination Terms

For tenants, it’s critical to approach subordination with careful consideration to ensure their interests are protected. Here are key steps to negotiating favorable terms:

  • Verify non-disturbance protections: Always confirm the agreement includes a non-disturbance clause explicitly safeguarding your right to remain in the property.
  • Clarify lease continuation terms: Make sure the agreement outlines what will happen to your lease obligations during and after foreclosure. This includes rent amounts, renewal options, and maintenance responsibilities.
  • Consult legal counsel: Partnering with an experienced real estate attorney is essential for reviewing and negotiating the terms of subordination. An attorney can help ensure the agreement balances the tenant’s rights with the lender’s requirements.

Balancing Risks and Opportunities in Subordination

Subordination doesn’t just protect lenders—it can benefit tenants indirectly by enabling landlords to secure financing that keeps the property well-maintained and competitive. For example, a landlord might use refinancing to upgrade shared amenities or improve building infrastructure, which can enhance the tenant’s experience and attract more customers to retail spaces.

Tenants should approach subordination as an opportunity to strengthen their lease protections. By negotiating a comprehensive SNDA agreement with robust non-disturbance clauses and clear continuation terms, tenants can mitigate the risks associated with subordinating their lease while ensuring their interests remain intact.

Connecting Subordination and Attornment in Practice

Subordination and attornment are two essential components of an SNDA agreement, each serving distinct yet complementary purposes. Together, they create a legal safety net that balances the often-competing interests of lenders and tenants while ensuring the property remains viable and functional, even in challenging circumstances. Understanding how these provisions interact is crucial for tenants looking to protect their leasehold rights without hindering the landlord’s ability to secure financing.

How Subordination and Attornment Interact

  • Subordination: This clause gives lenders the assurance that their mortgage takes precedence over the tenant’s lease in the property’s legal hierarchy. In practice, subordination allows landlords to access financing or refinancing opportunities critical to maintaining or upgrading the property.
  • Attornment: While subordination prioritizes the lender’s interests, attornment safeguards tenants. It requires the tenant to acknowledge and honor their lease with any new property owner, such as a lender who takes control after foreclosure. Attornment protects tenant stability by ensuring lease continuity even when ownership shifts.

When these provisions are included in an SNDA agreement alongside a non-disturbance clause, they provide a balance of security and predictability for all parties involved. Subordination protects the lender’s financial interests, while attornment ensures tenants are not left in a precarious position should the property change hands.

Real-World Scenarios of Subordination and Attornment

  • Multi-Tenant Office Building: A tenant leasing space in a busy office building agrees to subordinate their lease to the landlord’s mortgage as part of the SNDA agreement. In exchange, the tenant secures a non-disturbance clause that ensures their lease remains intact even if the landlord defaults. When the lender takes control of the property after foreclosure, the tenant honors the lease terms with the lender, as outlined in the attornment clause. This arrangement allows the tenant to maintain uninterrupted business operations while preserving the property’s leasing income for the lender.
  • Retail Tenant in a Mixed-Use Development: A retail tenant negotiates a detailed SNDA agreement with specific subordination terms to support the landlord’s financing. By doing so, they help facilitate property upgrades that enhance the overall development. At the same time, the tenant ensures attornment provisions are in place, guaranteeing their lease continues seamlessly if a new owner takes over. This confidence allows the tenant to invest in the space, such as through renovations or marketing efforts, knowing their lease rights are protected.

Why Subordination and Attornment Are a Strategic Pair

The interplay between subordination and attornment within an SNDA agreement creates a win-win scenario for lenders and tenants. For lenders, these provisions safeguard their investments by ensuring a clear chain of priority and uninterrupted rental income. For tenants, the combination of subordination and attornment—particularly when paired with a non-disturbance clause—provides reassurance that their lease rights will remain intact, even in unpredictable circumstances like foreclosure or property sales.

Through understanding how subordination and attornment work together, commercial tenants can negotiate agreements that minimize their risks while fostering a mutually beneficial relationship with landlords and lenders.

Key Takeaways for Tenants Reviewing SNDA Agreements

Navigating an SNDA agreement can feel overwhelming, but it’s essential for securing your leasehold rights and ensuring business continuity. A well-crafted agreement not only protects your investment in the leased property but also positions you to thrive even during ownership changes or financial disruptions.

When reviewing an SNDA agreement, tenants should focus on subordination and attornment clauses, understanding their implications, and leveraging legal knowledge to negotiate terms that reflect their specific needs. Here’s how:

Your Checklist for SNDA Agreement Review

  1. Understand Subordination’s Impact: Subordination doesn’t inherently disadvantage tenants, but it does place the lease below the lender’s mortgage in priority. To mitigate this, ensure the SNDA agreement includes a strong non-disturbance clause. This clause can ensure that your lease rights remain intact, even in foreclosure scenarios, so you can continue your operations without disruption.
  2. Negotiate Attornment Terms: Attornment provisions secure continuity in lease obligations with any future property owners, such as a lender or new landlord. Review these clauses carefully to confirm they protect your rights while ensuring you maintain the same lease terms, such as rent, renewal options, and property access.
  3. Consult Legal Counsel Early: Real estate attorneys play a vital role in SNDA negotiations. They can identify vague language, highlight potential risks, and ensure your lease reflects a balanced agreement. A proactive legal review ensures that your business interests are well-represented, offering peace of mind for the long term.  SNDAs should not be negotiated without qualified counsel.

Insights to Strengthen Your Position

Beyond the basics, here are a few advanced considerations for tenants:

  • Request Specific Non-Disturbance Terms: While many agreements include non-disturbance clauses, the details matter. Specify that your lease will survive under the exact same terms post-foreclosure, ensuring there’s no ambiguity about your rights or obligations.
  • Address Unique Situations: If your business relies heavily on location (e.g., a retail store), consider adding provisions that prioritize maintaining property conditions or access rights under new ownership.
  • Seek Favorable Lease Continuation Terms: Tenants should aim for agreements that keep future rent and renewal terms consistent, even if property ownership changes. This foresight protects against rent hikes or unfavorable renegotiations with new landlords.

Why Gottlieb Law Makes a Difference

Reviewing an SNDA agreement isn’t just about ticking off a checklist—it’s about strategically protecting your business. At Gottlieb Law, we bring years of experience in commercial real estate law to the table, ensuring that your lease terms are tailored to your specific needs.

Whether you’re a tenant seeking stability or a landlord looking to maintain financing flexibility, we have extensive experience structuring agreements that align with your goals. We take the time to analyze the nuances of your lease, anticipate potential challenges, and negotiate terms that minimize risk while enhancing security. Our team understands the balance required in SNDA agreements, helping both landlords and tenants reach fair, forward-thinking solutions.

Protecting Your Lease with Subordination and Attornment

Subordination and attornment are more than just legal clauses—they’re critical tools that define how leases survive and adapt during financial upheaval or ownership changes. Together, these provisions ensure that lenders’ interests are safeguarded while tenants maintain lease security and business continuity. For commercial tenants, understanding the interplay between subordination, attornment, and non-disturbance is essential to negotiating agreements that protect their rights and foster long-term stability.

Why Gottlieb Law Is Your Strategic Advantage

Navigating the complexities of an SNDA agreement requires more than surface-level understanding—it demands insight, precision, and strategy. At Gottlieb Law, we focus on guiding tenants and landlords through the intricacies of commercial real estate agreements. Our team ensures your lease terms are structured to anticipate challenges, address your unique business needs, and protect your investments. Whether you’re negotiating subordination, securing non-disturbance protections, or clarifying attornment provisions, we’re here to make sure your interests are fully represented.

Protect your lease, your business, and your peace of mind. Call Gottlieb Law today at 602-899-8188 or use our Contact Us page here to schedule your initial consultation.

Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.

What is Breach of Contract in Arizona - Gottlieb Law
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What is Breach of Contract in Arizona?
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Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.

Real estate transactions in Arizona present a dynamic landscape, brimming with both potential benefits and inherent challenges for those involved in buying or selling property.These deals often involve significant financial investments, and the legal agreements binding the parties are critical to ensuring that everything proceeds as planned. But what happens when one party doesn’t fulfill their obligations? 

Should either party fall short of their contractual duties, the entire agreement teeters on the brink of collapse. Such situations lead to what is known as a breach of contract. In this article, we’ll explore what constitutes a breach of contract in Arizona real estate, the potential consequences, and how you can protect yourself from such issues.

Understanding Contracts in Arizona Real Estate

In Arizona, a real estate contract is a legally enforceable agreement that binds two or more parties engaged in the sale, purchase, lease, or transfer of property. These contracts outline the obligations and rights of each party, including crucial details like the purchase price, property description, financing terms, and closing dates. However, for a contract to hold legal weight and be enforceable, it must incorporate certain fundamental elements:

  1. Proposal: One party extends a proposal to form an agreement.
  2. Agreement: The other party agrees to the terms set forth in the proposal, or the parties engage in back-and-forth negotiations until an agreement and meeting of the minds occurs.
  3. Value Exchange: There must be an exchange of something of value, often money, between the parties or one party must suffer at least a detriment.
  4. Mutual Consent: Both parties must willingly accept the terms of the contract, free from any coercion or undue influence.
  5. Legitimate Purpose: The contract’s intent must be lawful and in accordance with public policy.
  6. Capacity to Contract: All parties involved must be legally capable, meaning that they have the authority and mental competence to enter into the contract.

These crucial components form the bedrock of any legally binding real estate contract within the state of Arizona. The absence or deficiency of any one of these elements could render the contract null and void, or potentially subject to nullification.

What Constitutes a Breach of Contract?

A breach of contract arises when a party to an agreement fails to perform their agreed-upon duties as specified in the contract, without a legally justifiable excuse. In Arizona real estate, a breach can range from minor issues, such as a delay in payment, to significant problems, like a complete failure to transfer the title of the property.

Types of Contract Breaches in Real Estate:

  1. Minor (Partial) Breach: This takes place when a party neglects to fulfill a minor aspect of their responsibilities under the contract, while the majority of the agreement remains intact and is still being followed. For example, if a seller is a few days late in providing certain disclosures but still closes on time, it might still be considered a minor breach.
  2. Material Breach: A material breach is a more serious violation that occurs when a party fails to carry out a critical portion of the contract, causing substantial harm or loss to the other party involved. An example might be a buyer failing to secure financing and thus being unable to close on the property as agreed.
  3. Anticipatory Breach: This form of breach, known as an anticipatory breach, arises when one party unequivocally expresses their intention to not fulfill their contractual obligations before the time of performance arrives. For example, if a contractor tells the homeowner well before the project deadline that they won’t be able to finish the renovation, this would be considered an anticipatory breach.

Common Examples of Breach in Arizona Real Estate

  1. Failure to Pay: One of the most common breaches is the failure of a buyer to make the required payments as agreed in the contract. This could involve a missed down payment, failure to pay the earnest money, or inability to secure financing by the agreed date.
  2. Failure to Transfer Title: On the seller’s side, a common breach occurs when the seller fails to transfer clear title to the buyer. This could be due to existing liens on the property or unresolved ownership disputes, preventing the seller from providing a clean title at closing.
  3. Misrepresentation or Fraud: If one party gives inaccurate or deceptive details about the property, such as its condition, zoning regulations, or any legal issues tied to it, this could be seen as a breach of contract. Whether the misinformation is intentional or due to negligence, it can result in serious repercussions.
  4. Missing Critical Deadlines: Real estate agreements often outline strict deadlines, including timelines for inspections, securing financing, and closing. Neglecting to adhere to these timeframes, in the absence of a valid legal excuse, can rightfully be considered a breach of contractual obligations.

Legal Remedies for Breach of Contract

If a party neglects their contractual duties, Arizona law offers multiple avenues for the non-breaching party to pursue resolution. The suitable course of action depends on the nature of the breach and the conditions specified in the contract.

Financial Compensation: The most frequently sought remedy is financial compensation for the losses incurred due to the breach. Arizona law identifies several categories of damages:

  • Compensatory Damages: These damages, referred to as compensatory damages, aim to redress the aggrieved party’s concrete financial setbacks, with the objective of restoring them to the fiscal state they would have enjoyed if the breach had not transpired.  In some cases, you may be able to seek consequential damages for breaches of real estate contracts, as well.
  • Punitive Damages: In situations involving fraud or intentional wrongdoing, the court or jury may impose punitive damages as a means of punishing the breaching party and discouraging similar actions in the future.
  • Liquidated Damages: Certain contracts may incorporate a liquidated damages clause, which stipulates a predetermined sum of money to be paid in the event of a contractual breach. This is commonly seen in real estate contracts, where the buyer’s earnest money might be forfeited if they fail to complete the purchase.  

Specific Performance: In certain situations, the non-breaching party may request that the court issue an order compelling the breaching party to carry out their responsibilities under the contract. This remedy, known as specific performance, is particularly common in real estate deals, where the unique characteristics of the property make financial compensation inadequate.

Cancellation of the Contract: Rescission, a unique remedy, involves nullifying the contract, effectively freeing both parties from any further obligations. This option is often chosen in cases of significant breaches, where the non-breaching party opts to dissolve the agreement rather than enforce it.

Arbitration and Mediation: Many real estate contracts include clauses that require disputes to be resolved through arbitration or mediation rather than litigation. These alternatives often offer a faster and more cost-effective resolution compared to litigation, though the results can be binding.

How to Protect Yourself from a Breach of Contract

While breaches of contract are sometimes unavoidable, there are several steps you can take to protect yourself when entering into a real estate agreement in Arizona.

  1. Drafting Clear Contracts: Ensure that your contracts are well-drafted with precise language that leaves little room for interpretation. Clearly define each party’s responsibilities, set specific deadlines, and think about incorporating a liquidated damages clause.
  2. Due Diligence: Prior to committing to any real estate agreement, it’s of paramount importance to undertake meticulous and comprehensive research. This process should involve inspecting the property, conducting title searches, and verifying all representations made by the other party.
  3. Seek Legal Advice: Before affixing your signature to any real estate contract, seeking the counsel of a seasoned real estate attorney is strongly recommended. They can pinpoint any hidden risks that might not be immediately obvious. Additionally, they will work to ensure the contract is structured to fully protect your interests.

Steps to Take if You Suspect a Breach of Contract

If you believe the other party is failing to meet their contractual obligations, it’s important to act quickly:

  1. Gather Evidence: Maintain comprehensive records of all communications, documents, and activities related to the contract. Having this documentation will be critical should you need to pursue legal action. Detailed records can strengthen your case, providing the necessary proof to support your claims in court.
  2. Consult a Lawyer: A seasoned real estate attorney can evaluate your case, clarify your rights, and recommend the most appropriate steps to take. They can pinpoint any hidden risks that might not be immediately obvious. Additionally, they will work to ensure the contract is structured to fully protect your interests.
  3. Why Choose Gottlieb Law: At Gottlieb Law, we have a wealth of experience in managing breach of contract cases within Arizona real estate, and we’re ready to support you through any disputes that arise. Whether you’re a buyer or seller, we can guide you through the legal process, helping you seek the best possible outcome. Contact us today for a consultation.

Final Thoughts

Breach of contract issues in Arizona real estate can present significant challenges, but having a clear understanding of your rights and the available legal remedies is crucial. Whether you’re in the process of drafting a contract, facing a potential breach, or looking to enforce your contractual rights, it’s essential to take proactive measures. Having the right knowledge and preparation can significantly impact the security of your investments and help facilitate seamless real estate deals.

At Gottlieb Law, we specialize in guiding clients through the complexities of breach of contract disputes in Arizona real estate. Our experienced attorneys are equipped to assist you with everything from drafting clear, enforceable contracts to representing you in court if a dispute arises. We’re committed to safeguarding your interests at every stage, providing the legal support you need to navigate these challenging situations effectively. If you’re facing a breach of contract issue, let Gottlieb Law be your trusted partner in achieving a favorable outcome.

Contact Gottlieb Law today to schedule your initial consultation or call us today at 602-899-8188.

Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.
Business Torts Arizona Entities Neeed to Be Aware of in 2024 - Gottlieb Law
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5 Business Torts Arizona Entities Need to be Aware of in 2024
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Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.

Business torts, commonly referred to as an “economic tort” are the result of a civil wrong that causes a business to suffer some form of economic harm. For example, these torts can result from a variety of actions such as fraud, defamation, breach of contract, and more.

Understanding Business Torts

In the simplest of terms, a business tort is representative of any interference that involves the business rights of another entity. These rights could range from trade secrets and proprietary information to established client relationships. It’s crucial for businesses to comprehend these torts, as the consequences can be detrimental, leading to substantial financial losses and damage to reputation.

It is a civil wrong, quite distinct from a criminal act, that leads to legal liability for the individual or entity that perpetrates the misconduct. Unlike ordinary torts that typically result in physical harm or damage to property, business torts are primarily concerned with economic damage or loss of business opportunities.

The Scope and Impact of Business Torts

Business torts encompass a wide range of wrongful acts, from fraudulent activities and misrepresentation to intellectual property infringement and unfair competition. The impact of these torts can be profound, potentially leading to substantial financial losses, harm to the business’s reputation, and in some cases, even the collapse of the business itself.

Navigating Business Tort Lawsuits

Business tort lawsuits can be complex, often involving intricate legal arguments and substantial sums of money. It is crucial for businesses to have competent legal representation to navigate these lawsuits effectively. An experienced business tort attorney can help identify potential claims, gather necessary evidence, and represent the business’s interests in court.

The Crucial Five: Key Business Torts in Arizona

1. Fraudulent Misrepresentation

Fraudulent misrepresentation is a serious business tort that involves the intentional provision of false information with the purpose of deceiving or misleading another party. This can range from exaggeration of a product’s capabilities to falsifying financial records or other critical information. It’s critical for businesses to maintain transparency and honesty in all their dealings to avoid allegations of fraudulent misrepresentation.

2. Business Defamation, Commercial Disparagement & Trade Libel

Defamation of a business can take place in a number of ways, the most common being found in publicly released statements that can cause potential harm to the reputation of a business. This could be through slander (spoken defamation) or libel (written defamation). Commercial disparagement, on the other hand, involves false statements that discredit a business’s products or services. Trade libel is a subcategory of this, involving the dissemination of false information about a business’s goods or services. Businesses must be cautious about what they communicate publicly to avoid these torts.

3. Invasion of Privacy

Invasion of privacy is an issue that has taken center stage in the modern, digital era. Invasion of privacy could occur in various ways, from unauthorized data collection to the unwarranted public disclosure of private information. To prevent this, forward-thinking businesses need to ensure that they have a state-of-the-art data protection model and that they are in full compliance with any laws as they may relate to regulations of privacy.

4. Breach of Fiduciary Duty

Business members, such as executives, are mandated to act in the best interest of each and the company, or they may be at fault for breach of fiduciary duty. In a business context, this could apply to situations where a company’s board member or executive acts in personal interest to the detriment of the company. What’s more, a significant breach of fiduciary duty can lead to legal action that results in the tarnishing of the reputation of the business.

5. Tortious Interference with Contracts and Potential Business Relations

This type of a business tort is the result of a third party that interferes with and or disrupts a business and its contractual obligations. This could be through inducing a breach of contract or preventing a potential business relationship from materializing. Ensuring fair competition and respect for existing business relationships is crucial to avoid this tort.

The Future of Business Torts

With the ever-evolving business landscape, especially in the digital age, new types of business torts are likely to emerge. Issues around data privacy, online defamation, and cybercrime could potentially give rise to new kinds of business tort disputes.

Final Thoughts

These five business torts represent potential risks that Arizona entities should be watchful of in 2024. By understanding these torts, businesses can better safeguard their interests and maintain their integrity in the marketplace. It is recommended that businesses seek legal counsel to ensure they have the appropriate measures in place to prevent such torts and to handle any allegations that may arise.

The world of business torts is complex and ever-evolving. Staying informed about these legal matters, especially in the dynamic context of 2024, is not just important—it’s essential for the success and longevity of any business.

Consult an Experienced Arizona Business Tort Attorney

Gottlieb Law was founded to provide the best representation for all your real business legal needs. Our experienced lawyers can assist with all types of business torts including disputes and litigation. Speak to our firm today by calling 602-899-8188 or schedule an initial consultation by submitting your information on our contact us page.

Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.

Gottlieb Law - Avoid Common Legal Mistakes as an Arizona Small Business
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Make Sure to Avoid These Regular Legal Mistakes Made by Small Business Owners in Arizona
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Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.

Nobody wants legal trouble, but it’s an unfortunate reality for small business owners in Arizona who neglect crucial protections for their business. Whether entrepreneurs are juggling too many responsibilities or simply feel they cannot afford a lawyer, plenty of them learn too late that taking a casual approach to legal matters leaves one’s business vulnerable. The good news, however, is that research and preparation can help business owners evade common legal missteps. It’s impossible to forecast every possible legal risk, especially considering the nuances of different industries, but these are regular legal mistakes to avoid.

Improper or Unwise Business Setup

One of the most important decisions you will make early on in your entrepreneurship journey is how you set up your business. Sole proprietorship and general partnership structures are legally sound, but it’s wise to establish limited liability through an LLC, corporation or even a limited liability partnership. Otherwise, in the event of a lawsuit or other issue, not only are your investments in the company and the company assets at risk, but so are your personal assets. Failing to legally separate and protect your personal assets from those of your company can be a costly, irreversible mistake.   

Ownership structure also affects investor relationships and the potential to sell the business. Most outside investors look for the stock structure of a corporation, but small businesses may choose to establish an LLC instead because of the demands of maintaining corporate records. Consider the tax implications, investment opportunities and whether you intend to sell your operation before filing setup paperwork. 

Poor Record Keeping and Document Organization

Every business is required to maintain documentation on cash flow, tax history, human resources, employees, insurance and much more, which is no small feat — especially for entrepreneurs who are unfamiliar with record keeping best practices. However, there are substantial monetary penalties for businesses that fail to keep up these records — and the impacts can be felt years down the road. A violation may even disqualify the owner from certain business loans, causing the entire operation to fold. 

Small business owners in Arizona should become familiar with the documentation required for their chosen organizational structure. Corporations, for example, have specific records that must be maintained and do not apply to other types of businesses. From the time you establish your business, keep all of your documents (and keep them organized) so you can protect yourself and avoid the dissolution of your business. 

Employee Issues

It’s exciting to see your business grow enough to need staff, and stellar employees can amplify that growth even further. But before bringing anyone on board, be sure to do your due diligence on local, state and federal employment regulations. Resolving workplace legal issues can be a costly endeavor.

The first mistake in this category is not setting expectations upon hiring employees. Arizona is an “at-will” state, meaning either an employee or employer can dissolve the employment agreement at any time. In other words, absent a contractual agreement to the contrary, workers are not bound to one company and can leave whenever they want, while companies can fire employees at any time without reason. Employees of your small business in Arizona will likely already know they have employment-at-will status, but they should still acknowledge it formally during onboarding. Additionally, they should sign paperwork containing your business’ conduct policies, especially those around harassment and discrimination. Arizona courts often treat employee handbooks as enforceable contracts, so take special care when writing them.

Small business owners also run into trouble when they improperly treat W-2 employees like independent contractors. Fortunately, the IRS provides detailed information about classifying workers as self-employed, independent contractors or simply employees. Arizona also passed a new Declaration of Independent Business Status law (A.R.S. § 23-1601) that allows employers to have their independent contractors declare their status and verify they meet the requirements.

Finding Themselves in Court 

Running a small business in Arizona is incredibly demanding. You likely wear many hats in the effort to keep the operation running smoothly, and there is a major investment of your time, money and resources. Therefore, your business cannot afford to find itself in court. Litigation is oftentimes a lengthy process, and legal fees can mount quickly. 

The best way to stay out of legal trouble is to take the time and money to establish protections and set up your business to avoid these regular legal mistakes. Consulting with experienced attorneys may seem expensive up front, but think of it as a long-term investment in your small business’ success.  The attorneys at Gottlieb Law can help small business owners in Arizona get their company setup correctly and proactively avoid most common legal mistakes.  Contact us today at 602-899-8188 or schedule an appointment on our contact us page. 

Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.

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