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Wednesday, February 18, 2015

The Risks of Tenancy In Common

Historically, tenant in common (TIC) projects were owned by a relatively small group of investors who knew each other, such as long-time friends, business partners or family members. Strategies to maximize tax savings and preserve equity typically guided investors to this type of structure, rather than creating a limited liability company or partnership to own the property.

In the late 1990s, real estate sales in the form of tax-deferred 1031 exchanges created a new industry. Promoters began soliciting and pooling funds from investors to purchase real estate. Participation in the pool helped investors find replacement property to guarantee their capital gains tax deferment continued.

In 2002, the IRS clarified when this type of pooling is considered a partnership interest as opposed to a TIC interest, a critical distinction for investors using funds from a 1031 exchange transaction. Following that, investments in TIC interests grew considerably due to the numerous advantages. For those who needed a place to invest their 1031 exchange funds quickly, TIC interests provide a relatively simple way to ensure the funds are spent within 180 days of the sale of the previous property, without the hassle of researching, investigating, negotiating and financing a property in less than six months. TIC investors do not have to burden themselves with the day-to-day management of their investment property. Finally, TIC investors can pool their resources to purchase fractional shares of investment-grade property which would otherwise be out of reach.

With all of its advantages, the TIC interest also carries its share of risks. For example, many TIC promoters charged fees that were excessive, or sold the property to the investors for more than it was worth. If property values decline or purchase loans mature, it may be difficult to refinance, forcing the property into foreclosure and taking the entire investment with it.

Other promoters failed to maintain reserve funds separate for each property. If a promoter filed for bankruptcy and did not properly use the reserve funds, TIC investors were left with no recourse and were forced to cover the reserves out of their own pockets or risk losing their investment.

Further risks are caused by the investors themselves and the nature of their relationship to one another – or lack thereof. Owners of TIC typically do not know each other. Decisions regarding TIC governance often require unanimous agreement by all owners, and just one objection can grind the action to a halt. When owners don’t know each other, or are spread across many states, it can be difficult to communicate and obtain a unanimous agreement.

Despite the risks, TIC interests can still be a good place to park your money – but you must be a cautious, diligent purchaser. Visit the property, seek information from sources other than the promoter, and carefully review the past and projected financial data.

Tuesday, April 22, 2014

The Pros and Cons of Settling a Case

If you have been injured by the negligent actions of another, or have lost your job due to wrongful termination, or are involved in a contract dispute with someone, you may be entitled to compensation for your lost income, property damage, or other economic losses. Deciding whether to settle a lawsuit without taking the case to trial is a major decision demanding the full consideration of many factors.

Some plaintiffs wish to settle the matter quickly, while others want to let a judge or jury determine whether damages should be awarded and how much. There are advantages and disadvantages to each option; only you can decide what is best for your specific situation but an attorney can help you put the pros and cons of each option into perspective.

The vast majority of lawsuits never see a courtroom, evidence that the benefits of early settlement are compelling to a great number of plaintiffs and defendants. Settling a case is often more advantageous to the various parties rather than taking the case to trial. If you have received a settlement offer from the defendant or the defendant’s insurance company, you should review the offer with your attorney as soon as possible.

Settlement agreements have many advantages. Settling your case is much quicker than taking your case to trial, which can take up to a year – or more, depending on the jurisdiction and the complexity of the case. You can receive the money, or at least a portion of it, immediately so you can pay your bills and repair property damage. Your attorneys’ fees and other legal costs are greatly reduced by avoiding protracted discovery and the trial itself. Additionally, the emotional benefits are undeniable. You have the peace of mind of knowing exactly how much money you will receive, and you can get emotional closure right away so you can move on. Finally, settlement agreements can remain confidential, whereas court proceedings are public records.

On the other hand, there are tradeoffs. In exchange for the benefits stated above, you will typically have to accept a smaller monetary award than you might get if the case goes before a judge or jury.

Taking your case to trial, letting the court (or jury) decide the outcome, also has its advantages and disadvantages. If you go to trial and win, you may feel a sense of emotional satisfaction having prevailed in the lawsuit. And, as noted above, you may be awarded a much higher amount than what was offered in the settlement negotiations.

However, there is never any guarantee that you will win your case at trial, or that the amount awarded will be more than what you could have settled the case for. The value of any settlement offer or potential court verdict must be weighed against the increased costs of dragging the case out for many more months before a trial can take place. In considering your options, an experienced lawyer can provide you with a realistic assessment of whether a settlement offer is fair, and the likelihood of winning a greater award at trial.

Thursday, April 17, 2014

Do You Need Meeting Minutes?

Regardless of the size of the business, corporations (including those organized under Subchapter S) must observe all of the required formalities in order to maximize the benefits of a corporation. Corporate meeting minutes document the decisions made by the company’s board of directors, and are necessary to preserve the “corporate veil” in the event of a lawsuit or other claim against the company. If corporate formalities are not observed, your own personal assets may be at risk.

One such formality is the maintenance of a corporate record book containing minutes of meetings conducted in accordance with the company’s bylaws. Even in a one-person corporation, board resolutions must be drafted, signed and kept in the corporate records. Every major decision that affects the life of the business must be ratified by a board resolution contained in the corporate records.

There is no specific required format for meeting minutes, but the document should include any important decision made regarding the company, its policies and operations. Minutes should include, at a minimum:

  • Date, time and location of the meeting
  • Names of all officers, directors and others in attendance
  • Brief description of issues discussed and actions taken
  • Record of how each person voted, whether the vote was unanimous and whether anyone abstained from voting
  • Vote and approval of the prior meeting’s minutes

How do you know whether a decision needs to be documented in the meeting minutes? Generally, if a transaction is within the scope of the company’s ordinary course of business, it need not be addressed in the minutes. On the other hand, major decisions should be documented in the minutes, such as:

  • Significant contracts
  • Leases
  • Loans
  • Marketing campaigns
  • Reorganizations and mergers
  • Employee benefit plans
  • Elections of directors or officers

Non-incorporated entities such as limited liability companies are generally exempt from performing such formalities.

Monday, April 7, 2014

Making Sure Your Teenagers Don't Text and Drive

No self-respecting teen wants to take the school bus, particularly in his or her senior year. But with so many statistics on the dangers of young people on the road, you may wonder if it is ever a good idea to let your own teenager drive. In fact, distractions or recklessness are the most common cause accidents in which teenagers are involved. The most common distraction is the cell phone and texting in particular. Texting is significantly more dangerous than talking while driving because it takes more concentration and requires the driver to take his or her eyes completely off of the road. As learning to drive is seen as a rite of passage, how do you allow them this rite while making sure they don’t text and drive?

Read more . . .

Wednesday, January 2, 2013

Choosing A Litigation Attorney

If circumstances require you to get involved in litigation, you may find the process of selecting an attorney to be overwhelming. There are, however, some steps you can take to make the selection process a bit easier.

Read more . . .

Monday, September 10, 2012


This blog was started three years ago and since then, many new readers have joined. My initial comment expressed a hope that this forum would provide a means to communicate and share ideas as well as comments. That hope is just as valid today as it was in 2009. Following is what I wrote in the introductory posting and it still expresses my philosophy of what a lawyer is and should be. Thank you for reading this and my other postings.

Read more . . .

Monday, August 13, 2012

Employers and Immigration Compliance: What You Need to Know

The Immigration and Nationality Act (INA) makes it illegal for employers to knowingly hire undocumented workers and requires employers to verify each worker’s identity and eligibility by completing the I-9 Form. An employer’s failure to complete the I-9 Form can result in criminal and civil penalties.

The INA also protects individuals from employment discrimination based upon national origin, citizenship or immigration status. The Office of Special Counsel for Immigration Related Unfair Employment Practices (OSC) enforces the INA’s anti-discrimination provisions.  Victims of discrimination may file a complaint with the OSC to seek back pay, reinstatement and other remedies.

With so much at stake and so many potential pitfalls, it is important for all employers to familiarize themselves with the requirements and implement policies and procedures to ensure compliance.

Employers are prohibited from:

  • Discriminating on the basis of citizenship or immigration status, with respect to hiring, firing, recruitment or referral. This rule applies to employers of four or more employees.
  • Discriminating on the basis of national origin, with respect to hiring, firing, recruitment or referral. This rule applies to employers of between three and 15 employees. Employers may not extend different treatment to different individuals based on their birth place, country of origin, native language, ancestry or because they may look or sound “foreign.”
  • Requesting more or different documents to verify a worker’s employment eligibility. An employer may not request different or additional documents for determination of citizenship or national origin than those documents specified on the I-9 Form.  Furthermore, an employer is not permitted to reject genuine-looking documents.
  • Retaliating against an individual who files charges with the OSC, cooperates with an investigation or contests an action that may be considered discriminatory or in violation of the INA.

To improve compliance in your employment procedures, consider implementing the following practices:

  • Refrain from using discriminatory language in job postings, such as “green card only” or “U.S. citizen only,” unless it is required by law or by a government contract.
  • In completing the I-9 Form, do not request specific documents over other permitted documents. Each employee is permitted to present any document from the list of acceptable documents stated on the form.
  • Refrain from selectively verifying work eligibility for only certain employees based on their citizenship status or national origin; whatever your policy, make sure it is applied consistently to all employees.
  • Avoid the appearance of discriminatory practices by verifying employment eligibility only after you have made a hiring decision, and give the employee three days to provide the required documentation.
  • Do not immediately terminate an employee if you receive a “no match” letter from the Social Security Administration. While such a letter may mean the individual is not authorized to work in the United States, it is also possible that there is a discrepancy in the record due to a clerical error or legal name change.
  • If you suspect that an employee is not legally eligible to work in this country, notify the employee and request valid employment eligibility documents before terminating or suspending employment.



Monday, August 6, 2012

Top 3 Real Estate Tips for Small Businesses

For the vast majority of small businesses, the company’s first and only real estate transaction is entering into a lease for commercial space. Whether you are considering office, manufacturing or retail space, the following three tips will help you navigate the negotiation process so you can avoid any unpleasant surprises or costly mistakes.

“Base Rent” is Not the Only Rent You Will Pay
Most prospective tenants focus their negotiation efforts on the “base rent,” the fixed monthly amount you will pay under the lease agreement. You may have negotiated a terrific deal on the base rent, but the transaction may not be the best value once other charges are factored in. For example, the majority of commercial lease agreements are “triple net,” meaning that the tenant also must pay for insurance, taxes and other operating expenses. When negotiating “triple net,” ensure you aren’t being charged for expenses that do not benefit your space, and that you are paying an amount that is in proportion to the space you utilize in the building. Another provision to watch for is “percentage rent,” in which a tenant pays a percentage of revenue in excess of a specific amount. This may not be a bad thing, as it provides the landlord with an incentive to help ensure your company is successful.

There’s No Such Thing as a “Form Lease”
Most commercial property owners and managers offer prospective tenants a pre-printed lease containing your name and various terms. They often present these documents and adamantly explain that it is the landlord’s “typical form lease.” This, however, does not mean you cannot negotiate. Review every provision in the agreement, bearing in mind that all terms are open for discussion and negotiation. Pay particular attention to the specific needs of your business that are not addressed in the “form lease.”

Note the Notice Requirements
Your lease agreement may contain many provisions that require you to send notification to the landlord under various circumstances. For example, if you wish to renew or terminate your lease at the end of the term, you will likely owe a notice to the landlord to that effect, and it may be due much earlier than you think – sometimes up to a year or more. Prepare a summary of the key notice requirements contained in your lease agreement, along with the due dates, and add key dates to your calendar to ensure you comply with all notice requirements and do not forfeit any rights under your lease agreement.



Sunday, July 8, 2012

Just My Opinion

As we end our celebration of the 4th of July holiday for another year and head towards the fall elections, let's spend a moment reflecting on who we are and why we fight like siblings in a dysfunctional family.

In my opinion, we really are a cohesive nation but with diverse and passionate beliefs. We may argue, both reasonably and occasionally with more "volume" than common sense but in the end we pull together to get things done.

We are a people who spend each day trying to make this country just a little bit better for ourselves and our posterity. To paraphrase John F. Kennedy, at our best we do not look at things as they are and say "why", but instead looks at things as they should be and say "why not?".  We open our doors (sometimes not wide enough or fast enough) to people from all parts of the world and allow them to claim their piece of our dream. We do all of these things because we believe in ourselves and our ability to grow, improve, and always become better.

That, in my opinion is the real America exceptionalism.



Monday, October 12, 2009

One Attorney's Opinion

“My attorney is a fighter. He always fights to the last dollar of my money!” (Anonymous)

From the first day of law school attorneys are trained to be zealous advocates. By nature, attorneys are competitive. We fight to win, to achieve our client’s goals by besting the other side. Frankly, our clients look to us to be the combatants in the ring, championing their cause and advancing their interests. Our clients want us to go after the other side without pity or remorse.
But are we really serving our client’s interests by aggressively litigating? Should our focus instead be on solving our client’s problems by other means? In other words, should we look for alternatives to fighting and resort to legal combat only as a last resort?
By asking the questions I am also supplying my answers. Now, I like a good fight. It starts the adrenaline flowing and enlivens the practice of law. In addition I have no objection to earning legal fees from litigation; they can be quite good. But sometimes I think I better serve my clients by counseling them regarding why litigation is not always the best approach to resolving their legal problem.
Obviously, the decision to litigate is fact dependent and sometimes litigation is undertaken to make a point rather than achieve a specific objective. However, too often clients authorize litigation without truly understanding both the monetary and the psychological costs involved.
I view my role as an attorney to be an advocate, a counselor and an advisor. The advocate role is well understood by clients. The counselor and advisor roles are not.  In my experience, a good counselor is one who can help the client look at alternative means to achieve the desired end. The advisor then evaluates the alternatives, provides the client with his or her professional advice on the best strategy to employ, and often guides the client to make the most appropriate decision. These roles are not as much fun – and may not be as financially rewarding to the attorney – but they go to the fundamental service we provide, which is to help our clients resolve their legal problems.
While we are taught to be zealous advocates, perhaps we serve our clients best when we serve them least. Litigation is not the first strategy and frequently not the best alternative.

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