Purpose Driven General Counsel

Landlords/Investors/Property Managers: Single Member LLCs Could Evict Tenants without Legal Representation under House Bill

A common scenario in my legal practice: 2015-11-26-13-04-02

Investor purchases property in an LLC. Investor locates a tenant. Tenant falls behind in rent. Investor hires attorney to evict Tenant.

Why hold real estate in an LLC?

Most of my investor clients own investment real estate in a Limited Liability Company.

This is for liability protection.

Once a limited liability company comes into existence, limited liability applies, and a member or manager is not liable for the acts, debts, or obligations of the company. “Duray Dev., LLC v. Perrin, 288 Mich. App. 143, 151 (2010).

Why not hold real estate in an LLC?

Some investment property owners decide not to do so. The primary driving reason from my experience is cost.

Cost associated with setting up the LLC; and

Cost associated with hiring an attorney and evicting non-paying tenants.

Some landlords don’t want to hire an attorney to evict a tenant.

Under current Michigan law, since an LLC is a separate legal person independent of the actual owners of the LLC, unless such owner is a licensed attorney, an owner of an LLC cannot file a lawsuit on behalf of the LLC.

To do so would be the unauthorized practice of law.

You can practice law on your own behalf – just not on behalf of someone else.

Although, the saying goes – he who is his own lawyer has a fool for a client.

Proposed House Bill Would Allow LLCs to Evict without Legal Representation.

House Bill 4463 was introduced last month ago and referred to the committee on law and justice.

The Bill would allow owners of a single-member LLC (or a married couple under certain conditions) to file their own eviction actions on behalf of the LLC without the need for legal representation.

If the Landlord is seeking money damages, the amount, not including taxable costs, must be under the small claims Court maximum.

The Bill would also allow a Property Manager or other Agent to represent the LLC.

This makes sense for Landlords who want quick and cost-effective resolutions. I understand that an Investor who is not making money on a tenant also doesn’t want to expend additional legal fees to evict a Tenant. This is particularly true since the most attorney fees that a Landlord can recover against a residential tenant is limited to the statutory amount (currently $75).

I would be surprised if this bill passes, although other states have similar laws.

However, I will refer readers back to the lawyer who has a fool for a client…

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Business Law Update: Unfair Competition may not be Preempted by Michigan’s Uniform Trade Secrets Act

Greetings on this cloudy Friday in downtown Grand Rapids, Michigan.

Business owner: I’m going to give you a scenario.

Let’s say your business wants to engage the services of another business to sell its products.

Q: When a business wants to engage the services of another business that will necessarily involve the business divulging confidential information what do you do?

A: Enter into a Non-Disclosure/Confidentiality Agreement.

Another question:

Q: What happens when the business that received the confidential information goes on to develop a product eerily similar to your product after learning about your confidential information?

A: Potentially, a lawsuit.

Yesterday I read a new published decision from the Michigan Court of Appeals,

Planet Bingo LLC v VKGS, LLC

In the words of the Court of Appeals:

“the relevant procedural history is complex“.

Therefore, I won’t delve into the history. Suffice it to say, the parties filed lawsuits based upon the same claims in several different courts across the country.

“This case arises out of Video King’s use of a software program (“EPIC”) that was developed by Planet Bingo’s subsidiary Melange, Video King’s subsequent development of a competing software program (“OMNI”), and plaintiffs’ allegation that Video King wrongfully developed OMNI using confidential information gleaned from EPIC.” Id. pg 1.

The parties entered into a confidentiality agreement.

According to the court – the parties entered into a contract in 2005 that “had a substantial confidentiality clause:”

Such agreements are necessary to protect in a broad manner all confidential information disclosed to another party in a business agreement.

In a nutshell, Planet Bingo claimed Video King had access to Planet Bingo’s confidential information for its software program EPIC. Thereafter, Video King allegedly used that confidential information to create its own competing software program.

Planet Bingo sued VKGS (Video King) for –

breach of contract (confidentiality agreement),

unfair competition, and

unjust enrichment.

What is unfair competition?

“unfair competition” may encompass any conduct that is fraudulent or deceptive and tends to mislead the public. See Atco Indus. v Sentek Corp., Lexis 1670, page 7 (July 10, 2003).

This court went back and forth among several courts/jurisdictions and eventually, the Trial Court in Ingham County dismissed plaintiffs’ claims. Among other things, the Court said that the Michigan Uniform Trade Secrets Act (MUTSA) MCL 445.1901 et seq, preempted – or replaced the common law claim of unfair competition.

The Court of Appeals reversed.

According to the Court:

MUTSA generally “displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret,” Id. pg 6.

“It has been recognized from common law, on the other hand, that unfair competition encompasses more than just misappropriation. See In re MCI Telecom Corp Complaint, 240 Mich App 292, 312; 612 NW2d 826 (2000) (“[T]he common-law doctrine of unfair competition was ordinarily limited to acts of fraud, bad-faith misrepresentation, misappropriation, or product confusion.”) (Emphasis added). Id. pg 7.

“Thus, MUTSA does not preempt all common-law unfair competition claims, only those that are based on misappropriation of “trade secrets” as defined by MUTSA.” Id.

“The pertinent question, then, is whether plaintiffs’ unfair competition claim was based on misappropriation alone or also on fraud, bad-faith misrepresentation, or product confusion.” Id.

Conclusion:

We can glean from the Planet Bingo Case that a claim of unfair competition can be brought when based on:

Fraud
Bad-faith misrepresentation; or
product confusion.

If a claim for unfair competition is brought solely related to misappropriation of Trade Secrets, then the MUTSA is the controlling statute.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

twitter: @JeshuaTLauka

Detroit Startup Week Kicks off with Legal Panels: There are Legal Matters Startups Need to Know.

Detroit Startup Week is about a month away.

It is exciting to see the growth in downtown Detroit. Detroit was recently ranked the No. 4 City where Downtown is Making a Comeback.

It must be an exciting time to be part of the downtown Detroit community. The city promises to be buzzing during Detroit Startup Week.

Working in downtown Grand Rapids, I can’t help but mention some of our local startup groups.

We have some great organizations that support small business and encourage entrepreneurship in West Michigan, including:

Start Garden

Entrepreneurs’ Organization of Grand Rapids

Small Business Association of Michigan

Back to Detroit Startup, Week…

You can check out the events schedule, which includes a whole week packed full of valuable events.

I think it no coincidence that the very first day, May 20th, starts out with Detroit’s Small Business Legal Academy.

It seems fitting that a week long celebrating startups begins with education on all the legal ways things can go wrong.

According to the website:

SBLA Detroit will consist of a series of hands-on panels designed to provide practical legal and professional information necessary for new business owners and entrepreneurs to take their businesses to the next level. The panelists will cover legal issues involving real estate, intellectual property, employment, funding, formation, and organizational issues.

From the above excerpt, the legal panels look to discuss real issues that entrepreneurs will run into. I hope many take advantage of these panels.

The reality is that there are a host of legal areas that can turn into pitfalls for startup businesses – I write on quite a few of those areas:

Terms and Conditions in Contracts

Non-Competition Agreements

Entity Formation and Personal Liability

Personal Guarantees

Cash flow is a barrier for startups. This doesn’t mean you should avoid educating yourself on the legal issues affecting your business.

Take advantage of the resources available.

Consult with an attorney – Particularly law firms friendly to startup businesses.

e-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

twitter: @JeshuaTLauka

Recent Michigan House Bill Would Repeal Prohibition on Rent Control – A Response to the Affordable Housing Crisis?

On March 30, 2017 House Bill 4456 was introduced. The Bill would repeal Michigan’s prohibition on Rent Control.

The Bill was presumably proposed in response to the affordable housing crisis in Michigan and all across the United States. Other local governments across the U.S. are exploring legislative avenues to address the housing crisis.

According to Representative Chang, who introduced the Bill, the current rent control prohibition “makes it increasingly difficult for seniors and some families to find affordable housing, or to stay in the apartments they’ve lived in for many years.”
Representative Chang was apparently referring to the affordable housing crisis in Detroit. From all accounts, Grand Rapids is facing an affordable housing crisis as well.

Grand Rapids Housing Crisis

As many of you may know, a few months back the Grand Rapids Chamber hosted an Issue Summit on the Housing Crisis in Grand Rapids.

The Summit brought speakers representing many community stakeholders, including representatives from 616 Development, Grand Rapids Urban League,Rockford Construction, ICCF, MSHDA, and many local non-profits, including Mel Trotter Ministries, HQ, Heartside Ministries, on this lack of affordable housing, what is as Mayor Bliss emphasized, admittedly, “a complex issue”.

I have previously offered my own perspective, both as a lawyer representing real estate developers/investors, and as Board Chairman at Mel Trotter Ministries.

Is there an Answer found in Social Enterprise?

A few months back, Jim Harger with MLive posted a thorough article on the affordable housing crisis.

One community partner highlighted was Pastor Jim Davis and his company “Purpose Properties”

“The mission of Purpose Properties is to “raise enough money from local foundations and philanthropists to buy market-rate and affordable rental properties in the city.”

According to Jim Harger’s article:

“Purpose Properties plans to charge market rates for its properties to those who can afford them and use their profits to subsidize the rents of those who cannot afford market rates.”

We need more businesses and community stakeholders to approach our community problems like Jim Davis and Purpose Properties.

Community Partners Collaborating

Recently Mel Trotter Ministries announced that it was partnering with 3:11 Youth Housing to provide housing for homeless males 18-24.

As Mayor Bliss stated at the Housing Summit – the affordable housing crisis presents a complex issue.

It will take all community stakeholders to do their part – businesses, churches, government, and non-profits.

The question we should all ask ourselves: Am I working to build a better community?

e-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

Reflections from the Past-Board Chair at Mel Trotter Ministries.

On Wednesday my year-long term as Chairman of the Board of Directors of Mel Trotter Ministries came to an end.

It truly has been my honor to serve. As I reflect on my year of service, I wanted to share a few thoughts.

Who was Mel Trotter?

On Tuesdays throughout the year, Mel Trotter Ministries (“MTM”) hosts Meet The Mission Luncheons. On the back table after the luncheon you can find a book that we gift to our luncheon guests courtesy of Kregel Publishing titled “Man with a Mission.” It is the story of Mel Trotter.

MTM has been demonstrating the compassion of Jesus Christ to the homeless, hungry and hurting in West Michigan for over 117 years. What you may not know is that Mel Trotter was an actual man who lived and started the City Rescue Mission in Grand Rapids- the Rescue Mission that would one day bear his name.

You may also not know that Mel Trotter was an alcoholic, abusive man who squandered his paychecks on gambling rather than provide for his family.

Mel Trotter was intent on taking his own life one cold night when a companion directed him to the Pacific Garden Rescue Mission in Chicago, Illinois.

It was there that Mel Trotter encountered Jesus Christ. He surrendered his life to a Savior who loved him as he was.

Mel Trotter would go on to live a radically changed life. In 1900 Mel Trotter became the first executive director of the City Rescue Mission in Grand Rapids. He started and oversaw 68 other Rescue Missions across the country.

The transforming work that Christ has done in this one man’s life is the foundation of Mel Trotter Ministries.

MTM Today: Serving with Humility.

When I am asked about where I believe Mel Trotter Ministries’ is headed the first word that comes to mind is humility. I am reminded of Philippians Chapter 2:3-4, where Paul tells us to: “Do nothing out of selfish ambition or vain conceit, but in humility consider others better than yourself.”

MTM’s leadership team is, more than ever, committed to serve in humility. MTM has always endeavored to come along side our guests in humility to meet them where they are. But more than ever, MTM is striving to humbly seek out our community partners for the common goal of serving the homeless, hungry, and hurting in our community. As Dennis Van Kampen often says: “we can’t do this work alone.”

A great example can be seen from MLive’s article from a few hours ago. MTM has identified a need in our community – homeless male youths. It is no secret that Kent County has an Affordable Housing Crisis.

In response to this need, MTM is partnering with local organizations to provide affordable housing to homeless young men. Echoing Dennis’ words – We can’t do this work alone.

My Call to Younger Leaders. We Need You.

At Mel Trotter Ministries, we are always looking for volunteers. We need people who have a heart for the hungry, homeless and hurting in West Michigan. As we seek to end homelessness in West Michigan, one life at a time, it is a large task and we cannot do it alone.

This is my call to everyone, but particularly our next generation of leaders – millennials and beyond.

Ask yourself:

How can I serve?

Millennials – I’m reminded of the Bible – 1 Timothy 4:12 –

“Don’t let anyone look down on you because you are young, but set an example for the believers”

The fact remains – the millennial and younger generations are our future leaders.

Now is the perfect time to get plugged into one of the many opportunities to serve and lead.

Please take this as your personal invitation from me –

Take the initiative.

Get engaged.

Just show up.

e-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

Business Law Update: When are Non-Competes Enforceable?

I took this photo from my office, the first day of Spring 2017. It is fitting that the ice rink in Rosa Parks’ circle is melting.

With spring comes new opportunities – including employees leaving their jobs.

What happens if the employee signed a non-competition agreement during the course of employment? Are non-competes enforceable?

– it depends.

Check out a November 2017 article from MIBiz- PR firm sues former exec for breach of contract https://mibiz.com/item/25275-pr-firm-sues-former-exec-for-breach-of-contract.

A few years back I posted on an article written by Above the Law titled – “Jimmy John’s Serves Up Sandwiches And Oppressive Non-Compete Agreements.”

See the link from the “Above the Law Blog”

In Michigan, Non-Competes are enforceable to protect legitimate busines
s interests.

MCL 445.774a provides:

“1) An employer may obtain from an employee an agreement or covenant which protects an employer’s reasonable competitive business interests…”

Further the Agreement must be reasonable:

“as to its duration,
geographical area, and
the type of employment or line of business.”

In November I posted an article about a possible change to Michigan covenants not-to compete statute, you can see that article here – no new movement on th
at HB. It appears that it got stuck in committee and left to die…

Of note, a bill was proposed earlier this month that would require employers to offer Paid Sick Leave

At any rate, going back to the topic at hand…

The question posed by the Above the Law article is a good one – ok, Jim
my Johns, you have a non-compete agreement, that may be valid…so,

“to what end?

What is the point? What type of legitimate business interest is Jimmy Johns trying to protect here?

Going back to the initial topic of this post – when can a business enforce a non-compete?

One Answer:

When a business has a legitimate interest to protect.

A recent Michigan Court of Appeals on the topic of Non-Competition Agreements provides some illustration on this point.

BHB Investment Holdings v Ogg

I won’t delve into the details, but the first paragraph of the Opinion is telling:

“Steven Ogg took a job with Aqua Tots Canton after being terminated by its competitor, Goldfish Swim School of Farmington Hills. Ogg’s actions breached a noncompetition agreement he signed with the Goldfish franchisee, BHB Investment Holdings. BHB sought to preliminarily enjoin Ogg from working with Aqua Tots, but presented no evidence of irreparable harm. BHB later failed to establish that the agreement protected a legitimate business interest to support the issuance of a permanent injuncti
on. Nor did BHB substantiate that it suffered any damages as a result of the breach.”

Is restricting a former employee from swim instruction a legitimate business interest?

The Court on page 3 recognized a number of factors in the analysis in denying enforcing the non-compete, including:

the position was a low-level position;
employee had no access to confidential information;
employee didn’t take any information;
employee didn’t solicit customers;
interestingly, the employer didn’t previously enforce the non-compete when other employees left.

One other interesting piece of information – the Court rejected the employer’s allegation that its swimming lessons were proprietary information. The Court’s rationale?

the employer “placed its methods in the public domain because this was a public building and the students parents, as well as any member of the public, could watch the lessons and glean the methods.” pg 8.

Having no proprietary information, the employer “could not establish a legitimate business interest it needed to protect.” Id.

Lessons:

Non-competes will not be enforced unless they protect a legitimate business interest.
Non-competes are less likely to be enforceable against low-level positions with no access to proprietary information.
If you are going to seek an injunction in court, it helps to have some evidence that your former employee is unfairly competing.

questions? comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Business Law Basics: “For Want of a Comma” The Words You Use Can be Costly.

Disclaimer: The photo below has nothing to do with this post. It is simply my way of recognizing that I am sick of winter and looking forward to the 15 hour drive to Florida in a few weeks…

Today I read an article posted by the ABAJournal that illustrates the profound impact on word and grammar usage in contracts and legislation.

Oxford comma issue benefits drivers in overtime case

2016-01-09 12.56.14 — Photo I took of Clearwater Beach, FL

“FOR WANT OF A COMMA”

As the ABA Journal reports:

“Ambiguity caused by lack of a comma in a law on overtime pay has benefited Maine dairy delivery drivers.”

“The Boston-based 1st U.S. Circuit Court of Appeals pointed out the issue in the first sentence of its March 13 decision (PDF). ‘For want of a comma, we have this case,” the court said in an opinion by Judge David Barron.

“Because the statute was ambiguous, it should be interpreted in favor of the dairy workers who distribute milk but do not pack it, the appeals court found.”

A SINGLE WORD CAN BE LEGALLY SIGNIFICANT TO SHIFT RISK

Last year I wrote about how the words used in a contract dispute significantly impacted the rights and obligations in a business dispute, based upon the Michigan Supreme Court’s interpretation.

The Michigan Supreme Court made a distinction between the inclusion of the word “in” in a Title Company’s Closing Protection Letter in a prior case, and the “exclusion” of the word “in” in that instant case. In the Court’s determination:

“Although the distinction is slight—the only difference is the word “in”—the distinction is legally significant.”

Words Matter.

E-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

www.dwlawpc.com

Business Law Update: A discussion on Business Shareholder Oppression.

There are relatively few court opinions covering the Michigan Limited Liability Company Act. There have been even less on the issue of minority oppression claims. So I was excited to see a recent Court of Appeals decision on that subject. Check out t 2017-02-04-08-16-38-2 he February 9, 2017 unpublished decision of Wisner v SB Indiana, LLC, et al

The Wisner case involves two separate parties who claimed an owner/manager, Hardy, violated their rights as members and froze them out of the company.

The first question to ask is, “freeze out from what*?”

Control – Decision-making

Disclosures of Company Business

Profits in the Company

Employment in the Company.

What should a business owner/operator do to protect himself/herself?

Well, you have two readily apparent choices – address the issue before the business is formed, or address it once the problem arises.

1. Addressing the problems before the business starts.

The easiest way is this option: Get an Attorney involved at the onset of the business relationship.

Many of these business disputes in closely held companies could be resolved if, before going into business, the parties openly communicated their expectations, concerns, and clearly articulated in the formation documents (articles of incorporation/organization, Bylaws, shareholder agreement, Operating Agreement) a way out of the business relationship.

This could be the most cost-effective way to ensure to resolve business disputes – address them before they happen – with open communication, and clearly and concisely drafted (and executed!) documents.

2. Addressing the problems once they occur: Shareholder/Member Oppression Lawsuit.

Michigan law provides a cause of action against the shareholders/member
s who are in control of a company and oppressing minority owners:

Minority Shareholder Oppression, MCL 450.1489 (Minority Member Oppression, MCL 450.4404)

“A shareholder may bring an action…to establish that the acts of the directors or those in control of the corporation are:

illegal;

fraudulent;

or willfully unfair and oppressive to the corporation or to the shareholder.” (*in my experience this has been the most often the scenario where these cases arise – from the “freezing out” the minority owners from the business)

“If the shareholder establishes grounds for relief, the circuit court may make an order or grant relief as it considers appropriate, including, without limitation,
an order providing for any of the following:

(a) The dissolution and liquidation of the assets and business of the corporation.

(b) The cancellation or alteration of a provision contained in the articles of incorporation, an amendment of the articles of incorporation, or the bylaws of the corporation.

(d) The direction or prohibition of an act of the corporation or of shareholders, directors, officers, or other persons party to the action.

(e) The purchase at fair value of the shares of a shareholder, either by the corporation or by the officers, directors, or other shareholders responsible for the wrongful acts.”

Although this Statute applies to closely held corporations, there is also a virtually similar Michigan statute that applies to LLCs.

Therefore, if a court finds that those in control of the business committed misconduct against a minority owner amounting to “oppression”, the Court has broad discretion to create the type of relief it deems is best.

Back to the Wisner Case:

Without getting into the details of the case, there are two points the Court made relating to oppression claims.

a. Is failing to communicate with the minority members oppression?

The Wisner Court looked at the claims made by the minority member – that the manager “cut him off from communication.” The court found that, although Defendant substantially interfered with the minority member’s ability to com
municate…this did not constitute unfair and oppressive conduct. The court found that “it does not appear that his rights as a member of the LLC provided by MCL 450.4102(q), including any right to receive a distribution, or vote were substantially interfered with by Defendant’s conduct.”

b. If the Operating Agreement allows activity – that activity cannot be “oppressive”

The court also noted that at the formation of the company the parties had executed an operating agreement to govern their relationship.

The court noted that the oppression statute “had no application if the conduct at issue was authorized by an operating agreement. So to the extent that any of Mr.
Hardy’s actions were authorized by the agreements, then he cannot be found to be willfully unfairly oppressing these members.” Id. Pg 4.

“Likewise the case law has indicated that even a breach of those operating agreements would not be enough to find that he was willfully unfair and oppressive in his conduct.”

Lesson:

Sometimes filing a law suit for Minority Oppression is warranted due to the egregious misconduct of those in control of the company. However, to constitute “oppression” giving a minority owner relief, such conduct will need to be proven with sufficient facts.

The obvious take away points are two-fold:

1. Get an attorney involved before the business relationship begins and clearly document the
business relationship, especially an exit strategy. Any conduct the parties agree to in their shareholder/operating agreement cannot be “oppressive”.

2. If you are being frozen out of control in a business – Michigan law gives you broad remedies, including the minority shareholder/member oppression statutes.

Questions?

Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Fintech Update: Disruption for Good. The OCC’s Remarks Yesterday to Fintech Innovators at LendIt USA in New York

Yesterday, Thomas J. Curry, Comptroller of the Currency gave remarks about Fintech Innovation at LendIT USA (The Worlds Biggest Show in Lending and Fintech) Conference in New York. You can read Mr. Curry’s remarks here.

Mr. Curry praised the innovative Fintech Companies who “have fueled healthy competition to modernize and improve how the nation’s financial services needs are met.”

What I personally like is Mr. Curry’s emphasis on the opportunity Fintech has to reach the vulnerable in our communities.

According to Mr. Curry:

” Financial inclusion…brings those who are unbanked and underbanked into the fold, and too many of those individuals are concentrated in low- and moderate-income communities that are often the most vulnerable to financial difficulty and predatory practices.”

“What’s encouraging about (Fintech)is that there’s good data from the FDIC and others that suggest these communities that have been left out of the traditional system have higher adoption rates for new services that capitalize on emerging and mobile technologies”

****UPDATED

Check out the article by Crowdfund Insider reporting on Curry’s address: “We Will Be Issuing Charters to Fintech Companies”

Why Fintech Intrigues me – Purpose Driven.

I’ve previously talked about why fintech is so intriguing.

a. taking a risk doing something different;

b. disrupting business as usual;

c. for the good of others.

That’s social entrepreneurship at its finest.

Given the hot water that big banks continue to find themselves in, it isn’t surprising that a consumer friendly alternative is attractive, particularly to the vulnerable communities.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Real Estate Law and Affordable Housing Issues: Lawsuit Alleges Landlords Discriminating Against Families.

Here’s a profound truth those in the real estate industry will readily acknowledge:

Owning and Managing Real Estate is challenging.

I hear it from my Property Owner/Manager clients. I experience it when I am in court litigating or negotiating landlord/tenant disputes. 2017-02-04-08-16-38-2

Here’s another profound truth:

In many parts of the country, including Grand Rapids, Michigan, we have an affordable housing crisis.

Some of the pitfalls property owners should be mindful of are illustrated in a recent Department of Justice Press Release.

The Department of Justice issued a press release today concerning a lawsuit filed in the U.S. District Court for the Western District of Washington “alleging that the owners and manager of three Edmonds, Washington apartment buildings refused to rent their apartments to families with children, in violation of the Fair Housing Acts.”

(The complaint is an allegation of unlawful conduct. The allegations must still be proven in federal court.)

According to the press release, the Federal government alleged in its complaint that the “in March 2014, defendant Appleby told a woman seeking an apartment for herself, her husband, and their one year old child that the apartment buildings were “adult only” and therefore not available to her family. The complaint also alleges that at various other times from April 2014 to November 2015, defendants advertised their available apartments as being restricted to adults only”

Not good.

The federal Fair Housing Act prohibits discrimination in housing on the basis of race, color, religion, sex, familial status, national origin and disability.

As stated by Attorney Annette L. Hayes of the Western District of Washington
. ““Many families already face challenges finding affordable housing, and they should not also have to deal with unlawful discrimination.””

“Particularly in our tight housing market, landlords must follow the law and make units available without discrimination based on race, color, religion, sex, national origin, disability or familial status.

The lawsuit makes allegations that must be proven in court. However, I wonder, did this Landlord consult with legal counsel on renting practices before posting advertisements for rent?

There are some lessons to be learned for landlords, property owners, managers, and real estate investors.

Two takeaways from this news headline:

1. Before renting, it is worth engaging legal counsel.

Issues arise. When in doubt, e-mail or call your attorney.

2. Residential Real Estate Investment is highly regulated.

If you are a landlord leasing out “residential” property as opposed to purely commercial property (business tenant), you are under some stringent regulations. To be sure, these rules are there to protect consumers. You must comply with Federal laws, like the Fair Housing Act and state laws, like the Michigan Truth in Renting Act. Make sure you are operating lawfully. Make sure your lease is lawful.

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka