Landlords, Investors, and Real Estate Contractors – Made the AG’s 2014 Top 10 Consumer Complaints.

Today the Michigan Attorney General’s office issued a press release – “Top Ten Consumer Complaints” – check it out here

The State of Michigan Attorney General office’s consumer protection division provides consumers a forum to issue complaints against businesses that may have engaged in deceptive and unfair business practices against consumers.

The AG’s office made a list of the top ten most complained about industries in 2014 by consumers –  the list was made by “analyzing the more than 10,500 written complaints filed with the Attorney General’s Consumer Protection team in 2014.” On that list were:

  • Landlords,
  • Property Owners, and
  • Contractors.

Some of these consumer complaints very well may be against businesses that are actually committing “unfair” practices. However, complaints are also made against businesses for a variety of other reasons – in my practice I have seen a “breakdown in communication” as the biggest cause of such complaints.

At any rate…

These statistics should give reason for business owners in these industries to institute “best practices“.

Make sure your procedures are in order.

Make sure your contracts are up to date.

A specific call to Landlords and Investors:

Landlords and investors who own/manage residential properties are held to heightened statutory duties, including the Michigan Truth in Renting Act – make sure you are following these laws.

A specific call to Contractors:

Contractors who serve homeowners are held to heightened statutory duties as well. Most of these duties are “notice’ related –  (e.g. – notice of the right of the homeowner to rescind the contract within 3 days of signing). Further, if a contractor wants to preserve the right to record a construction lien, the Michigan Construction Lien Act has heightened notice provisions.

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Michigan Business Law Update: House Bill to Create “Application Fairness” for Felons

House Bill  4208 would create the “Michigan Application Fairness Act” – you can see the text of the bill that was introduced into the Michigan House on February 17, 2015

Under the Bill,

“An employer shall not make or use an initial application for employment that elicits or attempts to elicit information concerning conviction of a felony”

This Bill has some teeth to it, in the event that an applicant has been required to provide their felony history, a court could award damages and recovery of attorney fees.

This Bill is intended to promote the integration of those convicted of felonies back into the work force.

As I’ve previously mentioned, and it certainly deserves reiterating, there are a number of great companies who reach out to support putting Michiganders with certain employment barriers to work.  Goodwill Industries of Greater Grand Rapids lead by CEO Kathy Crosby does a fantastic job of equipping this demographic and putting them into long term employment. Mel Trotter Ministries has placed over 100 individuals in their shelter into full time employment in 2014.

Some West Michigan companies who do a great job of reaching out to hire/place those with employment barriers are Proos Manufacturing and Fabricating lead by CEO Amy Proos and Cascade Engineering lead by (former) CEO Fred Keller. Others include Lacks Enterprises, Kentwood Office Furniture and Express Employment Professionals of Grand Rapids lead by Janis Petrini  to name a few.

It will be interested to see the amendment process of this Bill through the legislative process.

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Lessons From Trial: Family Businesses and Disaster Prevention by a Proper Business Succession Plan.

I just finished up a complex and messy trial that spanned over a few weeks centering on a family owned and operated business.

The case involved multiple family members over multiple generations, and differing levels of involvement in the family business, and, as it turned out, differing expectations of the business succession plan once the business owner (Grandmother) passed away.

This case had been in court for years, and was the rare exception that did not settle before trial.

Why Didn’t it Settle?

Although the legal issues involved were complex – spanning corporate law, real estate, and probate and trust law, and related fiduciary duties, I believe the reason the case did not settle was only minimally related to the parties’ legal duties.

It was primarily the emotional and personal aspects of the relationship between the estranged family members  – the ups and downs – that spanned over Grandmother’s (Owner’s) life time.

I suppose the better question is, why was the case in Court to begin with? Posed differently, what could have prevented the fight in the first place?

Proper Communication Could Have Prevented the Lawsuit 

I read a recent blog post by The Family Business Consultant Group, advisers to family owned businesses, titled  “Communication in family enterprises: The role of assumptions” – you can check that out here

As I reviewed the article, I couldn’t help but reflect on the various questions that could have been asked between the parties  at any given time over the decades of the business operation.

If those questions were properly communicated (and of course, in turn, memorialized in writing) it would have lead to a mutual understanding of the business succession after Grandmother’s death.

A Proper Business Succession Plan Could Have Prevented the Lawsuit

Family relationships are complicated. They get even more complicated when the family owns and operates a business.

Current owners would do well to engage professional advisers-, legal, tax, accounting, insurance, etc.. in order to make sure business succession is not only are properly communicated, but also properly memorialized in a written plan.

Even if not every family member agrees with the plan, at least it is in writing, and properly communicated to all. This would go along ways to avoid a messy family dispute.

Comments? Questions?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Celebrating Entrepreneurship and Crowdfunding

February is the time to celebrate Entrepreneurship.

The National Entrepreneurship Week is slated for February 21 – 28 – you can check out the National website here to see what’s going on nationally to celebrate entrepreneurship.

What’s going on In Michigan…

Detroit is currently in its Entrepreneur Week – you can check out some of what’s been going on here:  Also follow @michipreneur on twitter or visit their website

Every State Governor has issued its own Proclamation for Entrepreneurship Week. Governor Snyder issued a Proclamation declaring that February 18 is Michigan Entrepreneurship Week. If you want to check out more resources and see what’s going on in Michigan for Entrepreneurship check out these resources

While I’ve got your attention….

an update on Intrastate Crowdfunding Laws.

Crowdfund Insider just a few days ago published an article that provides useful information on the status of crowdfunding laws in various states.

Although Intrastate Crowdfunding laws have been criticized for their perceived lack of utility for startup businesses, this certainly isn’t stopping State Legislators from proposing their own crowdfunding exemptions. The latest proposed bills are tweaking areas that appear to be problem areas for states. Two observations based upon the new bills,

1. States do not want to be disadvantaged by not having a crowdfunding Exemption available for their startup business communities.

The 6 states that initially introduced Crowdfunding Exemptions has blossomed into 13, with 13 other states having bills introduced. Regardless of its critics, State Legislators want to encourage entrepreneurship. They see crowdfunding as a way to do that.

2. States without Crowdfunding Exemptions are listening to the critics and therefore are proposing bills that get around some of the problem areas.

Critics of crowdfunding claim that the costs associated with intrastate crowdfunding make it an inefficient tool. Also, the language in the earlier versions of crowdfunding laws limit the ability for certain real estate investment companies to efficiently crowdfund. In response, some States are proposing bills that increase the funding caps and make it more flexible for certain real estate investment companies to utilize the exemption, while at the same time maintaining fraud prevention measures (requiring significant disclosures to investors, requiring issuers to have all deals flow through a registered crowdfunding portal – that has government oversight and approval.)

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Lawsuits and Technology: There’s an App for getting a Job – But are you an Employee or a Contractor?

A recent article from the ABAJournal highlights a new emerging dispute in employee v.s. independent contractor law – you can check that article out here

Reasons for Business Owners to Properly Classify Workers

ln a previous blog post I talked about the consequences of business owners mislabeling employment status see here

Employee v.s. Contractor – Matters to the Worker
“Employees” enjoy protections under Federal and State law not afforded to independent contractors.

Take for example the Michigan Wage and Fringe Benefit Act – which requires Employers to pay employees every two weeks, or at a minimum on a monthly basis.  MCL 408.472. The Michigan law also imposes strict penalties for an employer found to have violated an employee’s rights.

New Technology – New Questions for Workers

It isn’t a surprise that technology has given rise to a dispute in this area of the law.

The article gives reasons why these “app-summoned” workers are grumbling about their “wrongful” status of independent contractor. Being labeled an Independent contractor presumes a level of autonomy – apparently not enjoyed by the plaintiffs in the lawsuits.

Could Technology Give Rise to a New Legal Classification?

Interestingly, some law professors’ solution is creating a new class: “Dependent Contractors” – a sort of hybrid of rights and duties. It will be interesting to see what comes of these lawsuits – a new classification for workers?

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Michigan Real Estate Law Update: Proposed House Bill to Allow Tenant’s Waiver of Trial By Jury.

A Michigan House Bill was proposed last week that would allow a landlord in a residential lease to include a waiver of a trial by jury. You can see the proposed bill here

This proposed amendment would revise a portion of Michigan’s Truth in Renting Act, which only applies to residential landlord tenant rental agreements.

Allowing the waiver would certainly serve the interests of landlords/property managers, as well as the efficiency of court resources. As lawyers are well aware, a bench trial, particularly in residential landlord/tenant dispute, can be tried much more efficiently than a trial by jury.

The bill has been referred to the judiciary committee. It will be interesting to see if it comes out intact.

Questions? Comments? 

Jeshua@dwlawpc.com

http://www.dwlawpc.com

Local Businesses: More on Crowdfunding

Is Crowdfunding Right for Your Business?

An interesting article in Crain’s Detroit addresses crowdfunding and whether its right for businesses. Check it out here.

The article is meant for small and large businesses alike to consider whether or not crowdfunding is a viable source of funding for their respective businesses. The article addresses “rewards based” crowdfunding and “equity” crowdfunding, but let’s just consider “equity” crowdfunding, particularly, Michigan’s intrastate crowdfunding Exemption – the MILE Act. For more on the MILE Act, check out some of my prior posts.

Crowdfunding and Local Community-based Businesses.

One point that came out of the article was that crowdfunding, if it is a viable funding tool, is best suited for small local businesses.

I certainly agree that local businesses, who intend to stay local, are well-suited for crowdfunding. In fact, that was a goal of the Federal JOBS Act.

As the State of Texas has recognized in promulgating its own rules on intrastate crowdfunding:

“The legislative history of this federal provision [JOBS Act] suggests that the exemption was intended to apply only to offerings genuinely local in character, which in reality represent local financing by local industries, carried out through local investment.”  You can check out Texas’ Intrastate Crowdfunding Rules here

The Michigan Municipal League stated in the Crain’s Article that long-standing community-based businesses can benefit from crowdfunding, since those businesses would have name recognition in the community, and proven track record to stick around.

Crowdfunding is Met with Skepticism.

Not surprisingly, most of the attorneys interviewed react to crowdfunding with some skepticism.

“It’s such a gray area that a lot of attorneys just say, “I don’t know’ and take a conservative approach,” said Kevin Hitchen, co-founder of Localstake. “That’s why you don’t see a lot of businesses (using MILE). It’s restrictive.”

Indeed, as a lawyer, my job is to protect my clients from liability, it is hard to fully protect clients from the unknown.

As I’ve previously indicated, the State of Michigan appears not to be anywhere near ready to propose rules to help guide the MILE Act Implementation. Without this guidance, it certainly makes life difficult for Michigan business lawyers advising their client’s on MILE Act compliance.

However, I don’t believe that justifies labeling the MILE Act as a fad that will soon fade away. At a minimum, it is a tool that local entrepreneurs should consider for local (and lasting) economic development.

As I’ve previously written, I believe crowdfunding is a useful tool for social entrepreneurs who want to invest in a local community. Detroit, Grand Rapids, and other urban communities are good examples of communities ready for entrepreneurs to “take the leap” into intrastate crowdfunding.

Michigan is Not Backing Away From Local Crowdfunding

On October 21, 2014 Governor Snyder signed into law HB 5273 which created a “Michigan Investment Market” to local intrastate crowdfunded securities. You can check out the legislation here

The intention  of the “Michigan investment market” would be to connect buyers and sellers of local securities. You can review the New York Times article titled “A Way for Local Businesses to Grow” about the new law here

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Legal News Update Begs the Questions: are Universal Legal Forms a Good Investment for a Business Start-up?

Happy Friday!

The ABAJournal reported today that LegalZoom “has gotten a green light to operate in the United Kingdom as an alternative business structure.”  You can read the entire article here

The ABAJournal also has an interesting extensive article about the value of these alternative legal service providers see that article here

I’ve previously commented on my own views of universal legal forms, and the complications that can arise from using those forms without obtaining legal counsel. You can check out my previous article here . That article highlights a case where an individual used a universal legal form that ultimately did not likely result in her intentions coming to fruition.

Regardless, People Use These Products.

Legal Zoom and others like it encompass a multi-million dollar industry. So people, a large part being small businesses, start-ups and entrepreneurs, are using these products.

Question: Is a minimal investment in these pre-made legal documents a good investment for start-ups?

First, I can understand why an entrepreneur might be drawn to buying such a product.

Entrepreneurs (particularly those involved in small business/start-ups) are more likely to utilize low cost legal forms as opposed to retaining legal counsel. For two reasons:

1. Entrepreneurs are more likely to take risk (e,g, – venturing into a business transaction without legal counsel = RISK);

Lawyers, on the other hand, are in the business of limiting liability for our clients. We are risk averse!

and

2. start-ups lack cash flow.

I have stated in previous posts good reasons for why I believe everyone (whether business, or consumer) should have a lawyer involved whenever a legal documents are undertaken.

At some point, the small business owner needs to make a cost-benefit analysis:

what is the cost of engaging a lawyer, and what is the risk if I do not? Is the risk worth it?

The problem here is that it is hard gauge the risk without seeking legal counsel (catch 22).

It’s no surprise that the legal industry is always considering whether alternative legal fee structures are worth considering. (e.g. – fixed fee v.s. hourly rate). The legal industry needs to make legal services more accessible, since there is an unmet need for legal services.

My exhortation to the start-up business owner: 

get a lawyer referral from a trusted source, and see if the lawyer will work with you regarding alternative fee structures. What could it hurt?

A lawyer who works with start-up businesses and entrepreneurs likely understands your competing business interests.

The lawyer probably also values the relationship with a growing business client that the lawyer can look forward to advising over the course of many years to come.
Thoughts? Questions?

http://www.dwlawpc.com

Jeshua@dwlawpc.com

Michigan Real Estate Law Update: Investors: If you Intend to Redeem, Better Record that Deed.

Happy New Year!

A brief Michigan Legislative Update that affects real estate investors. HB 5795  was passed into law on December 29, 2014 and given immediate effect. The law amends the redemption from foreclosure statute. MCL 600.3140.

See the legislative analysis of the House Bill here

Purchasing Property at (and after) Foreclosure.

Under the prior language, anyone “lawfully claiming from or under the mortgagor or the mortgagor’s heirs, executors, or administrators” could redeem the property from foreclosure.

This effectively meant that an investor who missed the foreclosure sale could contact the homeowner (or their personal representative, if deceased) and purchase a quitclaim deed that would transfer the homeowner’s “redemption rights” in the property.

“Redemption Rights” One Stick in the Bundle of Rights.

As every lawyer who sat through Property Law in first year Law School was taught, Property Rights are akin to a “bundle of sticks” – multiple rights within that bundle, including, complete ownership (fee simple) possession, contingent rights, mineral rights, air rights, etc…and in the case of a homeowner, a right of redemption.

A quitclaim deed transfers “whatever” rights the homeowner had at the time of the transfer. In the case of a homeowner after foreclosure, this typically means only “the right of redemption” since that is the only stick left in the bundle.

When Do you have a Right to Redeem as the Owner of a Redemption Right?

The result of HB 5795, it doesn’t preclude a homeowner from assigning their interest, but it puts the burden of the “grantee” (or real estate investor who purchased the rights) to record the deed prior to redemption.

The practical effect is that it places no duty on a purchaser at foreclosure, or the register of deeds, to accept payment, unless they are presented with a “recorded interest.”

What’s the Purpose for this Amendment?

For real estate investors who pick up properties at foreclosures, there is nothing that irks them more than another investor who approaches them a few months after foreclosure sale and informs that they own the right to redeem the property via a quitclaim deed, and they intend to redeem.

All the investor’s time and energy in due diligence to investigate properties worth picking up, not to mention the amount of cash that was needed to purchase the Property at the foreclosure sale – all gone to waste.  When the investor expected to either rehab and flip the property, or make it into a long term rental investment, what does the investor get in return? a nominal short term interest payment on their funds.

It isn’t surprising that an investor is not too happy when they get the call asking for a pay off from one “lawfully claiming under the mortgagor” Now, rightfully, the investor could search the Register of Deeds and see if a quitclaim deed had been recorded. If not, it arguably gives them grounds to refuse a pay off.

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Legal News Update: Lawyer’s “million-dollar challenge” was not an enforceable contract.

So a lawyer headlined in the ABAJournal yesterday because he evidently announced on national television that he would pay $1 Million to anyone who could disprove his client’s alibi.

As the ABA Journal Reports it “In the interview, recorded before trial and broadcast after his client’s 2006 conviction, [the lawyer[ said the prosecution’s theory was impossible. “I challenge anybody to show me—I’ll pay them a million dollars if they can do it,” he said in the edited interview. “Twenty-eight minutes, can’t happen. Didn’t happen.”

A law student took up the Lawyer’s “million dollar challenge”

Once the lawyer decided not to “pay up”, the law student sued the attorney for the million dollars.

The 11th Circuit Court of Appeals held in favor of the lawyer – that the “million dollar challenge” did not give rise to an enforceable unilateral contract.

Unilateral v Bilateral Contract?

According to Black’s Law Dictionary, Eighth Edition, pg 349, a unilateral contract is “[a] contract in which only one party makes a promise or undertakes a performance.”

As further clarified: “[M]any unilateral contracts are in reality gratuitous promises enforced for good reason with no element of bargain.” Id. citing P.S. Atiyah, An Introduction to the Law of Contract 126 (3d ed. 1981).

in a unilateral contract, something needs to happen in order for the contract to be binding. In the context of real estate, think about the difference between a “purchase agreement” and an “option to purchase” (If I lost you on that one, just e-mail me)

So, using the $1 Million challenge as an example, the law student argued that there was an offer made to him (and anyone watching the T.V. broadcast, apparently) and he accepted that offer by travelling from Florida to Georgia…

The Court did not buy that argument.

in contrast:

a bilateral contract  embodies “mutual and interdependent conditions and obligations.” Brauer v. Hobbs, 151 Mich. App. 769, 776, 391 N.W.2d 482, 485 (1986).

For example, most written contract between two parties. the conditions and obligations go both ways, and there are remedies in the event that one party does not do what they promise to do.

Lesson:

I don’t think there is one here. Unless you are considering to take the $1 Million Challenge, I think the lesson is, don’t do it, or the 11th Circuit Court of Appeals will hold against you once your case gets dismissed at the trial level.

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email: Jeshua@dwlawpc.com