Archive for April, 2016

“Prince Died Without a Will.” Business Owners Should Ask the Question: Who Are My Advisers?

April 28, 2016 Leave a comment

Yesterday, the ABAJournal posted that Prince’s sister filed in court claiming Prince died without a will.

A year ago I posted about some lessons from Robin Williams’ Estate.

I wrote about Robin Williams’ Estate as “an example of the problems that can erupt after a loved one passes away – even if that loved one had a well thought out estate plan.”

In the case with Prince, it appears that he had absolutely no estate plan at all.

This is surprising given, as the ABAJournal put it Prince apparently “had a ‘revolving circle’ of lawyers and business advisers, according to the New York Times. He also handled many of his business affairs himself.

I wonder where were the attorneys, accountants, financial advisers telling prince:put your affairs in order!

Maybe this happened. Maybe he had one or more lawyers over the years tell him, “by the way, Prince, you really need to prepare an estate plan so that your finances are in order when you die.

Maybe estate planning was simply not important to him. According to the article Prince did not have a surviving spouse or parents… one can only speculate.

Prince is apparently survived by 5 siblings. It will be interesting to see if they can all agree on the estate administration or if there are any other apparent heirs that claim a part of the quarter of a billion dollar empire Prince left behind.

Two comments:

1. To business advisers: If we aren’t being proactive with our clients to push them to get their affairs in order, we are doing a disservice. This is especially true when we serve business owners or individuals whose finances might have a lot of moving parts.

2. To Business Owners: Who are your advisers? Maybe you are like Prince – you like to handle many of your business affairs yourself. That only works so well. You can’t be an expert in every area. Surround yourself with good counsel. You need advisers who can steer you in the right direction.


Twitter: @JeshuaTLauka

Proposed Bill Affects Landlords in Recovering Property Against “Squatters”

April 26, 2016 Leave a comment

Several years ago I wrote a post about a proposed bill affecting Landlords.

The Bill affected the time frame which a property owner could bring an action to recover property; most importantly, it affected the statute of limitations for a claim of “adverse possession” or “squatters rights” by a holdover tenant.


Here’s the scenario:

Investor purchases at foreclosure. Investor finds out the Property is being occupied. Redemption period expires. Investor files suit to gain possession of the Property.  “occupant” counter-sues – and claims “I own this Property by adverse possession”.


The prior bill provided that the statute of limitations period does not apply to a person if an adverse party is asserting a claim to the property based upon adverse possession.

That bill went nowhere.


House Bill 5546 was introduced a few weeks ago and referred to the judiciary committee.

The Bill would extend the period which a “squatter” or “holdover tenant” would need to prove title by adverse possession from 15 years to 30 years.

This makes sense for Landlords: what if you purchase real estate at foreclosure sale, attempt to remove a tenant and find out they have a claim to adverse possession?

The statute would make it harder for a hold-over tenant to prove they had a lawful right to the Property.


Twitter: @JeshuaTLauka

A Lawyer’s Perspective: the Tension Between Encouraging Real Estate Entrepreneurship and Keeping Families in Affordable Housing.

April 20, 2016 6 comments

2017-09-14 15.04.09If you are reading this, you may know that I am a lawyer.  I love working with entrepreneurs – a large number of my clients invest in/manage real estate.

As the current Chairman of the Board of Mel Trotter Ministries, I also care very deeply about the homeless, hurting, and hungry.


I was in court recently on behalf of an investor client. The client purchased real estate at foreclosure sale, redemption period had come and expired months ago, and I was filing suit to terminate any “possessory rights” of anyone occupying the Property.

In this specific case someone was residing at the Property, without any lawful claim, not paying any money to stay there, for months/years. My client needed immediate possession of the Property to begin work to bring the Property in good condition, to ultimately rent to a willing tenant.

I read this article from the ABAJournal:

Couple must sue to evict stranger who moved into their vacant home

It sounds kind of strange, right? Why would someone need to sue to evict someone who has no business being there in the first place?

This question illuminates  the “flip side” of the housing crisis (not enough affordable housing is causing families to be homeless.)

The flip side:

There are entrepreneurs who revitalize blighted real estate. These entrepreneurs pay money to own property, invest real money into purchasing, renovating, and leasing the property to individuals/families who can afford to pay rent. (Depending on the level of development of the property, some might call this “gentrification”)  There are people living in these homes they cannot afford. So they live there, rent free, until a court orders them to leave. At that point – they are rendered homeless, or struggling to find housing they can afford.

After obtaining a possession judgment for my client – my job ends.   But my “Mel Trotter” hat keeps my mind going…

What becomes of these people? Maybe they end up sleeping in their car. Hopefully they end up receiving help – to meet them where they are at. Places likeMel Trotter Ministries, that will take in families and care for them –  provide them time to get into affordable housing. Since January 1, MTM has put 37 families into permanent homes.   

I see firsthand the tension:

 We should encourage entrepreneurs to revitalize blighted property – we should do everything we can to place families in affordable housing.

There is a tension: and it needs to be embraced.

I get these words of wisdom – to “embrace the tension” we see in our daily lives from a man I admire named Fred Keller – founder and Chair of Cascade Engineering.

For me, the answer isn’t ignoring the tension on complex matters – which is why I am writing this post. I embrace it.



Twitter: @JeshuaTLauka

Real Estate Law Update: Michigan Supreme Court Holds Full Credit Bid did not Bar Contract Claim against Third-Party.

April 15, 2016 1 comment

Happy Friday, all!

Real Estate Investors and anyone involved in the foreclosure process is aware that a “full credit bid” at the foreclosure sale by the bank/mortgage holder “extinguishes the underlying debt.” You can check out my prior posts on this subject.

A case that has been on appeal for years is Bank of America v First American Title, et. al.

Two days ago the Michigan Supreme Issued an Opinion that has legal and precedential significance.

The Michigan Supreme Court was asked to, among other things, address “the scope of the full credit bid rule.” Bank of Am. v. First Am. Title Ins. Co., 2016 Mich. LEXIS 660, *1 (Mich. Apr. 13, 2016).

Regarding that scope, the Court held that “the full credit bid rule does not bar contract claims by a mortgagee against nonborrower third parties.” Id. pg 29.

In so doing, the Court overruled prior case law.


This case was factually interesting in that it was based on BOA’s financing the purchase of 4 properties (with inflated property values), the borrowers turned out to be “straw borrowers” who took the money, ran, and defaulted on the loans.   BOA foreclosed and bid the full amount (a full credit bid) on two of the properties, and then took a $7 million hit when it thereafter sold the properties.

ISSUES: CPLs and the Scope of the Full Credit Bid Rule

The issues are varied, including the enforceability of closing protection letters (CPLs) issued by title insurance companies under certain circumstances.

What is a Closing Protection Letter?

As the Supreme Court explains, A CPL “is a contract between the title company and the lender whereby the title insurance company agrees to indemnify the lender for any losses caused by the failure of the title agent to follow the lender’s closing instructions.” Id pg 37.

“[a] lender who also wants the title insurer to be responsible for the agent’s acts in connection with escrow closing activities and services must separately contract with the title insurer for such additional protection by entering into an ‘insured closing letter’ or ‘closing protection letter.” Id.

In BOA’s case, it was on the hook for a huge loss and wanted to point to the Title Company and say “you should have caught that, you must indemnify me!”

Words Matter.

A word (literally) on the CPL issue – the Court made a distinction between the inclusion of the word “in” in the CPL in the prior case, and the “exclusion” of the word “in” in the instant case. In the Court’s determination:

“Although the distinction is slight—the only difference is the word “in”—the distinction is legally significant.” Id. page 43.

“[i]f the word ‘in’ is not included, as is the case here, the phrase ‘handling your funds or documents in connection with . . . closings’ simply defines or identifies the closing agent, effectively broadening the indemnification coverage to any acts of fraud or dishonesty by the closing agent related to a closing.” In light of this distinction, the fraud or dishonesty by Westminster or Patriot need not be tied to their handling of Bank of America’s funds or documents.” Bank of Am. v. First Am. Title Ins. at page *44 (Mich. Apr. 13, 2016)

Words matter!


1. The Full Credit Bid Rule applies to the borrower/lender.  It does not apply to third-parties and will not affect any contracts or claims between a lender and a third party.

2. Words matter! As the Supreme Court opined – one word can be “legally significant.” It could determine liability for millions of dollars…


Twitter: @JeshuaTLauka

Landlords & Property Managers: Time to Review your Tenant Applications – Beware Blanket Bans on Renting to those with Criminal Convictions

April 11, 2016 Leave a comment

“Private landlords who have blanket bans on renting to people with criminal records are in violation of the Fair Housing Act and can be sued and face penalties for discrimination.” The New York Times Also check out theABAJournal

According to the Times article ” In particular, blanket bans violate fair housing law because they have a disparate impact on minorities, who are arrested and convicted in disproportionately high numbers, officials said.”

You can review the guidance that came out of HUD’s General Counsel office.

Per the NYTimes:  the guidelines discuss “how the fair housing law applies to policies that exclude people with criminal records, a group that is not explicitly protected by the act but falls under it in certain circumstances”

The Counsel’s report is about 10 pages the first page lists some pretty staggering statistics:

“As many as 100 million U.S. adults – or nearly one-third of the population – have a criminal record of some sort.”

“The United States prison population of 2.2 million adults is by far the largest in the world.”

For a discussion on some of the policy arguments surrounding the FHA- you can check out NPQuarterly’s article from today.

Bottom Line for Landlords: No Blanket bans on Tenant applicants just because someone has been convicted of a crime.

A good piece of advise from Debra Carlton  a spokeswoman with the California Apartment Association, which represents 50,000 rental property owners,  quoted in the NY Times article: “We always urge owners not to use a blanket policy and to look at the tenant’s ability to pay rent and be a good tenant,