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News for Residential Real Estate Investors: Michigan Landlord Settles with DOJ for Allegations of Fair Housing Violations.

August 30, 2016 Leave a comment

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 involved in negotiating in landlord/tenant disputes.

 

Some of the pitfalls property owners have to watch out for are illustrated in a recentFederal government press release.

The Department of Justice issued a press release today concerning a lawsuit settlement reached with a Landlord and 7 Michigan apartment complexes over Discrimination Charges brought by the Federal Government. You can review that press release here.

 

According to the press release, the Federal government alleged in its complaint that the “ the defendants, including the rental manager…as well as the corporate entities that own the complexes…discriminated against families with children by prohibiting them from renting one-bedroom units in the defendants’ apartment complexes.

According to the press release: the Fair Housing Center of Southeastern Michigan…had testers posing as prospective residents…ask[ed] to rent one-bedroom apartments. Testers who said that they wanted to rent an apartment with their child were told that children were not allowed in one-bedroom units.” Id.

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 Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division. “Families with children deserve access to housing that meets their needs without facing unlawful discrimination. The Justice Department will continue to enforce the Fair Housing Act to ensure that families with children have the same rights to housing within their price range as people without children.

I’m speculating, but maybe the landlord didn’t know the law.

I wonder, did the landlord/property owner ever consult with legal counsel on its practices?

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

 

Two takeaways from this news headline:

 

1. 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 much more stringent regulations. 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.

 

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

What’s going on in Grand Rapids Real Estate and Beyond.

August 26, 2016 Leave a comment

Happy Friday!

Some headlines to share – enjoy!

I. What’s going on in Grand Rapids Real Estate News:

In the wake of Propaganda Donuts Leaving Division public attention has been drawn to the tension between local businesses and the homeless population on Division Ave.2016-07-22 13.10.20

I explored this topic in my blog post: Can business, local government, and non-profits find ways to work together for the common good?

Check out the latest news on this subject from WoodTV8. Local government looks to be taking measures:

Goals for S. Division: Homeless, Business Coexisting

According to the Wood TV8 Article:

“That will be one area of focus for GRPD Capt. Scott Rifenberg as he takes over control of the department’s new Central Service Area, which was created in response to the downtown growing pains.”

Per Capt. Rifenberg: “That’s really going to be my goal, to make that area somewhere that people want to come to, that people feel comfortable in no matter what socioeconomic class they come from.”

Mel Trotter Ministries hosts a Unity Picnic: Bringing Unity around Division

Check out the Blog Post from Mel Trotter Ministries (“MTM”). MTM in connection with the Heartside Neighborhood Collaboration Project hosted a Unity Picnic in Heartside Park.

The rationale from Dennis Van Kampen, CEO of MTM:

 

if we offered a free meal and played some music and invited the police, the business owners, the homeless, the folks who live in the new housing units, the agencies in the area, then conversations could lead to tolerance and tolerance could lead to understanding and acceptance. Just maybe through this meal, we could rise above our differences to see our similarities… and great things could begin.

Thank you, Dennis. Great example of embracing the tension in the community in order to bring unity.

II. Beyond:

The U.S. Needs More Affordable Housing “How Cities Are Preserving Affordable Housing”

 

 

III. Parting Note for Landlords

Landlords Beware:

Maintaining a Tenant “Blacklist”? Potential Pitfalls in Tenant Screening.

 

e-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

Categories: Uncategorized

Reflections on the Guy with the Jack Hammer…

August 25, 2016 Leave a comment

This morning I was making my commute to work on the highway – traffic was backed up and at a stand still.

Eventually, all cars started to roll along slowly (at this point, I was happy that at least traffic was moving).

Fifteen minutes and a few miles later I slowly passed the root cause of the traffic congestion…one construction guy with a jack hammer.

He was working on a small patch of concrete on the highway. Yet his lone actions closed down a lane for miles and disrupted traffic flow for so many travelers.

It is amazing to me that one person’s actions can be the cause of such disruption.

It gave me pause to reflect:

Sometimes disruption is a good thing.

It gave me pause to ask myself:

am I being a disruptive force for good?

 

A quote from Jim Elliot came to mind during my commute this morning:

 

“Wherever you are, be all there. Live to the hilt every situation you believe to be the will of God.”
– Jim Elliot

 

Here’s a call to living courageously each day and being a disruptive force for  good.

 

e-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

Twitter: @JeshuaTLauka

Business Owners: Think Before you Sign. Recent Court Case Shows Why the Language in Your Contracts Matter.

August 17, 2016 1 comment

I’ve previously written about the importance of understanding the contracts you sign.

I just read a recent Court of Appeals decision that provides a great illustration for business owners to give pause before signing a contract on the dotted line.

Check out the case of Solis v Kroger and The Greener Side.

It’s only a few pages – easy read.

Facts:

  • Solis slipped on some ice in a Kroger’s parking lot.
  • Solis sued Kroger.
  • Kroger’s response – “its the fault of our ice removal company!”
  • Kroger sued its ice removal company – Progressive and Progressive’s sub-contractor – The Greener Side.
  • The Greener Side’s response – “Yes, we had a sub-contract agreement, and YES, it had an indemnity agreement, but we didn’t have an obligation to indemnify Kroger in that instance.

So What’s going on here?

Before Kroger engaged Progressive and the Greener Side, it made them sign a subcontractor agreement.

This agreement had an indemnity clause. It intended to allocate the risk of some unknown event (e.g. – someone slipping and falling and suing Kroger) to the subcontractor, and away from Kroger.

According to the Court of Appeals:

“The threshold question in any indemnification action is whether the indemnity clause applies to the underlying claim at issue. Citing Miller-Davis Co v Ahrens Const, Inc, 495 Mich 161,174 (2014).

The Greener Side argued for a narrow interpretation of the indemnity clause. It’s argument – “the indemnity provision does not apply because it had no obligation to perform snow and ice removal services on the day of Solis’ fall.”

Unfortunately for the Greener Side, the Court of Appeals held that the indemnity clause language was broad. 

“The Greener Side agreed to take “the entire risk of any and all personal injuries or property damage arising out of or in any way connected” with its performance under the contract.”

That’s broad language. If the Greener Side did not want to assume that much risk, it should have attempted to narrowly tailor the indemnity language.

Important Lesson:

Understand Your Contracts Before Signing. 

Contracts are about risk allocation. In a business relationship you need to decide what risk you are willing to bear, and what risk you will allocate away and then make sure the contract clearly states your agreement.

www.dwlawpc.com

e-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

Celebrating Entrepreneurs: National Startup Day

August 5, 2016 Leave a comment

Yesterday August 4 was the 4th Annual National Startup Day Across America.

According to the website, National Startup Day Across America was created to:

“raise awareness of startup activity and job creation and help catalyze support for your local entrepreneurial community.

On the importance of startups in the U.S.:

“Startup companies act as entrepreneurial leaders, innovators, and job creators within our communities.”

An interesting statistic I read today from an article by Recode:

companies less than one year old have created an average of 1.5 million jobs per year over the past three decades, fueling both local and national economic growth.”

 

However, according to the Small Business & Entrepreneurship Council,Entrepreneurship is in decline.

SBE Council’s CEO, Karen Kerrigan is encouraging elected officials to “commit to policies that encourage startups.

We are fortunate to have a thriving and generous West Michigan Business Culture.

So, why not support a startup today?

Go grab a cup of coffee at a local business!

Spread the Word about an Entrepreneur Doing Good work in our community.

A shout out to some of the great organizations that support small business and encourage entrepreneurship in West Michigan:

Start Garden

LocalFirst

GRIN

GRAPE

LinkedUPGR

Grand Rapids Chamber

Small Business Association of Michigan

– Happy Startup Day!

 

e-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

Twitter: @JeshuaTLauka

MI Supreme Court in Lawsuit Involving 5 Hour Energy: Commercial Non-Competes Must be Evaluated Under the Rule of Reason.

August 1, 2016 1 comment

A while back I wrote a post about the  Court of Appeals Decision: The Non-Compete Lawsuit Involving 5 Hour Energy.

To recap, the facts:

Parties:

  • Plaintiff, Innovation Ventures, LLC, – the maker of “5 Hour Energy”
  • Defendants Liquid Manufacturing, LLC, K & L Development of Michigan, LLC, and Peter Paisley and Andrew Krause, the presidents and owners of Liquid Manufacturing and K & L Development.

i. Innovation Engages Liquid to bottle 5 Hour Energy

  • On May 18, 2007, plaintiff entered into a manufacturing contract whereby plaintiff hired defendant Liquid Manufacturing to bottle 5 Hour Energy.
  • In June 2010, plaintiff terminated its agreement with defendant Liquid Manufacturing, and the parties entered into an agreement to formalize the termination and to formalize plaintiff’s exercise of its option to purchase the equipment that defendant Liquid Manufacturing used to bottle plaintiff’s product. Id. pg 1.
  •  The Termination agreement contained nondisclosure and non-compete provisions, but permitted defendant Liquid Manufacturing to produce a list of 36 “Permitted Products” on the equipment that was formerly used to bottle plaintiff’s product; that permission could be revoked for violation of the Termination Agreement. Plaintiff agreed, though, to give defendant Liquid Manufacturing 30 days to cure any violation of the agreement. Id.

ii. Innovation Engages K&L to Help Market 5 Hour Energy

  • In 2008, Plaintiff and Defendant K&L entered an oral agreement with defendants, defendants to act as consultants “to help design, manufacture, and install certain beverage production and packaging equipment for plaintiff.”
  • On April 27, 2009, plaintiff and defendants Krause and K & L Development entered into a written agreements, including a confidentiality and non-compete agreement” Id.
  • On or about May 10, 2009, less than two weeks after the signing of the Agreements, plaintiff terminated the parties’ business relationship. The Parties entered into a “Termination Agreement”

And The Plot Thickens…

iii. K&L and Liquid Join Forces to Make: Eternal Energy

  • On September 10, 2010, defendant Eternal Energy LLC, which produces a liquid energy shot known as “Eternal Energy” was formed by the owners of Liquid Manufacturing and K&L Development to compete with 5 Hour Energy.
  • On May 9, 2011, defendant LXR Biotech was formed;  Defendant LXR Biotech markets and distributes Eternal Energy in approximately 2–ounce bottles, which is approximately the size of 5 Hour Energy bottles. Id. pg 2.
  • On September 20, 2010, ten days after the formation of defendant Eternal Energy, defendant’s CFO contacted plaintiff’s counsel, and requested that Eternal Energy be added to the list of Permitted Products that defendant Liquid Manufacturing could, pursuant to the Termination Agreement, produce.
  • In an e-mail dated September 21, 2010, plaintiff agreed to include it. (This would prove fatal to Plaintiff’s claim for breach of the termination agreement by Liquid Manufacturing producing “Eternal Energy”).
  • On January 27, 2012, plaintiff sued Defendants, alleging breach of a confidentiality agreement, non-compete agreements, as well as  tort claims for the disclosure of its confidential information.

Essentially, Plaintiff claimed that Defendant wrongfully obtained Plaintiff’s confidential information, and the Defendants used the information in marketing Eternal Energy, and by representing to Wal-Mart that defendant previously bottled 5 Hour Energy for plaintiff. Id.

After several amended complaints and extensive discovery of documents, (aka “loads of attorney fees”) Defendants filed a motion to dismiss. The Court granted the  motion and dismissed all claims. Plaintiff appealed. The Court of Appeals affirmed – found in favor of Defendants.

The Court of Appeals held the non-competition agreement unenforceable.

Just a few weeks ago the Michigan Supreme Court overturned the Court of Appeals decision. You can check out the full decision here

Why did the Supreme Court overturn the Court of Appeals? (hint – check out the Title of this Post).

Two issues taken up by the MI Supreme Court:

1. Was the Business Contract void because it lacked consideration?

and

2. Did the Court of Appeals apply the correct test when deciding the non-compete was unreasonable?

To  summarize the Supreme Court’s findings:

1. No. The Business Contract wasn’t void for lack of consideration. 

The Court of Appeals held the Non-disclosure agreement was unenforceable because it lacked “consideration” –  The Supreme Court disagreed.

As the Court held: “To have consideration there must be a bargained-for exchange” Citing Gen Motors Corp v Dep’t of Treasury, 466 Mich 231, 238-239 (2002). “Generally, courts do not inquire into the sufficiency of consideration: “[a] cent or a pepper corn, in legal estimation, would constitute a valuable consideration”. Id. 239.

2. The Court of Appeals used the wrong legal standard to evaluate the reasonableness of a non-compete. It should have used “THE RULE OF REASON

The Court held: a commercial noncompete provision must be evaluated for reasonableness under the rule of reason.

The Court of Appeals evaluated the “reasonableness” of the parties’ noncompete provision under the standard governing noncompetes between employer and employees.

The Supreme Court noted that “[i]n general, federal courts have assessed noncompete agreements between two commercial entities under the rule of reason.” Citing Perceptron, Inc. v Sensor Adaptive Machines, Inc, 221 F3d 913, 919 (CA 6, 2000).

The Rule of Reason:

As cited by the Supreme Court:

“a court must take into account a variety of factors, including specific information about the relevant business, its condition before and after the restrain was imposed, and the restraint’s history, nature and effect.” Citing State Oil Co v Khan, 522 US 3, 10 (1997).

What Now?

The Case goes back to the trial court to determine whether or not the noncompete provisions are reasonable under the rule of reason.