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

April 27, 2017 Leave a comment

 

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

April 21, 2017 Leave a comment

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 infoIMG_1513rmation 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.

April 18, 2017 Leave a comment

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

LocalFirst

GRIN

GRAPE

LinkedUPGR

Grand Rapids Chamber

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?

April 13, 2017 Leave a comment

2017-03-07 15.13.50

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 DevelopmentGrand Rapids Urban League,Rockford ConstructionICCFMSHDA, and many local non-profits, including Mel Trotter MinistriesHQHeartside 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