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Michigan is Back Trending Towards Social Entrepreneurship: April 24, 2018 Benefit Corporation Legislation Proposed.

April 30, 2018 3 comments

Good morning! Downtown Grand Rapids is starting to look and feel like spring. The trees are just starting to get their leaves – I can’t wait for West Michigan to become green once again.

4.30

Speaking of new life – the legislature has breathed new life in the possibility of benefit corporations (“Bcorps”) becoming a viable legal option to do business in the State of Michigan.

House Bills 5867, 5868 & 5869 were introduced last week, on April 24, 2018, that would allow BCorps to be formed under Michigan Law.

 

Back almost two years ago the legislature proposed similar legislation which died in committee. For a review of the Former BCorp Bills, the House Fiscal Agency issued a Fiscal Analysis, check it out here. The Analysis provides good background on what the legislation would do. This is helpful for those who are not overly familiar with BCorps in general.

 

 

The latest proposed Bcorp Legislation

The current Bcorp legislation has some different language than the 2016 proposed language. One difference is the definition of “general public benefit” to “specific public benefit” which would be defined under the new Bcorp law as:

 

“SPECIFIC PUBLIC BENEFIT” INCLUDES, BUT IS NOT LIMITED TO,
ANY OF THE FOLLOWING:
(i) PROVIDING LOW-INCOME OR UNDERSERVED INDIVIDUALS OR
COMMUNITIES WITH BENEFICIAL PRODUCTS OR SERVICES.
(ii) PROMOTING ECONOMIC OPPORTUNITY FOR INDIVIDUALS OR
COMMUNITIES BEYOND THE CREATION OF JOBS IN THE NORMAL COURSE OF
BUSINESS.

(iii) PRESERVING THE ENVIRONMENT.
(iv) IMPROVING HUMAN HEALTH.
(v) PROMOTING THE ARTS, SCIENCES, OR ADVANCEMENT OF KNOWLEDGE.
(vi) INCREASING THE FLOW OF CAPITAL TO ENTITIES THAT HAVE A
PUBLIC BENEFIT PURPOSE

 

I still need to perform a more detailed review of the legislation to see how it differs from the prior iteration; and also how it compares to what other states are doing.

 

 

Education on the “why” for BCorps.

Interested groups and local politicians have been educating the public on why BCorp laws would be a good thing for our state.

State Rep Hank Vaupe gave a discussion to a local chamber group on B-Corps two Septembers ago:

As Rep. Vaupe indicated “benefit corporations provide an opportunity for businesses to use the markets, rather than traditional charity giving, to advance their philanthropic missions.”

 

BCorp Certification is Trending in Michigan…

Over the last several years more and more local businesses have becoming Certified B Corps through BLabs. West Michigan has the most concentration of BCorp businesses in the State.

Check out a March article from Rapid Growth Media on the strong presence of Bcorps in West Michigan.

Headlines in Grand Rapids have brought attention to the need for businesses to ask the question: Am I working to build a better community?

 

B-Corp certification is one way (certainly not the only way) for businesses to hold themselves accountable to being a good community partner.

 

Why has it taken so long to get here?

 

Over the last several years Michigan legislators have introduced BCorp legislation – to no avail.

Check out this handout from Rep Barnett several years ago in support of the BCorp legislation he proposed in September 2010.

I found particularly interesting the very last section – it provides some comment on why some Michigan businesses may have been averse to the introduction of BCorp legislation. Feel free to read it and reach your own conclusions.

Trending Towards Social Entrepreneurship.

The trends all show that millennials and our up and coming workforce want to to be part of business as a force for good in our local community.

Questions? Comments?

Jeshua@dwlawpc.com

http://www.dwlawpc.com

Connect with me on Twitter: @JeshuaTLauka

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Real Estate Law Update for Investors and Lenders: Court of Appeals Holds “Admittedly Curious Practice” “Expungement Affidavit” is Not Permitted under Statute.

April 20, 2018 Leave a comment

Happy Friday, all! I took this photo today – the sun is shining and it is starting to feel like spring.

4.20

 

 

In what was already a shocking day for a major lender, Wells Fargo, the Michigan Court of Appeals, in a case of binding precedent, invalidated an efficient tool lenders and investors routinely utilized to undo a foreclosure and revive a mortgage.

I just reviewed a published Court of Appeals decision that came out yesterday that will change the way investors, lenders, and mortgage holders set aside foreclosures.

 

 

The Case: Wilmington Savings Fund Society, et al. v Clare

The Facts are a bit complex, however they can be summarized as follows:

Defendant owned property in Hemlock, Michigan. The original lender held a mortgage on the Property; this mortgage was assigned numerous times. Id. page 2.

In 2010 lender’s assignee (“new lender”) foreclosed on the mortgage. After the redemption period expired, the new lender filed an action to evict the mortgagors/homeowners (“homeowners”).

After trial, the Court found in favor of the homeowners.

the court basically held that the new lender could not provide sufficient evidence that there was a proper chain of title passing on to new lender. Id.

In 2014 new lender’s servicer, Ocwen filed an “Affidavit of Expungement” – which stated that, among other things, the new lender:

agrees to set aside the above Sheriff’s Deed, making it void and of no force or effect, thus reinstating and reviving the above mortgage and Note”  Id.

 

Expungement Affidavit

The Expungement Affidavit has been a common tool used by lenders/mortgage holders  who have foreclosed on mortgages to record an affidavit that would, in theory, and relying on MCL 565.41a, set aside the foreclosure sale, sheriff’s deed, and reinstate the underlying mortgage. See Id, page 6.

The Sixth Circuit Court of Appeals indicated that this is a “admittedly curious practice” other states with similar statutes have not interpreted the statute to allow the affidavit to be used in this way. Id. Citing Wuori v Wilmington Savings Fund Society, 666 Fed Appx 506, 510 (CA 2016).

 

The Court of Appeals agreed and held, as an issue of first impression:

“a Party cannot set aside a foreclosure sale simply through the unilateral filing of an expungement affidavit.” Wilmington, Page 5.

The Court analyzed the statute and held “the plain language of the statute does not include any indication that an affidavit may be used to create a condition. It necessarily follows that a party cannot unilaterally revoke a foreclosure sale by recording an affidavit that is itself the claimed condition.” Id. pg 6. (emphasis in the original).

 

 

Lesson

So, investors and lenders have one less tool at their disposal for what was an efficient method to clear up title if there was a problem with foreclosure.  Since this case is binding precedent, lenders showed take note of this.

 

 

 

 

 

e-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

www.dwlawpc.com

 

 

 

 

 

Real Estate Law Update: Evictions, Affordable Housing, Harassment provide an Opportunity for Investors to Shine Brightly.

April 18, 2018 Leave a comment

I wrote my last post right before leaving for a week on the beautiful, warm beaches of Destin, Florida. We came back to snow. In Spring.

Michigan has experienced some awful weather in the last week. I hope today is the turning point. Most of the snow is melting, as you can see from today’s photo.

The headline of my post says it all:

4.18Owning and Managing Real Estate is uniquely challenging.

 

I hear it from my Property Owner/Manager clients. I experience it when I am involved in negotiating in landlord/tenant disputes.

 

I see the affects of a lack of affordable housing on the most vulnerable in our population.

I see it when mentoring at a local school, or serving at Mel Trotter Ministries.

 

 

 

If you own or manage investment real estate, you are involved in messy business.

 

And there are many investors who are simply part of the problem.

 

DOJ Sues Landlord for Sexual Harassment Allegations

Just one week ago in a recent press release  the Department of Justice, announced that it filed suit against Owners and Managers related to allegations of sexual harassment in New York..

According to the press release, the owner and manager:

 since at least 1990, Douglas Waterbury has sexually harassed numerous women who have lived in or inquired about the defendants’ residential rental properties.  The suit alleges that Waterbury’s conduct has included demanding or pressuring female tenants and potential tenants to engage in sex acts with him in order to obtain or keep rental housing; subjecting female tenants and potential tenants to unwelcome sexual contact and groping; offering to grant tangible housing benefits, such as reduced rent or deposit payments, in exchange for sex acts; refusing needed maintenance services or otherwise taking adverse housing actions against female tenants who refused his harassment; and making unwelcome sexual comments and advances.  The conduct alleged in this complaint is egregious, ranging from demands to exchange sex for rent, to unwanted sexual encounters.

 

I believe that is why, at least in West Michigan, there is an opportunity for real estate investors to stand out.  To shine.

 

“Evicted” – Lack of Affordable Housing

I have written many times about West Michigan’s Affordable Housing Crisis.

Last week the ABAJournal posted an article on extensive research performed by Matthew Desmond, author of “Evicted”

According to the research, evictions are much more prevalent than first believed. This is not surprising to me, given the lack of housing for the most vulnerable population in West Michigan.

As the ABAJournal article notes, the consequences of evictions are many:

“…Schools reroute buses to homeless shelters, job applicants have no answer when a form requires an address, and families who don’t have an address to receive renewal notices lose public lose food stamps and Medicaid benefits. Some people take years to recover, and the eviction remains on their records, causing problems when they look for future housing.”

 

Shining Brightly as part of the Solution.

West Michigan is attempting to address the Affordable Housing Crisis. This is a community wide problem that will require an entire community to come around it.

At the beginning of this year, Kent County implemented an “Eviction Prevention Program” – to keep vulnerable people in housing. You can learn more about that here.

Local non-profits and churches in partnership with Luis Palau Association are implementing One West Michigan intended to mobilize the community, churches and non-profits to come together to address those issues most pressing – this includes Affordable Housing.

 

Finally, as I’ve written before – I believe the Affordable Housing Crisis that we find ourselves in provides a unique opportunity for Real Estate Investors to be different.

To shine brightly.

 

 

 

e-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

www.dwlawpc.com