Happy Wednesday, all. I took this photo back on Mother’s Day. Looking forward to spending more time enjoying Michigan summers. Summer is approaching!
Last December it looked like Landlords were going to finally be able to represent their LLCs under limited circumstances when evicting tenants. Check out my prior post here
That Bill, after undergoing some changes, died in committee.
Well, it is back!
On April 25, 2019 the law that would allow some LLCs to evict tenants in limited circumstances has revived as House Bill 4509
History Behind the Bill…
As background, a common scenario in my legal practice:
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.
House Bill 4509 – Would Allow LLCs to Evict without Legal Representation.
House Bill 4509 was introduced in April 2019 and referred to the judiciary committee.
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.
I commented in the past that I would be surprised if this bill passes, although other states have similar laws.
The prior version of the Bill came out of the committee on law and justice and a substitute bill was referred for a second reading. The Bill was passed by the House and sent to the Senate Judiciary Committee over a year ago and it eventually died.
The Major Difference in the Substitute Bill
The major revision that came out of the committee affects property managers.
The Bill as introduced would have allowed property managers or agents to represent the LLC under certain circumstances – e.g. – having personal knowledge of the relevant facts related to the Property and tenancy.
That language was removed from the first version of the bill.
Under the substitute bill, Property Managers or other Agents would not be allowed to represent the LLC.
Further, this is a “burden shifting” mechanism in the substitute bill – the law would place the burden on the LLC owner to prove he or she is in compliance with the statute. That makes sense – since the legislature would be creating an exception to the rule – only lawyers practice law.
It will be interested to see if this Bill stands a chance.
Questions? Comments?
e-mail: Jeshua@dwlawpc.com
Twitter: @JeshuaTLauka
Jeshua Lauka's Business and Real Estate Law Blog 