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For the benefit of all stakeholders – Pushing the Needle Forward on Business as a Force for Good.

August 22, 2019 Leave a comment

Good afternoon, all. I hope you all have been enjoying the summer. I took this photo this morning as the sun was rising over downtown Grand Rapids.

Just a few days ago Business Roundtable announced the release of a new Statement on the Purpose of a Corporation signed by 181 CEOs who commit to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders.”

Thanks to Jeff Van Winkle for bringing this to my attention. You can check out the link to the Business Roundtable webiste and the announcement: https://lnkd.in/eYSTrxg

It is exciting to see the general acknowledgment and support for the idea that business exists for a purpose more than simply profit.

This is not a new thing, particularly in West Michigan.

West Michigan is truly a unique place where business and philanthropy intersect unlike any other place.  Giving of time, talents and treasure to worthy causes is embedded in the culture of this community.

We know of many businesses that have established core mission statements of social good as something beyond profit for quite some time. I look to Cascade Engineering, as one example. Check out the Blog of Fred Keller, Founder of Cascade – titled “Purpose & Profit”

Some groups are skeptical that this statement will lead to any real change – case in point Corporate America Says “Sorry” via @npquarterly

However, I am hopeful that this statement pushes the ball forward on business for good in the State of Michigan.

BCorps?

Last year the State House tantalized social entrepreneurs, once again, with 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 on April 24, 2018, that would allow BCorps to be formed under Michigan Law.

There was never any movement on those bills and they died in committee.

Back almost two years ago the legislature proposed similar legislation which also died in committee (are you recognizing a pattern?). 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.

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.”

Michigan is behind the ball.

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

Check out this handout from Rep Barnett almost 10 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.

Michigan now ranks as one of the vast minority of states that has not enacted benefit corporation legislation.

Check out the Benefit Corporation website for a state by state legislative analysis.

I hope Michigan can continue to make progress and recognize business as a force for good.

Questions? Comments?

Jeshua@dwlawpc.com

http://www.dwlawpc.com

Connect with me on Twitter: @JeshuaTLauka

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Real Estate Law Update: Bill Would Impose Stricter Requirements on Recording a Construction Lien

Good afternoon, all. I hope you all are enjoying the beginning of summer.

Summer is here.

Residential Builders – check out this House Bill 4695 introduced on June 11, 2019.

This Bill would impose stricter requirements on licensed builders prior to recording a Construction Lien.

According to the Bill, a Contractor:

SHALL DISPLAY THE CONTRACTOR’S LICENSE AND, IF THE CONTRACTOR IS AN INDIVIDUAL, THE CONTRACTOR’S PERSONAL IDENTIFICATION, CONSISTING OF AN OPERATOR’S LICENSE, CHAUFFEUR’S LICENSE, OR PERSONAL IDENTIFICATION CARD ISSUED BY THE DEPARTMENT OF STATE, WHEN RECORDING A CLAIM OF LIEN UNDER SECTION 111. IF THE CLAIM OF LIEN IS NOT PRESENTED IN PERSON, THE CONTRACTOR SHALL ATTACH TO THE CLAIM OF LIEN COPIES OF THE CONTRACTOR’S LICENSE AND PERSONAL IDENTIFICATION.

Violating this law would result in a stiff penalty – criminal sanctions – punishable by a misdemeanor.

The the intent of this Bill would seem to encourage contractors to make sure their licensing is in order and would therefore discourage contractors from filing liens without lawful cause. Simply put, if a Lien doesn’t have a photo ID and proper licensing attached to it, then it wouldn’t be valid.

In reality, this extra hurdle could be an impediment from contractors who otherwise are entitled to payment from having perfected valid liens.

The Bill was sent to the committee on Regulatory Reform.

My sense is that this Bill does not come out of committee without some significant amendments. I’d love to hear your thoughts.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Michigan Business Law Update: Bill Would Allow Single Member LLCs To Evict Tenants without Legal Representation

Lake Macatawa, Holland, Michigan

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

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Standing in the Gap for Those in Need: My Review of HillBilly Elegy

I just finished reading a book called “Hillbilly Elegy” by JD Vance.

What I liked about this book:

So many striking themes from my own family of origin:

poverty, dysfunctional family relationships, addiction, alcoholism, abuse, vulnerability.

It is also personally interesting to me that, like me, JD Vance also ended up graduating from high school, then college, then law school and became a lawyer, beating the odds of those family members that raised him (or failed to raise him).

For those who grew up in middle/upper class families, it is an eye-opening insight into a large segment of our culture lives.

Two key take away points for me from this book:

  1. People Become Homeless Due To Lack of Community.

At Mel Trotter Ministries, we often point to the quote in this photo as one of the primary factors for homelessness.

JD’s book confirmed that fact to me, in his own experiences.

In short, if its because of a lack of community that people tend to enter into homelessness, community needs to be part of what gets them out.

We need to do a better job of being community to the most vulnerable people in our own community, wherever that is.

2. Do Not Underestimate the Impact You can Make in a Child’s Life.

For the last 5 years I have spent every Thursday during the school year mentoring an elementary school-aged boy.

These boys, in large part, suffer from the same tragedies:
poverty, dysfunctional family relationships, addiction, alcoholism, abuse, vulnerability.

I can’t think of a better use of my time – one hour a week than spending it telling a kid that he is valued – he has what it takes – who may not hear that from any other place.

As a kid, I remember being desperate to hear such words from an adult.

“You have What it Takes”

Imagine if all of the struggling students in our local communities had adults who were consistently showing up in their lives telling them:

“You have What it Takes”

My call to you, go be that person in the life of some vulnerable kid today.

Questions? Comments?

E-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Community Spotlight: Next Step of West Michigan – walking alongside the most vulnerable

March 27, 2019 1 comment

Yesterday I visited with Jonathan Peerboom – Program and Development Director of Next Step of West Michigan (Next Step) – a faith-based nonprofit employing people coming out of prison or rehab and providing them with a community of support that will help them integrate into the workforce, regain hope and empower themselves to create a better future.

Jonathan Peerboom, Program and Development Director, Next Step of West Michigan

John’s Story.

What really impacted me about my visit was meeting “John” and hearing his story.

John is an employee of Next Step. John was putting together crates and stopped to talk with me and greeted me with a huge smile and an enthusiastic handshake.

Like many of us, John has experienced many struggles and hardships over his life, starting with a traumatic childhood which caused ripple effects throughout his adult life. John ended up spending 10 years in prison.

As many of us know, the barrier to employment and re-entry into society after a felony conviction and extended prison sentence is often times insurmountable.

When society is telling the Johns of this world that they have nothing to offer this world, that they are only valued if they have the right looks, status, job, house, money, family, etc… Next Step is telling those, like John, like me once as a kid, the opposite.

John has inherent value.

He is worthy to be loved because he is a person, made in the image of God.

Next Step gave John a job – the integrity of working for a living – and through words and acts tells John that is loved and inherently valued. Now, John, 7 years removed from prison, is a changed man.

A Sustainable Non-profit.

Next Step states on its website that
it is “a nonprofit that aims to make a real impact in the lives of its employees, while maintaining a financial model anchored in sustainability.”

Approximately 85% of its revenue is through a delivery of services or goods. The remaining 15% are investment gifts that fund administration costs, provide for new initiatives and increase capacity.

Next Step operates like a social enterprise – it has a self-sustaining business model that employees

Relationships Change lives.

Yesterday after meeting with Jonathan at Next Step, we traveled not too far down Division for luncheon held at Mel Trotter Ministries, another community partner along with Next Step serving the most vulnerable in our community.

I love this quote that is often spoken of at Mel Trotter Ministries – “People don’t become homeless when they run out of money. They become homeless when they run out of relationships.”

That is our job.

Being those relationships for the most vulnerable.

Not just “one-way relationships” but truly reaching out in community in a sustainable way.

Keep up the good work Jonathan and Team at Next Step! Next Step would love to partner with you if you want to learn more about the work they are doing in our community. I encourage you to check out their website or email Jonathan

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Real Estate Investors Bidding at Foreclosure Sale: What Happens to a “Surplus?”

January 28, 2019 1 comment

It is a snowy day today in Grand Rapids. If you are on the roads, drive safe!

snow day

 

Last week I read a  Court of Appeals decision that prompted me to write on the topic concerning real estate investors.

 

The market to purchase distressed real estate has become extremely competitive since 2008-09. Having multiple real estate investors bidding on properties can cause some serious problems. 

Some lenders/investors have tried some creative methods of recovery and made some interesting legal arguments in order to  maximize their profit at or after foreclosure sales. Complex legal issues can arise in a competitive market when there is money to be made.

For clients of mine that purchase investment real estate at foreclosure – an interesting situation can come up:

  1. Purchaser at foreclosure knows the bidding is competitive – is the highest bidder – overbids due to competitive bids.
  2. Purchaser, in order to “pocket” the overbid (and to extinguish the mortgagor’s right of redemption) – purchases the homeowner (mortgagor’s) interest via quitclaim deed prior to foreclosure and thereafter.
  3. The Sheriff conducting the sale receives and deposits the surplus with the County Treasurer.
  4. Purchaser seeks from the County Treasurer the overbid amount after the foreclosed debt is satisfied.

 

 

Facts of January 22 Decision in Trustlink Equities LLC v Dietech

That’s presumably what the Plaintiff, purchaser expected to happen in this case.

With real estate, however, things don’t always go how you expect.

Check out the January 22, 2019 unpublished case of Trustlink Equities, LLC

This case is helpful, because it provides some guidance to an area of the law that isn’t used very often and there simply isn’t a lot of case law about: what happens to surplus funds after foreclosure and who is entitled to those funds?

In the Trustlink case,  after foreclosure, there was a second mortgage with $162,497.12 remaining owed. Id.

After the proceeds from the sale of the Property to Purchaser satisfied the first mortgage the Sheriff received and deposited the $77,490.54 in surplus funds with the St. Clair County Treasurer.

Purchaser filed a document with the Treasurer, “document titled “Verified Claim for Turn-Over of Proceeds of Sale.” seeking payment of the $77,490.54 surplus funds.

Defendant, the junior mortgage servicer, filed a competing document titled “Verified Claim for Surplus Proceeds of Sale

The result was that the funds were turned over to the Circuit Court for the proper disposition. The Court found Defendant, as junior mortgage holder, the proper party. Plaintiff appealed. A few interesting points to discuss came out of this case.

 

Law:

There are a couple of particular laws that come into play here:

I. Full Credit Bid

One general one to be aware of – the Full Credit Bid Rule – it basically stands for the proposition that: “An overbid at a Sheriff’s sale extinguishes the entire debt.” Pulleyblank v. Cape, 179 Mich.App. 690, 446 N.W.2d 345 (1989) (per curiam).

Practically speaking, if the bank bid the entire amount that was owed, regardless of whether or not the fair market value of the property is worth less than what is owed, the bank cannot come after the borrower for a deficiency.

 

II. MCL 600.3252 – Surplus Funds After Foreclosure. 

That statute states in relevant part:

If after any sale of real estate…there shall remain in the hands of the officer…making the sale, any surplus money after satisfying the mortgage on which the real estate was sold, and payment of the costs and expenses of the foreclosure and sale, the surplus shall be paid over by the officer…to the mortgagor…or assigns, unless at the time of the sale, or before the surplus shall be so paid over, some claimant or claimants, shall file with the person so making the sale, a claim…in which case the person so making the sale, shall forthwith upon receiving the claim, pay the surplus to, and file the written claim with the clerk of the circuit court of the county in which the sale is so made…

 

So, the mortgagor is entitled to receive the funds from the Sheriff – or if sent to the Court, an interested party making a “claim” to the funds may make a claim to the Court.

“The statute allows both (1) parties who filed a “claim” with the person making the sale, and (2) any person or persons interested in the surplus, to apply to the circuit court for distribution of the surplus funds after a foreclosure sale.” Id. page 10.

 

a. Mortgagor – “demand” v.s “claim” – all the same?

One of the primary issues on appeal concerns whether the Purchaser’s filing qualified as a “demand” or as a “claim” under MCL 600.3252. Plaintiff filed with the Treasurer a  document and did not use the word “demand.”

The Court held that, “because plaintiff conveyed to the Treasurer its assertion of its right to disbursement of the surplus funds, we conclude that plaintiff made a “demand” for purposes of MCL 600.3252.” Id. page 7

 

b.  Mortgagor’s demand needs to be “immediately” paid?

Purchaser argued that the Sheriff should have paid “immediately upon demand” and disregarded the junior mortgage holder. Basically a “you snooze you lose” argument.

The Court was not convinced, holding:

“Although plaintiff makes a valid point that an obligation to make payment “on demand”
generally requires immediacy, the specific facts of this case support the trial court’s ruling that the Treasurer was justified in delaying payment for seven days while it conducted its due diligence in evaluating plaintiff’s filing.” Id. Page 10.

 

In summary – if you are a Purchaser at foreclosure and have obtained the “mortgagor’s” rights – be careful to search the title for competing claims to that money.

You can’t rely on the fact that you immediately demand the funds to ultimately entitle you to them.

 

Questions? Comments?

E-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Grand Rapids Social Enterprise, L3Cs and a Call to Community Partnership.

November 21, 2018 Leave a comment

Yesterday I visited with Dr. Justin Beene – Founder of Grand Rapids Center for Community Transformation  (GRCCT) – a collective of non-profit/for-profits working to see flourishing in Grand Rapids for all.  GCCT is essentially a hub for social enterprise, for the common good of the Greater Grand Rapids Area.

Justin Beene

Dr. Justin Beene, the future expansion of GRCCT

GRCCT states on its website that Grand Rapids was ranked the number one city in the United States to raise kids by Forbes Magazine (Van Riper, 2012).

Even more, the city has been ranked as one of the most philanthropic areas in the United States (Raghaven, 2013).

GRCCT mentions the powerful presence of the institution of the Church in Grand Rapids, and over 2,800 nonprofits.

This all sounds good, but there is much work to be done. There is still great need in the Grand Rapids Community.

 

 

despite the affluence, giving, and nonprofit services in West Michigan, the outlook in education, employment, and long-term quality of life for many urban citizens looks bleak. 

Forbes Magazine just recently released a study of 52 metropolitan cities in the United States and found Grand Rapids to be the second worst city in the country for African-Americans to live based on business ownership/entrepreneurship, median income, and home ownership (Kotkin, 2014)…

Youth living in the urban center of Grand Rapids are among the most impoverished young people in the country.”

 

In response to the great need in our city, particularly for youths struggling with poverty,  GRCCT supports several social enterprises (Rising Grinds Cafe and Building Bridges) that not only provide skills/job training but also provides revenue for the long-term sustainability of these programs.

 

Low-Profit Limited Liability Companies.

Both Rising Grinds Cafe and Building Bridges are Michigan Low-profit Limited Liability Companies (L3Cs)

Back in 2009 the Michigan legislature authorized the formation of these “hybrid” business entities.

L3Cs are formed fundamentally for a charitable/socially beneficial purpose, but unlike non-profit corporations, members can own equity in these L3Cs.
L3Cs – Viable Tools for Social Entrepreneurs…

I’ve said this before- L3Cs are a viable tool for social entrepreneurs – they tell the whole world that your company exists, fundamentally to do good.

Certainly, that is the purpose of both Rising Grinds Cafe and Building Bridges –  they exist for the common good.

 

Doing our Part – Being a Good Community Partner.

Grand Rapids is taking deliberate steps to help those most in need, particularly in the area of affordable housing

Recent national headlines demonstrate that there is a lot of mixed feelings about the proper solutions to the affordable housing crisis facing many cities across the U.S.

 

One key take point that GRCCT inherently understands:

 

Creating real change requires an entire community’s involvement.

 

GRCCT is looking for individuals, businesses, organizations

MTM

who will partner for the common good of the Greater Grand Rapids Area.

I love this quote that is often spoken of at Mel Trotter Ministries – “People don’t become homeless when they run out of money. They become homeless when they run out of relationships.”

That is our job. Being those relationships for the most vulnerable.

Not just “one-way relationships” but truly reaching out in community in a sustainable way.

Keep up the good work Justin and all at GRCCT.