Archive

Archive for the ‘landlord/tenant’ Category

Business Law Update: A Booming Downtown Real Estate Market Means Businesses Should Pay Careful attention to Contracts.

June 5, 2018 1 comment

Happy Tuesday, all.

I took this photo yesterday from the skywalk between the Amway Grand Plaza and the DeVos Place Convention Center. I like walking downtown and watching the development unfold.

6.4

It is an exciting time to be working or living in downtown Grand Rapids. Everywhere you look, real estate development is transforming the town.

Check out Experience Grand Rapids for a detailed list of all the current downtown development.

Not to rain on anyone’s parade (but that is kind of a lawyer’s job)…

With increased commercial activity comes increased opportunity to fall into legal pitfalls.

 

 

As I tell my clients – if you are in business for any amount of time, it is just a matter of time, you will probably get into a business dispute.

Real estate development is no exception. The more transactions, the more opportunity for hiccups along the way.  A Court opinion I read last week brought this reality to  my mind.

 

Case Study

Last week an unpublished Michigan court of appeals case was released that highlights some contract drafting pitfalls. You can check out the May 31st unpublished decision of Greater Faith Transitions, Inc. v Ypsilanti Community Schools here

 

The case was about a commercial lease in which Landlord also granted Tenant an option to purchase the Building.

These “lease with options to purchase” can pose interesting questions – as the facts of this case illustrate.

Summary of the Facts

  • On August 13, 2013, plaintiff and defendant entered into a lease with option to purchase a property in Ypsilanti owned by defendant.
  • The parties intended the lease to be effective until August 31, 2018.
  • Under the lease terms, plaintiff was required to make monthly rent payments and to pay for all utility bills, including water bills.
  • According to plaintiff, it had attempted to enforce its option to purchase the property in a text to defendant on February 2, 2017, that stated:
    I tried to call you to make you aware of the fact that we’re buying the church this year.
  • On February 13, 2017, defendant sent to plaintiff a letter from its attorney and a Notice to Quit Termination of Tenancy, claiming that plaintiff was in default of the lease for repeated failure to pay water bills.

Plaintiff, tenant, sued its landlord, among other things, for interfering with its right to exercise its option to Purchase.  The trial court ended up dismissing Tenant’s lawsuit.

The tenant appealed.

The opinion of the Court of Appeals was interesting, essentially holding that the tenant’s claim for breach of contract was not ripe – since a contract was not yet breached. The tenant was not yet evicted.

(See opinion, page 2 – “Plaintiff claims that “Defendant’s improper use of summary proceedings to evict Plaintiff from the leased premises will breach the parties’ Lease
with Option to Purchase because Plaintiff will be deprived of its right to cure any defaults during the term of the Lease (i.e., through August 31, 2018) so that Plaintiff can exercise its option to purchase thereunder.”)

 

The ultimate ruling aside, the case, to me, provides a good opportunity to highlight a few drafting issues that can come up in commercial leases.

First, a general point I want to bring to the business owner’s attention:

Why Careful attention to Business Contracts is important – Freedom of Contract 

First and foremost, when entering a business contract each party should understand – they will be bound to the contracts they sign.

In a commercial lease context the courts’ mantra is “Freedom of Contract“.

The Court will look at the contract that the parties’ agreed to, and, absent extraordinary circumstances, enforce it by its term. (therefore in  a commercial lease you might see language such as the following “rent is due with no right of offset, setoff, counterclaim…”) In such instance, the landlord is telling the tenant that tenant has no right to withhold rent just because landlord may have breached a duty under the lease.

The Courts have recognized that commercial landlords and tenants are “free to contract”:

 

Drafting Issues.

Going back to the court opinion, it doesn’t appear to me from reviewing the opinion that the parties disputed that the tenant defaulted in failing to pay utility bills.

Question:

Did the lease have a provision that said that the “Option to Purchase” terminated if:

  • the tenant had been in default at any time?
  • or, only in Default at the time the Option was being exercised?
  • Or, did it say nothing on the subject of Default?

Another question:

was there a lease provision that strictly provided where “notices” must be sent?

e.g. – was it left up to the parties to interpretation whether or not notice delivered “via text message” was an appropriate method?

 

If these issues are plainly addressed in business contracts, then possibly, the parties avoid a lawsuit.

 

 

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauk

 

 

 

Advertisements

Staring Into the Eyes of a Fatherless Generation.

There’s nothing like a Michigan summer.

Memorial Day weekend means the beginning of summer – and, consequently, the end of the school year.

 

IMG_2377

 

Today was my last day of mentoring for the school year.  Unless my student moves  (which is always possible) I hope to see him in the Fall.

Most of my interaction with my student is asking questions and just trying to encourage him.

 

One question I asked him today while shooting basketballs during recess:

 

 

 

Do you think you will see your dad this summer?

His answer: I don’t know.

I will state the obvious: The fact that this elementary school aged boy doesn’t know if he will see his father for months is heartbreaking.

This reality is simply not how the world should be.

And, unfortunately, this story is typical.

 

Fatherless Generation

I took these statistics from the Fatherless Generation

  • 63% of youth suicides are from fatherless homes (US Dept. Of Health/Census) – 5 times the average.
  • 90% of all homeless and runaway children are from fatherless homes – 32 times the average.
  • 85% of all children who show behavior disorders come from fatherless homes – 20 times the average.  (Center for Disease Control)
  • 80% of rapists with anger problems come from fatherless homes –14 times the average.  (Justice & Behavior, Vol 14, p. 403-26)
  • 71% of all high school dropouts come from fatherless homes – 9 times the average.  (National Principals Association Report)

 

I look at these statistics, and ask myself:

is it worthwhile spending one hour a week during the school year with a boy who needs a positive male role model?

The answer every time is “Yes.

I am not writing this post to: a) pat myself on the back or b) guilt anyone who is reading this.

I am just trying to illuminate a reality.

I often hear people say they cannot believe the poverty, brokenness, homelessness, addiction, that families are experiencing right in our own City. of Grand Rapids

It is true.

It is also true, that we can’t do everything, but we can do something.

What about you?

Are you working to build a better community?

E-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

Twitter: @JeshuaTLauka

Real Estate Law Update: The Most Vulnerable Are Affected in an Affordable Housing Crisis.

Today, is a gray rainy cold day in Grand Rapids, Michigan.

Yesterday, like most every Thursday during the school year, I spend the noon hour with an elementary school-aged kid in one of the most economically depressed school districts in Grand Rapids, Michigan.

5.11

 

Over the last 4 or 5 years I have had 4 different students that I mentored.

Inevitably, they all move. Their families end up getting evicted, become homeless, or just leave to find new housing that they can afford.

 

Poverty in your Backyard

If you live in West Michigan, I urge you to pause and consider the poverty and vulnerability that exists in your own backyard. It is astounding to me that just a 15 minute drive from the suburbs kids are experiencing hunger and homelessness.

Right now.

It is no secret that Grand Rapids is experiencing an Affordable Housing Crisis.

 

The American Bar Association Journal reported recently that nearly 1 million U.S. households were ordered evicted in 2016. 

 

At the school where I mentor, the stories that I hear about infestations are sad.

Kids talk about roaches, bed bugs, mice.

Particularly, I hear a sense of dread about bed bugs.

I have previously blogged about some proposed Michigan legislation that would establish rights and duties concerning bed bug infestation in residential Landlord Tenant relationships.

 

Beg Bug Legislation.

One June 9th  2017 Michigan House Bill 4719 was introduced – by Representative Brandt Iden -himself a Developer and Property Manager in South West Michigan. check out the text here – the Bill would amend the Michigan statute governing landlord tenant relationships to include addressing the control of certain pests – including bed bugs.

 

Update

There has been no noticeable progress and this Bill appears to be dead. The House Fiscal Agency prepared its legislative analysis back in October 2017 – you can check it out here for details

 

What the Bill seeks to do:

Impose certain duties on landlords regarding bed bugs:

1. Mandates specifically that the Landlord is to keep the rental space free from bed bugs and provide educational literature about bed bug infestations to new tenants.

2. Prohibits Landlords from renting out space that the landlord knows is infested with bedbugs

3. Provides specific requirements for a landlord to respond to a complaint of bed bugs:

  • within 7 days of receiving a complaint, Landlord shall order an inspection for bed bugs;
  • within 7 days of confirming infestation, Landlord shall begin control and schedule inspections of adjoining rental units.

4. Limits damages against Landlord for infestations unless caused by Landlord’s Negligence.

Impose certain duties on tenants regarding bed bugs:

1. Tenant shall inspect for bed bugs when first occupying the space;

2. Tenant shall not move “infested property” into a rental unit

3. Tenant shall notify Landlord within 2 days of notice of infestation.

4. Tenant responsible for damages due to bed bugs caused by Tenant, or guest.

The bill was referred to the Committee on Law and Justice.

Something that the legislative analysis highlights –

“Notwithstanding any other provision of the Landlord-Tenant Act, the landlord and tenant could agree in writing (by hard copy) or electronic mail how responsibility would be assigned for costs resulting from an infestation, including, but not limited to, costs of
control or treatment.

This would provide some discretion among the parties to craft a resolution.

 

 

Michigan Poverty  Law Program’s Opposition

The House Law and Justice Committee met in October 2017.  The Apartment Association and Property Management Association affirmed its support of the Bill. The Michigan Poverty Law Program testified in opposition to the Bill.

You can review the Michigan Poverty Law’s written statement in opposition here

The Poverty Law Program acknowledged in its remarks that bed bugs are a serious problem in many communities, but opines that this Bill is not the answer.

Bedbug infestation is a problem. It can cause tenants problems, particularly in lower income housing. As reference, I would highly recommend reading Matthew Desmond’s book “Evicted” It is no secret that Michigan, particularly Kent County, is experiencing an Affordable Housing Crisis.  Further, unhappy tenants who withhold rent can cause landlord problems that end up in court.

 

In my opinion, this type of bill could provide clarity to landlords and tenants on their reciprocal duties and rights in such circumstances. It could also provide them flexibility to come up with a resolution to get rid of any infestations.

I am grateful for those like the Michigan Poverty Law Program who are advocating for the vulnerable in our communities – people like the kids I mentor every week.

I would also call on opponents of this Bill to propose a solution.  If the Bill proposed back in June 2017 is not good policy, then please propose one that you believe is good policy.

 

 

 

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

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

 

 

Lessons from Court: Real Estate Investors combating the Affordable Housing Crisis

February 1, 2018 2 comments

I took this photo this morning. Even when its cold outside, there is just something about the morning sun rising over Grand Rapids that gets me excited.

IMG_2115

 

Wearing Multiple Hats.

Life is complicated when we wear multiple hats. I’ve written about the multiple hats I wear.

We all wear multiple hats. For example – I am a Christ Follower, a husband, a father, an attorney, a (recent) church elder, a volunteer, a mentor, etc…

 

The two roles that I find colliding most often are as follows:

 

Hat 1. I am an attorney representing business owners including real estate investors.

Hat 2. I am the past-board Chair at Mel Trotter Ministries – and am committed to ending homelessness, one life at a time.

 

Two Universes colliding

My two universes often collide and bring me right into the middle of a thick tension. That tension is highlighted by a scenario I often find myself in, such as the one a few days ago.

 

Recently I walked into the courthouse with a relatively simple task: obtain a Judgment for my client.

 

My client, real estate investor, recently purchased property that had an existing holdover tenant. This tenant had not paid any rent in months.

 

The complicating factor that I discovered when I met the tenant outside the courtroom:

the tenant was a single woman with young children, with no place to go.

 

These are the situations that law school doesn’t prepare you for.

How do I advise my client in this situation?

 

An Affordable Housing Crisis.

I just read an article today from Nick Manes at MIBiz on how in Grand Rapids there is still a Strong Demand for rental real estate.

This article is one of many constant reminders that it is hard to find housing in Grand Rapids, even if you can afford it.

The young lady I met at court, and others similarly situated, could very well find herself homeless.

I am thankful for places like Mel Trotter Ministries where in 2017 over 400 individuals found housing.

 

 

Three Examples of Real Estate Investors being part of the Solution.

I am thankful for those who are willing to work with tenants. In the case above, my client agreed to provide additional time for the tenant to find other housing.

See here for my article on the Eviction Prevention Program – a program implemented last month intended to address the affordable housing crisis in Grand Rapids.

 

Another client scenario comes to mind. This particular client is a well-to-do business owner with a big heart, and entered into the residential real estate rental industry truly to be part of the solution – to provide affordable housing to those in need without gouging those on a fixed budget – even though the market would allow my client to charge higher rent.

This is social entrepreneurship at its finest!

However, in this particular client’s case, my client was “too nice”. He was taken advantage of by a tenant.  In the end, I believe the Landlord’s generosity actually did a disservice to the Tenant by allowing the Tenant to stay months in the property without paying. Certainly the tenant wasn’t helping the landlord by failing to make any efforts to pay.

Many of my clients can’t afford not to receive regular rent. They rely on the rent to pay the mortgage.

This is why it is often said that the affordable housing crisis is complicated.

 

I also think of the private investor who decided last year to work with Mel Trotter Ministries to house and case manage homeless youth – to get them into their own stable housing. This investor knows that he could get more profit on this rental, but is willing to take less money in hopes of changing the lives of homeless male youths.

 

 

A Lesson from these 3 Real Estate Investors….

There are no easy answers here. But what I appreciate about all three of the investors I mentioned above, is that they were all committed to “do something” – maybe somewhat awkwardly at times, maybe with mixed results, but their hearts were in the right place and they all did something to be part of the solution to transforming lives out of homelessness. They were committed to making their community better.

 

Are we willing to step up and be part of the solution, in some capacity?

We can’t do everything, but we can all do something.

 

How are we working to build a better community?

 

E-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

Twitter: @JeshuaTLauka

 

 

Legal Update: Legislation that Real Estate Investors, Landlords and Veterans Should Keep Tabs on in the New Year.

January 4, 2018 Leave a comment

It is a beautiful and cold afternoon in downtown Grand Rapids today.

IMG_2039

We head into 2018 with some Michigan Bills that affect Real Estate Investors, Landlords and Veterans.

Veterans.

The Michigan Legislature is pushing hard to protect those who have served our country.

Yesterday MLive posted that the Michigan Legislature is taking up some 50 bills that will affect Veterans

One such bill I highlighted in a post last summer. On August 16, 2017 HB 4872 was introduced into the Michigan House.

The Bill would amend the “Elliott-Larsen civil rights act,” and would provide that veterans are included in the list of those protected by Michigan law against housing discrimination.

The Bill would define Military Service as:

“STATUS OF BEING AN ACTIVE DUTY MEMBER OF THE ARMED FORCES OF THE UNITED STATES OR A VETERAN WHO RECEIVED AN HONORABLE OR GENERAL
ADMINISTRATIVE DISCHARGE FROM ACTIVE DUTY WITH THE ARMED FORCES F THE UNITED STATES.”

The Bill brings two thoughts to mind:

  1. Our Veterans and those who served our country deserve to be treated fairly in housing and all other areas of life.
  2. This Bill brings up a fundamental question: are Veterans being discriminated against in housing? Does it happen?

 

According to statistics recently published in the Bridge with insight from Dennis Van Kampen of Mel Trotter Ministries, there are fewer homeless veterans than ever in Michigan today, but more homeless youth.

The Bill was sent to the committee on Military and Veteran Affairs. No action has been taken on this bill since I posted in August, but I will continue to track this bill.

I look forward to hear comments from the public on this issue: are we in Michigan protecting our Veterans access to fair housing?

 

“Nuisance Property”: Bill Would Protect Those in Affordable Housing from being penalized for calling 911.

On November 28, 2017 Senate Bill 667 was introduced.

The bill is intended to prohibit local units of government from penalizing tenants, occupants, or landlords of rental dwellings for contacts made for police or emergency assistance in certain situations.

Presumably, the Bill is intended to restrict those municipalities that have ordinances that punish landlords and tenants by labeling a rental property a “nuisance” when a certain number of calls to police or emergency assistance.

The Bill in its current form, generally, holds a “reasonableness” standard – meaning the emergency call must be reasonable under the circumstances – the person making the call must reasonably believe they, or a person they are calling on behalf of, is a victim of a crime; and the intervention is needed to prevent a crime, or respond to an emergency.

 

This appears to be one of several Bills that would potentially address the affordable housing crisis.

As a reference, I would highly recommend reading Matthew Desmond’s book “Evicted” It is no secret that Michigan, particularly Kent County, is experiencing an Affordable Housing Crisis.

One potential way to address this crisis is providing Landlords and Tenants security that their local government unit will not unreasonably label properties as nuisances if the police are called for real emergencies. It appears this Bill is attempting to address such a scenario.

 

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka