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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.

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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 from 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

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Grand Rapids Combats Affordable Housing Crisis – Eviction Prevention Program

November 21, 2017 Leave a comment

 

You know winter is approaching when Rosa Parks Circle begins to freeze over and the ice rink begins to form. See the photo I took from my office yesterday.

In fact, the Ice Rink officially opens on Friday!

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Before we know it, downtown will look like a snow globe – see the photo, below, I took from last Christmas.IMG_1927
There is an Address Affordable Housing Crisis

As many of you know, Kent County, like much of the U.S. is experiencing a serious lack of Affordable Housing.

The City of Grand Rapids has made concerted efforts to address problem through an advisory board, which has come up with strategies for addressing the Affordable Housing Crisis

 

 

 

Kent County Eviction Prevention Program

Beginning January of 2018, the 61st District Court will begin a pilot program – the “Eviction Prevention Program” (EPP). Judges Faber and Distel are the initial judges presiding over the EPP.

The EPP was developed as a collaborative effort between the City of Grand Rapids, Salvation Army of West Michigan, The Kent County Court System, the Michigan Department of Human Services and with funding provided by Steelcase.

 

Purpose of the Eviction Prevention Program

The EPP is intended to keep those tenants in housing, who truly want to stay in their housing.

The program will not be appropriate for every tenant.

The EPP appears best suited for those on the margin of being homeless due to an emergency situation (as opposed to those tenants chronically behind in rent).

The EPP provides one-time rent assistance and would allow a Landlord to hold a possession and money judgment in abeyance, pending the Tenant’s payment of rent.

The program is, essentially,  intended as a one-time emergency for those on a fixed or low income, who are essentially faced with the difficult choice of either paying an outstanding medical bill, car repair bill, groceries, etc.., or pay their rent.

 

What Property Managers and Landlords need to know about this program:

Landlords – any tenants behind in rent which have been served a summons and complaint for eviction, beginning in January 2018, should be receiving information about the EPP along with the summons and complaint.

Tenants will know that this is a potential resource to keep them in housing.

What you need to know:

1. The program is entirely voluntary. Landlords can choose to opt out.

2. Not every tenant will qualify. A tenant needs to have income to make the next month’s rent payment.

3. The program is geared towards keeping tenants in housing. If a tenant wants out of your property, the program will likely not be the right fit.

 

Why I like this program.

This program provides an opportunity to keep people in housing who are on the verge of being homeless. The fact is, families are experiencing homelessness in Grand Rapids every day.

Practically speaking, the program works for tenants who have the potential to get caught up, who otherwise are good tenants.

The program is an opportunity for Landlords to get paid and to be part of the solution to the affordable housing crisis.

Housing is a community problem. It is encouraging to see the great collaboration between government, private sector, non-profit sector.

 

 

e-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

www.dwlawpc.com

Real Estate Investors and Property Managers – Update on the “Bed Bug Bill”

October 31, 2017 1 comment

Today is Halloween so I thought would write on a topic that gives me the creeps…. bed bugs.

 

Courtesy BedBugs.org

Infestations can be an issue that every property manager or owner of residential investment real estate may face.

 

One June 9th 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.

Recent Update

There has been no noticeable progress, except that the House Fiscal Agency prepared its legislative analysis a few weeks back – you can check it out here

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.

My thoughts:

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.

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.

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Real Estate Investors: In Your Efforts to Make a Profit Be Wary of Cutting Corners.

October 10, 2017 Leave a comment

Let me illustrate a picture for you: Let’s say you are a real estate investor. You show up for a foreclosure sale. There are several people present to bid on a specific piece of property.  One of those guys winks at you, motions you to come over (in a clandestine sort of way).

The guy whispers to you “I will pay you $500 to walk away not bid on this property.

Red Flags should be going off to you by now. Unfortunately, the same red flags either did not go off or where intentionally ignored for the 63 or so individuals who were targeted for bid rigging at foreclosure sales by the Department of Justice.

“The Antitrust Division has prosecuted scores of real estate investors who, for their own benefit and profit, conspired to corrupt the bidding process at foreclosure auctions.” – Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division

In today’s market, good deals for real estate investors are getting harder to come by. With distressed property becoming a scarce resource and competition ever increasing, some real estate investors have resorted to less than  legal  acts to boost their profit.

2017-09-23 19.30.53Investors should know that the  Department of Justice as well as State Agencies are cracking down on unfair real estate practices.

 

Spartan Stadium. This photo has nothing to do with the post, and is only motivated by Spartan Nation’s victory on Saturday (I took this photo at a different game a few weeks ago)

On Friday, the DOJ announced that Jim

Appenrodt pleaded guilty to two counts of bid rigging in U.S. District Court for the Northern District of California in San Francisco.

 

Investigations Have Yielded 63 Plea Agreements to Date.

 

 

 

 

In Michigan the record numbers of foreclosed properties since 2008 has provided a market (albeit one that is slowing down) for flipping residential real estate. With this opportunity to profit has also created an opportunity for abuse and fraud.  The real estate legal landscape is complex enough, do yourselves a favor – follow the rules.

 

Questions? Comments?

E-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Real Estate Investors & Property Managers Should Avoid These Pitfalls: DOJ and Landlord Settle Allegations of Family Discrimination.

September 8, 2017 Leave a comment

I’ve said it before, owning and managing real estate is challenging. Particularly residential real estate.

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

2017-08-10 08.14.57-1

 

 

Some of the pitfalls property owners have to watch out for are illustrated in a Wednesday, September 6  Department of Justice Press Release.

The Department of Justice issued a press release today concerning a lawsuit settlement reached with a Landlord and Tenant over Discrimination Charges brought by the Federal Government. You can review that press release here.

 

 

According to the press release, the Federal government alleged in its complaint filed in March 2017 that “in March 2014 defendant Appleby told a woman seeking an apartment for herself, her husband and their one-year-old child that the apartment buildings were “adult only.

The complaint also alleged that defendants advertised their apartments as being in “adult buildings.

Not good.

The federal Fair Housing Act prohibits discrimination in housing on the basis of race, color, religion, sex, familial status, national origin and disability.

As stated by Acting Assistant Attorney General John M. Gore, of the Justice Department’s Civil Rights Division. “The Fair Housing Act prohibits apartment owners and managers from denying housing to families because they have children…We will continue to vigorously enforce the Fair Housing Act’s prohibition of discrimination against families with children.

 

I’m speculating, but maybe the landlord didn’t know the law.

I wonder, did the landlord/property owner ever consult with legal counsel on its practices?

On a personal level, this type of practice of discriminating against families is unfortunate, especially considering we are in an affordable housing crisis.

In Kent County Michigan, it is reported that 2,098 school-aged kids are reported homeless.

 

 

There are some lessons to be learned for landlords, property owners, managers, and real estate investors.

Two takeaways from this news headline:

1. It is worth engaging legal counsel. 

Issues arise. When in doubt, e-mail or call your attorney.

 

2. Residential Real Estate Investment is highly regulated.

If you are a landlord leasing out “residential” property as opposed to purely commercial property (business tenant), you are under much more stringent regulations. You must comply with Federal laws, like the Fair Housing Act and state laws, like the Michigan Truth in Renting Act, and Landlord Tenant Relationship Act. Make sure you are operating lawfully.

 

Questions? Comments?

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Cautionary Tale for Real Estate Investors: Yesterday California Investor Sentenced to Prison for Bid Rigging at Foreclosure Sales.

There are many pitfalls for real estate investors who purchase distressed property.

In today’s market, good deals for real estate investors are getting harder to come by. With distressed property becoming a scarce resource and competition ever increasing, some real estate investors have resorted to less than legal  acts to boost their profit.

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Rosa Parks Circle in Downtown Grand Rapids

Investors should know that the Department of Justice as well as State Agencies are cracking down on unfair real estate practices.

 

As a follow up to a story that I have been keeping tabs on, just yesterday, the Department of Justice announced that a judge sentenced a real estate investor for his roles in a conspiracy to rig bids at public real estate foreclosure auctions held in Northern California.

This after a 3-week trial.

 

 

You can see the press release here

 

According to the press release: Alvin Florida Jr. was “sentenced to serve 21 months in prison and to serve three years of supervised release. In addition to his term of imprisonment, Florida was ordered to pay a criminal fine of $325,803.

Based upon the DOJ’s investigation – this was a large conspiracy “to rig bids to obtain hundreds of properties sold at foreclosure auctions. The conspirators designated the winning bidders to obtain selected properties at the public auctions, and negotiated payoffs among themselves in return for not competing. They then held second, private auctions at or near the courthouse steps where the public auctions were held, awarding the properties to conspirators who submitted the highest bids.”

 

What is particularly striking to me is that including today’s sentencing the DOJ report that:

68 individuals have pleaded guilty or been convicted after trial as a result of the department’s ongoing antitrust investigations into bid rigging at public foreclosure auctions in Northern California.

 

Question for Real Estate Investors:

What type of unfair practices do you believe is going on in your state? What are you seeing take place at foreclosure sales?

In Michigan the record numbers of foreclosed properties since 2008 has provided a market (albeit one that is slowing down) for flipping residential real estate. With this opportunity to profit has also created an opportunity for abuse and fraud.  The real estate legal landscape is complex enough, do yourselves a favor – follow the rules.

 

Questions? Comments?

E-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Business Law Update: Court Lessons on Personal Guarantees.

Rosa Parks Circle in Downtown Grand Rapids

In the world of lending if a business wants to secure financing, you will be hard-pressed to find a bank that is not going to require some collateral, including a personal guarantee of the debt by the principal owner(s) of the business.

businesses don’t want to sign personal guarantees; it’s why businesses take on the corporate formalities of a limited liability company, or a corporation – to limit their personal liability. Therefore, it is understandable in a lawsuit over a promissory note that an individual would argue against the enforceability of a personal guarantee.
This is a reason why lenders, private investors, should make sure their legal documents are precise – so that in the event a lawsuit needs to be filed the document is not drafted so as to create an ambiguity.
Two cases come to mind that illustrate problems in enforcing personal guarantees – one recent and one a few years back.
June 29, 2017 Real Estate Development case
For an interesting case that went up and down the appellate courts, just look no further than a June 29, 2017 decision of WNC Housing LP v Shelborne Development Company
In that case a mortgage loan for a particular real-estate development project, the “Shelborne Park project,” was in default, and to avoid foreclosure, plaintiffs purchased the debt at a negotiated price.” Id.
The trial court found the general partner in a limited partnership of the development, Makino, to be a guarantor.
Makino appealed the trial court’s determination that she was personally liable, attacking the language of the general partnership agreement. The Court of Appeals affirmed the trial court’s decision that Makino was liable, but the Michigan Supreme Court, vacated that portion and essentially told the Court of Appeals to reconsider it.  The Court of Appeals reconsidered, reviewing the text of Makino’s partnership agreement and found, once again, Makino was liable under the language of the agreement (The pertinent language stated that Makino as general partner “hereby guarantees lien free Completion of Construction of the Apartment Housing on or before May 1, 2003”) . Id. at page 3.
October 9 , 2012 Case of the Ambiguously Signed Promissory Note.
Another example is illustrated in the 2012 unpublished Michigan Court of Appeals case of Marcuz v. Steven Premiere Properties & Dev., L.L.C., 305733, 2012 WL 4801060 (Mich. Ct. App. Oct. 9, 2012)
The promissory note was signed by Branoff twice: once as a “member” of Premiere Properties, and once “individually.” The note was also signed by defendants Mario and Antonio Giannandrea “individually.”
Premiere Properties defaulted on the promissory note so Marcuz sued the company and individuals on September 3, 2009.
In court, Branoff admitted that he signed the promissory note twice, but he claimed his second signature was not intended as a personal guarantee.  But his signature and the two other individuals were simply “because “we were showing…who were going to be the finalized members of the company.

Thus, an ambiguity exists.
Regardless, the trial court and the Court of Appeals disagreed with Branoff.
The Court held that “[w]hen Branoff signed the promissory note first as a “member” of Premiere and second “individually,” he manifested his intent to personally guarantee the note. Simply put, it would have been redundant for Branoff to sign the promissory note a second time if he did not intend that his second signature have some legal effect different from his first signature.”
LESSON from these two cases:Don’t Draft Legal Documents In a Manner That Creates Ambiguities.
Although the Lender in both instances did in fact win the day, the problem remained – they won after litigating a case that went to appeal, (and in Makino’s case, up to the Supreme court and back down to the Court of Appeals) which undoubtedly cost significant legal fees. The  drafter of the promissory note and the partnership agreement – much of the trouble could have likely been avoided if the partnership agreement and promissory note were more clearly drafted.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka