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Subpoenas have been in the news quite frequently this year. They are not unique to the high-profiles cases in the news. Subpoenas are a frequent and necessary part of litigation in state and federal courts and administrative proceedings. If you have received a legal document called a subpoena from a process server, it is important that you know what this paper is and what it means to you. What is a Subpoena? A subpoena is an order issued by a government agency authorized to issue them. Subpoenas can be issued in state and federal court proceedings (both civil and criminal matters) and by administrative agencies that have adjudicative functions such as the Bureau of Workers Compensation, Equal Employment Opportunity Commission or U.S. Department of Labor. The subpoena usually requires you to appear at a certain place, date, and time to testify as a witness about a particular case. In a criminal case, you can be subpoenaed only to testify in court. In a civil case, you may be subpoenaed for out-of-court testimony (known as a deposition) as well. In either kind of case, a subpoena may order you to provide documents. Delivery of Subpoenas The rules for delivery of subpoenas vary depending on the issuing authority. Typically a subpoena must be delivered in person. In most cases this can be done by one of the parties in the case or by anyone who is at least 18 years old. If you receive a subpoena and are not one of the parties in the case, you should receive an attendance fee and transportation costs for appearing at the designated time and place. In a civil case, you should receive the attendance fee and transportation costs by the person who delivers the subpoena. In a criminal case, you will be paid after you travel to the designated place and testify as a witness. If the subpoena was sent by ordinary first-class mail that is not proper service. However, the recipient may sign an acknowledgement acknowledging that they were served and waive the requirement of personal service. Be careful who signs for things sent to you. If you get your subpoena in the mail and return the acknowledgement or another person signs on your behalf, the court can issue a warrant for your arrest for failing to appear even if personal service is not established. Material Witness Subpoena If you are a material witness to a criminal trial, by application of either the Commonwealth or the defense attorney, the court may set bail for any material witness to appear. Bail may be monetary, or the person may be held until they testify. A material witness is one who’s testimony is essential for either the Commonwealth or the defense. In other words, the case cannot proceed without that witness. The application must set forth adequate cause for the court to conclude that the material witness will fail to appear when required if not held in custody or released on bail. When You Receive a Subpoena Read the subpoena carefully. The subpoena will tell you the names of the parties; the date, time and place you will need to appear; the name of the lawyer who issued the subpoena; and the location and type of court in which the case is taking place. If the subpoena requires you to bring certain documents or other objects, they should be described in the subpoena or in a separate paper given to you along with the subpoena. It is not an option to simply ignore the subpoena, even if there was some defect in the appearance or delivery of the subpoena. You must either appear as ordered or file papers with the court objecting to or seeking to quash (i.e. rescind) the subpoena. You should contact an attorney immediately to discuss your options. Objecting or Quashing the Subpoena You may object to any subpoena. If you have a legitimate reason for not wanting to comply with the subpoena, you or any person with a sufficient interest in the matter can file a motion to quash a subpoena. A motion to quash asks the court to issue an order that you are not required to comply any or portions of the subpoena. The court will often hold a hearing to determine if there is a valid reason (technical or legal) to quash the subpoena. A motion to quash can be filed for many reasons: · the documents requested are confidential or protected from disclosure by the law (such as attorney-client communications, spousal communications); · there is some technical defect in the appearance or delivery of the subpoena; · the is some legal basis for challenging the validity of the subpoena; · you are too far away from the place where you are required to appear; · the subpoena is overly vague; or · the required appearance or documents requested would cause an undue burden or cost to you. The court may quash a subpoena to protect a party or witness or other person from unreasonable annoyance, embarrassment, oppression, burden or expense. You should file any objections with the court immediately, not on the date you are required to appear or provide the documents. A subpoena will also require that you remain at the place described until the testimony is closed, unless the judge excuses you. But you should contact the lawyer for the party who subpoenaed you to find out if you may be called the next day, or on a day in the future. This may help to prevent confusion or unnecessary time spent waiting. Minimum Compliance with Subpoena What is the bare minimum you can do without getting into trouble? Minimum compliance with a subpoena means that you appear at the time and place directed. You must also bring whatever is requested specifically on the subpoena. When it comes to requested records, you must only comply with the language of the subpoena, not the intent. Minimum compliance means that you only need to bring the exact records requested. Even if you know there are other records out there, you need only produce those explicitly listed on the subpoena. Failure to Comply with Subpoena If you do not object to the subpoena or appear as the subpoena orders, a judge may find you in contempt of court. Contempt of court may result in a jail term in criminal proceedings. The court may also order you to pay fees to the parties who may have been damaged by your failure to appear. The court may also issue a warrant for your arrest. The sheriff may take you into custody and bring you to the place where your testimony is required. If it is impossible or extremely difficult for you to appear as required by the subpoena, call the lawyer for the party who issued the subpoena. Usually, the lawyer’s name, address and phone number will appear on the subpoena. The lawyer might be able to postpone your testimony so you could testify at another time. But you should keep in mind that the lawyer may not be able to change the date and time of your appearance if a court date is already set and cannot be moved. If it is impossible for you to appear, or if it would be seriously harmful to your health or business, you should seek the advice of your own lawyer. If the appearance is for a deposition or to produce records, the issuing attorney will usually try to accommodate your schedule or help you better understand what documents they are seeking from you. Receiving a subpoena in any type of case is a serious matter. You must get an attorney even if you have nothing to hide. Even if you are a victim of a crime, you should consult with an attorney. Defying the court can land you in prison or result in paying very hefty expenses for failing to comply. Don’t try to handle it yourself. Contact the experienced litigation attorneys at Fiffik Law Group for help.

By Michael E. Fiffik, Esquire On September 7, 2014, Act 117 of 2014 became effective. Act 117 amends the Pennsylvania Mechanics’ Lien Law (“MLL”), 49 P.S. 1101, et seq., to provide that a construction loan secured by an open-end mortgage will have lien priority ahead of any filed mechanics’ lien claims, even when the visible commencement of work was prior to the recordation of the open-end mortgage where at least 60 percent of the proceeds are “intended to pay or used to pay” all or part of the “costs of construction.” The amendment to the MLL overcomes the problems created by the decision by the PA Superior Court in Commerce Bank/Harrisburg, N.A. v. Kessler. That ruling mandated that for an Open-End Construction mortgage to have statutory priority over mechanics liens, 100% of the proceeds of the loan had to be used for hard costs of construction. And if any portion of the loan proceeds were used for something other than the costs of construction, such as closing costs, satisfaction of an existing mortgage or payment of other judgments and liens, the entire mortgage lost its statutory protection against mechanics liens. Now, in addition to clarifying that loan proceeds may be used for purposes other than construction costs, an expansive definition of “costs of construction” has been added to the MLL, which encompasses all costs, expenses and reimbursements pertaining to erection, construction, alteration, repair, mandated off-site improvements, government impact fees and other construction-related costs, including, but not limited to: costs, expenses and reimbursements in the nature of taxes; insurance; bonding; inspections; surveys; testing; permits; legal, architect, engineering, consulting, accounting, management and utility fees; tenant improvements; leasing commissions; payment of prior filed or recorded liens or mortgages, including mechanics’ liens; municipal claims; mortgage origination fees and commissions; finance costs; closing fees; recording fees; title insurance or escrow fees; or any similar or comparable costs, expenses or reimbursements related to an improvement, made or intended to be made, to the property. Act 117 will apply to mechanics’ liens perfected on or after the Act’s effective date of September 7, 2014, including liens relating to construction of an improvement for which the visible commencement of work occurred prior to the effective date. For Further Information If you have any questions about this change in the MLL, please contact Michael E. Fiffik, or the attorney in the firm with whom you are regularly in contact.

Deadline to apply is June 30. June 30th is the deadline to apply for a Paycheck Protection Program Loan. Many lenders have stopped accepting applications. Here is a list of Fintech lenders that may still be accepting applications (but act fast!): Fundbox Biz2Credit Funding Circle Paypal Quickbooks Capital Confirm that they are still accepting applications. You can also check out the SBA’s lender match. As always, our attorneys are here to help and answer any questions.

How much of your loan will be forgiven? Basic Rules: The Paycheck Protection Program (“PPP”) provides that the loan will be forgiven if the loan recipient utilizes the proceeds for qualified expenditures within a given time frame. The Expected Forgiveness Amount is based on two factors: 1) type and amount of expenditures over an 8-week period and 2) not reducing employee headcount by more than 25%. Relevant period for forgiveness is the 8-week period beginning on the date that PPP proceeds are deposited in your account. You cannot select any 8-week period. You should identify the beginning and ending date of your 8-week period. SBA’s Interim Rule (and all subsequent SBA guidance) requires borrowers to spend at least 75% of the loan proceeds on “payroll costs,” as defined below. The max loan forgiveness is the sum of the following expenditures during the 8-week period: Payroll costs, which encompasses payments of: Employee wages, commissions, tips, vacation, sick pay, limited to $100,000 per employee prorated for the covered period (in other words, $15,385 max/per employee for the 8 weeks); Employer-provided group health care benefits during the covered period; Employer-provided retirement payments during the covered period; and Payment of state and local employer payroll taxes paid during the covered period. Payroll costs DO NOT INCLUDE: Compensation of an individual employee in excess of $100,000 annually, as prorated in the covered period; Federal employment taxes imposed or withheld between February 15, 2020, and June 30, 2020, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees; and Qualified sick and family leave wages under the Families First Coronavirus Response Act (you are already getting a tax credit for these payments) Plus other qualified expenditures (may not exceed 25% of total loan proceed expenditures) Payments of rent (for real property and leased equipment) for leases in force before Feb. 15, 2020, Utilities including electricity, gas, water, transportation, telephone or internet access for which service began before Feb. 15, 2020, and Interest (but not principal) on any debt under agreements that existed before February 15, 2020. BEST PRACTICES: Keep in separate account. Deposit all PPP proceeds in a separate bank account and ensure that PPP loan proceeds are used only for expenditures that are eligible for forgiveness. Keep all related support to corroborate disbursement of such funds. For payroll funding, only payroll for amounts within the forgiveness parameters should be funded from the PPP segregated account. Ideally, employees making more than the threshold would receive two separate checks. Where circumstances do not permit this or where it is too impractical (e.g., if payroll must be funded into a single account), only funding within the forgiveness parameters should come from the PPP account, with the excess funded from non-PPP sources. It is key to understand that the $100,000 annual salary limit per employee is on gross compensation, so associated applicable withholding taxes should be paid from these funds. Recordkeeping Good recordkeeping will be critical for loan forgiveness. Over the eight-week period, keep track of eligible expenses and their accompanying supporting documentation. Lenders will likely require these documents in digital format, so take the time to scan any paper documents and keep backups of the digital records. The documentation should include: Payroll registers or ledgers Health insurance invoices and payments Payments for retirement amounts Support for rent expense (lease and cancelled checks/Automatic Clearing House (ACH) or wire transfer evidence) Support for interest paid on debt obligations Evidence of utilities paid including invoices State and local payroll tax payments (e.g., for New York State, the MCTMT and State unemployment insurance) supported by tax returns, vouchers, or other documentary evidence. Maintain Employee Data Maintain a headcount of all full and part-time employees on payroll. In many cases your payroll processing company will be able to provide this information. The company will need to account for the average number of full-time equivalent employees per month during: The eight-week period beginning with the receipt of loan proceeds (numerator) The period covering 2.15.19 to 6.30.19 (denominator benchmark 1) The period covering 1.1.20 to 2.29.20 (denominator benchmark 2) Follow You Lender’s Advice: Your lender will decide what portion of your loan is eligible for loan forgiveness. As such, its important to understand what information your lender will want to see in order to make that decision. Talk with your lender to get a better understanding of its view on eligible expenditures. Applying for loan forgiveness: Following the eight-week period in which you spend your PPP funds, you can submit a request to your lender for loan forgiveness. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. If you are a self-employed individual, you will rely on the 2019 Form 1040 Schedule C to determine the amount of net profit allocated to the owner during the eight-week period. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on loan forgiveness within 60 days. Action Plan: Move loan proceeds to separate account Identify funding date and relevant following 8-week period Estimate payroll expenses for 8-week period Calculate budget for non-payroll expenses that will allow you to earn maximum loan forgiveness (8-week payroll figure /.75) Identify qualified non-payroll expenses that you’ll pay with loan proceeds Determine method of paying qualified expenses during 8-week period Track expenses and keep records Keep in mind – loan forgiveness applies to qualified expenses for an 8 week period.  So maximize your expenditures during that 8 week period.

Small businesses losing lots of money during the COVID shutdown may expect insurance to cover their losses. Unfortunately, many insurers are denying COVID-19-related claims, leaving small businesses to fend for themselves. Several Pittsburgh restaurants have taken legal action against their insurers in the Allegheny County Court of Common Pleas claiming that financial losses sustained during this pandemic should be covered by their insurance policies. Businesses that should consider filing claims include restaurants, beauty salons, retailers, physician practices, medical centers, physical therapists, chiropractors and farmers. Any business that operates from a place of business that has been closed or experienced a significant downturn in business should consider making a claim. These lawsuits are looking to help cover business income and COVID-19-related losses following the order by Pennsylvania Governor Tom Wolf to shut down nonessential businesses back on March 19th. Fiffik Law Group is part of a statewide group of professionals leading the way to fight for small businesses to get business interruption claims paid. Call us for assistance to pursue your claim at (412) 391-1014.

The Federal government enacted two laws in March 2020 that affect small business owners and their employees. The Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Securities (CARES) Act. Both laws include important tax benefits for employers and self-employed persons. The CARES Act also provides for a Paycheck Protection loan program administered by the U.S. Small Business Administration. Those loans will become available sometime in April. It’s important to understand that employers may need to make a choice between taking the tax benefits or applying for a Paycheck Protection loan. The effective date of the FFRCA is April 1, 2020 so its time to take stock of the tax benefits and start making some important choices for your business. Here is a summary of the three key tax benefits in the FFRCA and CARES Act. Employee Retention Credit Eligible employers are entitled to a refundable payroll tax credit for 50% of wages paid to certain employees during the COVID-19 crisis. Eligible employers – The credit is available to employers, including non-profits, whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel, or group meetings. The credit is also provided to employers who have experienced a greater than 50% reduction in quarterly receipts, measured on a year-over-year basis. → Before You Claim the Credit: The credit is not available to employers receiving Paycheck Protection Program loans from the Small Business Administration. Applicable Payroll Period – Applicable for all wages paid, including cost of benefits, between March 12, 2020, and before January 1, 2021. Calculating the Credit – The credit is computed on a calendar-quarter basis and equals 50 percent of qualified wages up to $10,000 paid to each employee or $5,000 in actual credit. Eligibility for the credit begins with the first 2020 calendar quarter in which the employer’s gross receipts declined by greater than 50 percent of the corresponding calendar quarter of the prior year, and ends with the calendar quarter following the calendar quarter in which the gross receipts exceed 80 percent of the corresponding calendar quarter of the prior year. Refundable Payroll Tax Credits Small and midsize employers, as well as self-employed persons, can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for 100% of the cost of providing Coronavirus-related leave to their employees. This applies to wages paid for qualified employee leave taken between April 1 and December 31, 2020. → Distinction from Employee Retention Credit. The employee retention credit is applicable to all employees and all wages paid. The refundable payroll tax credits are applied only to wages paid for workers eligible and taking paid sick leave or family care leave required under the Families First legislation. Qualifying Paid Sick Leave for Workers Paid Sick Leave – Employees can receive two weeks (up to 80 hours) of paid sick leave at 100% of the employee’s pay where the employee is unable to work because the employee is quarantined, and/or experiencing COVID-19 symptoms, and seeking a medical diagnosis. Child/Family Care Leave – An employee who is unable to work because of a need to care for an individual subject to quarantine, to care for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19, and/or the employee is experiencing COVID-19 symptoms can receive two weeks (up to 80 hours) of paid sick leave at 2/3 the employee’s pay. An employee who is unable to work due to a need to care for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19, may in some instances receive up to an additional ten weeks of expanded paid family and medical leave at 2/3 the employee’s pay. Small Business Protection Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or childcare is unavailable in cases where the viability of the business is threatened. Detailed guidance is forthcoming from the Department of Labor concerning criteria for exemption. Credits Paid Sick Leave Credit – Employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days. Child/Family Care Leave – Employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period. Additional Child Care Credit – In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child whose school or child-care facility is closed or whose child care provider is unavailable due to the Coronavirus, eligible employers may receive a refundable child care leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child-care leave credit. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period. Complete Coverage Employers receive 100% reimbursement for paid leave pursuant to the act. Health insurance costs are also included in the credit. Self-employed individuals receive an equivalent credit. Fast Funds – How to Claim the Credit Reimbursement will be quick and easy to obtain. When employers pay their employees, they are required to withhold from their employees’ paychecks, and later deposit with the federal government, federal income taxes and the employees’ share of Social Security and Medicare taxes. Employers who pay qualifying sick or child-care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child-care leave that they paid, rather than deposit them with the IRS. Payroll taxes available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes and the employer share of Social Security and Medicare taxes with respect to all employees (not just employees entitled to leave). Examples If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date. If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000. Delay Payment of Employer Payroll Taxes The CARES Act allows taxpayers to defer paying the employer portion of social security taxes through the end of 2020. This applies to all employers, regardless of whether a business has been negatively impacted by the COVID crisis, or has employees taking COVID-related leave for themselves or their family. The deferral applies only to the employer’s share of social security tax, typically 6.2% up to the social security wage base ($137,700 for 2020). It does not apply to the employer’s Medicare taxes nor to the employee’s share of social security or Medicare taxes. Specifically, all employer social security taxes otherwise required to be deposited between the date of enactment and December 31, 2020, are not required to be deposited on the normal deposit schedule. Instead, half of such taxes would be required to be deposited by December 31, 2021. The remaining deferred social security taxes would be required to be deposited by December 31, 2022. If you have any questions about these tax benefits and how they might apply to your business, please contact Michael E. Fiffik, Esq or Lacey Gordon, Esq. They’ll be able to help you understand whether your business qualifies and which choices are best for you.

Individual taxpayers and businesses will have an extra 90 days to pay the Internal Revenue Service (“IRS”) if they owe federal income tax for tax year 2019. Normally, taxpayers must make payment of taxes owed by April 15. However, Treasury Secretary Steven Mnuchin recently announced that individual and small business filers will be able to defer payments of up to $1 million and corporations can defer up to $10 million, without incurring any interest or penalties, until July 15, 2020. This extension to pay does not extend the deadline to file federal tax returns. As such, the normal due date to file federal tax returns remains April 15, for now. For those taxpayers who are not able to make the normal filing due date, relief is available by requesting an automatic six-month extension, making October 15, 2020 the new filing deadline. To obtain this filing extension, individuals must submit Form 4868, and businesses must submit Form 7004, to the IRS by April 15. Keep in mind that this filing extension does not impact the new deadline to make payment of taxes owed by July 15, 2020. This announcement also does not affect the deadline for state income tax payments. However, with a change in the federal tax payment deadline, it is anticipated that most states will likely follow suit. Until there is an official announcement by a state, assume that the state income tax payment deadline remains the same. There is reporting that the administration is also considering delaying the estimated quarterly tax payments that self-employed workers and businesses pay the IRS throughout the year. The first payment is typically due by April 15.

We talk to lots of clients looking to invest in real estate. I commend each and every one of those who call us first before jumping prematurely into a deal. That’s a great indicator of future success — a willingness to learn and recognition of what they don’t know (and need to know). There are a few key issues that I try and share with these entrepreneurs to make them wiser along the way: Don’t Skimp On Due Diligence. It’s seems like an obvious piece of advice but you’d be surprised how many folks underestimate the benefits of investigating their target property. This is usually a big mistake. Take the time to conduct a thorough review of the physical condition of the property and its key systems. Check local zoning and building codes to ensure that your intended use of the property is permissible and possible. Pay someone to conduct a thorough title search and examination for hidden defects in the title. Failing to do any one of these can result in a nightmare investment. Understand the Lender Process. Most investors need a source of financing for a deal. If you plan to seek a loan from a bank, it’s a good idea to interview banks before you apply for a loan. Ask them about various loan products and their approval process. Find out what information and documents you need to have ready for review. When the time comes for you to apply, you will already have the beginnings of a relationship with a lender and you’ll be better prepared to go through the loan process faster and with a greater chance of success. Timing. Real estate deals are often time sensitive. Sellers may have other bidders and want you to close quickly. Your loan commitment has an expiration date. There’s a lot that has to happen for a closing to come together. Talk to one of our attorneys about the closing process and get an estimate of how long you might expect the process to take. If you enter into a deal without understanding timing, you could not only lose a security deposit but also the property. Brad’s Story: Consider Brad’s deal gone wrong. He bought a property and intended to operate his truck repair business from the building already on the property. He did no investigation into either the local zoning codes or the title to their property. After he started repairing trucks, he received a citation from the local municipality informing him that the repair business was not among the types of commercial activities permitted by the local zoning code for his property. He was unable to obtain any kind of variance and no exceptions to the code applied to him. As a result, he was forced to find a new location for his business and is stuck with a property for which he has no use. You don’t have to be uninformed about a real estate transaction. Call one of our attorneys before you sign an agreement. We can help you plan for success.

Many mistakenly think this is a type of corporation.  This is a shorthand term describing any corporation that elects to be taxed in a certain way. It is called electing “S” status. A corporation’s default tax status results in one tax on the corporate income and then another tax on the individual owner when profits are paid as dividends. The S status election eliminates this “double tax” problem.   All corporate profits are taxed at the individual’s rate only. This election makes sense for most small businesses. It’s best to consult with an accountant for specifics for your company. Are there S LLCs? Limited liability companies may also elect S status. The default tax rules for LLCs are different than for corporations.  Single member LLCs are taxed like sole proprietorships.  Multi-member LLCs are treated as partnerships.  There are important differences in the tax rules applicable to LLCs and corporations so choose wisely. We regularly advise businesses on the tax status elections available to then. Please ask for Michael E. Fiffik, Esquire for any business matter.

A Maryland couple purchased a property to flip in the Pittsburgh area.  The sales agreement said “as-is, where is” subject to all liens, diseases, warts and infections.  The price was right.  No title search, no due diligence.  After the deal closed, the flippers learned that the house had previously been placed on a list for demolition by the local municipality.  They tried in vain to fix the place up, plowing an additional $10,000 into the property but it wasn’t enough to satisfy the city.  The house was torn down. This couple could have avoided all of these problems by hiring an attorney to do a title search and examination.  The municipal violations would have been uncovered and they could have avoided the deal or negotiated in advance with the municipality.  All at a negligible cost. How did this turn out for our flippers?  Well they’re understandably upset and their options aren’t great.  Sue the seller for fraud?  Good luck finding the Nevada LLC seller or collecting if successful.  Sue the city for its decision to demolish?  Expensive and even less likely to succeed.  They are stuck with a vacant lot and a demolition bill.  This deal was a total loss but it didn’t have to be that way. Our real estate attorneys, Michael E. Fiffik being one, represent buyers, sellers, investors, landlords and tenants in a variety of residential and commercial real estate matters. Find our real estate page here.

You call the seller and he’s nowhere to be found. A few days later, your deed is returned to you by the deed recording office having been rejected as defective. You find out that the so-called new owner bought the property about a week after yours for a fraction of the cost that you paid. That’s when you start to realize that you were scammed. Can’t believe it? I talked to a potential client this week with this problem. Many of us visit the internet for help doing a project on our own. There are tutorials on almost every topic. How to make sausage, to fix your dishwasher and even real estate investing. These work, right? In many cases, yes. The sausage turns out great, the dishwasher works like new and we close on that investment property all on our own saving big bucks. What happens, though, if something goes wrong? Even professionals make mistakes once and a while, so it’s reasonable to think that a DIY real estate investor might as well. The difference between lousy sausage and a problematic real estate deal is the repercussions. Mistakes in real estate deals may result in complicated problems that take a great deal of time and money to resolve, if they are resolvable at all. My recent caller’s problem was that his deed lacked a proper acknowledgement (seller signature). That can be an honest DIY mistake although in his case, I think he was the victim of a scam. Thousands of people buy blank deed forms every day. It’s the user’s responsibility to complete them correctly. The forms often include brief notes to help complete the task but even the most comprehensive instructions can’t address every potential situation. Each state and county sets out specific, and sometimes unique, requirements for a deed’s content and form. These requirements can vary widely. Here are the deed requirements in Pittsburgh as an example. Non-compliance can lead to additional fees or outright rejection by the recording office. Some deed transfers are simple. DIY investors can execute deeds with no problems but why take the risk? A deed can be defective in so many ways of which the vast majority of people would never be aware. Fixing the problem deed – sometimes years later – can be very expensive and can even prevent you from selling the property when you need to sell it. Why risk it to save a few dollars? Involving an attorney to review the deed and the deal reduces the likelihood of unforeseen consequences. Even though this will add a few dollars the acquisition cost, it’s worth the peace of mind from knowing that you’re getting what you paid for. As for that investor I talked to this week? The price of the fix could be half or more than he invested in the property. The new owner filed suit against his tenant for unpaid rent and the investor is paying his tenant’s legal fees in order to keep him in the property. In short, it’s a mess but one that could have been easily avoided. Fiffik Law Group’s real estate attorneys have years of experience representing purchasers and sellers, equity investors and developers, landlords and tenants involving residential and commercial properties.  Please contact Michael E. Fiffik, Esquire for help with your situation.

An operating agreement is the blueprint for how your business operates. In a business with two or more members, it’s easy to understand why an operating agreement is necessary.  Common issues include what happens when disputes arise between members, how membership interests can be transferred and who runs the business.  None of these are issues for the single member LLC so an operating agreement makes no sense, right?  Here are three reasons why that’s wrong. Without an Operating Agreement, your Limited Liability Status is Jeopardized Most of my clients who want to form an LLC want the protection it provides their personal assets from the debts and obligations of the business. This limited liability is not “automatic”. An LLC must earn this limited liability. This means that an LLC must be treated as a separate entity from the business owner.  Creditors who try to avoid this liability protection — known as “piercing the veil” – argue that the LLC and owner are not two separate entities, but one and the same in which the owner is treating the LLC assets as his own, similar to a sole proprietorship. The owner can fight back by producing a valid operating agreement for the LLC as proof that the LLC is truly a separate legal entity. An Operating Agreement is Necessary to Do Business with Others An active LLC will need to deal with potential lenders, creditors, taxing authorities and other persons in order to successfully carry on its business. All of these persons are likely from time to time to ask individuals who are members of single-member LLCs for legally valid documentation concerning, for example, the identities of persons with authority to bind their LLCs and concerning the tax and financial structures of these LLCs.  Written operating agreements provide this documentation Without an Operating Agreement, your LLC is Bound by the Default Rules of your State We all know how business tends to go when the government is the one calling the shots. It’s not pretty. LLC acts are written primarily for multi-member LLCs, and many of their mandatory and default provisions are inappropriate for single-member LLCs whose members are individuals.  Luckily, most state laws governing LLCs allow the default rules to be overwritten in the company’s operating agreement.  Going without an operating agreement is like having no last will and testament.  Do you want the government deciding how your estate will be administered and distributed upon your death?  No.  Don’t let the government set the rules for your LLC. If you used an internet service to form your LLC, you probably did not prepare an operating agreement.  Even if you did, its probably a “one-size-fits-all” type.  That’s not much better than relying on the LLC Act. To find out if you have everything in order for your LLC, call one of our experienced business attorneys at Fiffik Law Group.