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Category Archives: Miscellaneous

Another public interest class action win — Cincinnati Alarm Tax

Author By Christopher P. FinneyPosted on

As we wrote here, in November the Ohio First District Court of Appeals in White v. Cincinnati unanimously ruled in favor of clients of the 1851 Center for Constitutional Law and Finney Law Firm in a challenge to the City of Cincinnati’s alarm tax scheme. The City of Cincinnati asked the Ohio Supreme Court to review that decision, a discretionary call by Court.  Historically, Ohio’s top Court accepts only about 5% of such cases for consideration.

Today, the Ohio Supreme Court declined to accept for review the First District decision.  Since that was the last stop on the railroad for the City, the inevitable next legal steps are injunction against further collection of the tax, class certification and an order of restitution before Common Pleas Court Judge Wende Cross.

Amazingly, even after the First District ruled that the tax was illegal, through today the City of Cincinnati insisted on continued collection of the tax. So, an injunction by the trial court now will be necessary.

If you are a Cincinnati alarm fee payor, you should be expecting a refund once the amount has been calculated and the procedural hurdles cleared, perhaps later this year.  If the City continues to attempt to extract alarm charges from you, respectfully decline and send them this blog entry!

New Mediation Rules May Revamp Civil Litigation in Kentucky

Author By Todd McMurtryPosted on

Mediation, a quicker and more cost-effective alternative to litigation, has long been a voluntary option for parties in civil disputes. Now, the Kentucky Supreme Court has adopted rule changes that make court-ordered mediation commonplace in the litigation process. As a result, more lawsuits are likely to be resolved by this method.

The new rules, which took effect on Feb. 1, 2022, give courts the authority to refer all or part of a civil case to mediation and to appoint a mediator — a neutral third party who helps settle some or all of the contested issues. The mediation will remain fully independent of, and outside of, the court proceeding but the court has the discretion to enforce its order to mediate.

In deciding whether to order mediation, the court is required to consider these factors:

  • The stage of the litigation, including whether discovery has been conducted
  • The nature of the issues to be resolved
  • The value to the parties of confidentiality, rapid resolution or maintenance of ongoing relationships
  • The willingness of the parties to mutually resolve their dispute
  • Other attempts at dispute resolution that may have been made
  • The ability of the parties to participate in the mediation process, including virtual mediation
  • The cost to the parties

Mediation will not be ordered in any case where a court determines that one party may pose a risk of harm to others.

Once mediation is ordered, the litigants have 15 days to agree on a mediator and if they don’t, the court can select one. A mediator must be a Kentucky lawyer and comply with a code of conduct that, among other things, requires them to remain competent in mediation skills. Payment of the mediator’s fees is typically shared among the parties. The attorneys for the parties schedule a mediation conference. The mediator confers with the attorneys (and any unrepresented parties) to work out procedures for the conference and may require them to submit confidential statements of the case in advance. The parties’ representatives at the conference must have full authority to negotiate a settlement.

Although mediation is a separate process, the court must be kept advised of its progress. The parties are required to submit a joint statement to the court enumerating the issues that have been resolved and those that remain for trial. The parties may also identify any matters that, if resolved or completed, would facilitate a settlement. The court in its discretion may encourage the parties to continue discussions, with the goal of avoiding or limiting a trial.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; [email protected]; 513.797.2850.

 

9 tips for real estate buyers, sellers, landlords and tenants to protect themselves in inflationary times

Author By Christopher P. FinneyPosted on

The business buzzword for 2022 is: Inflation.

The inflation rate in 2021 was 7.5%, a rate that the the Federal Reserve says took them completely by surprise.  And 2022?  Many prognosticators (this author included) believe inflation will hit double digits for the first time in more than 30 years.  This comes after rates of inflation consistently at or below 2% for the past decade.  As a result, many marketplace participants simply are not aware of strategies that will enable them to navigate the shoals of an inflationary environment.

This blog entry may pivot between references to rates of inflation and rates of interest for borrowing.  These two concepts, while different, are addressed interchangeably as (a) inflation is a widely accepted indicator of an over-stimulated economy and (b) the predictable response to inflation is raising interest rates charged to banks by the Fed to dampen that economic activity.  In turn, banks will then raise the rates charged to consumer and commercial borrowers.  So, higher inflation inevitably begets higher interest rates.  The Fed has forecasted both (i) the possibility of front-loaded rate increases, meaning sharp rises in the coming months (as opposed to sequential rate hikes being stretched out over months and years) and (ii) as many as seven rate hikes in 2022 alone.  This means interest rates could rise by a full 2% or more from today’s rates before January of 2023.  How high can rates go? In March of 1980 the prime rate of interest peaked at 19.5%.  Imagine the impact of interest rate adjustments on your business model at those exorbitant rates.

Here are a few things to consider to protect yourself in inflationary times:

  1. Utilize commercial rent adjustments to your advantage.  During low inflationary times, landlords and tenants have commonly avoided complex periodic calculations for rent increases based upon Consumer Price Increases (CPI) increases, in favor of either fixed rent rates during the term of a lease or rent increases only pursuant  to a fixed schedule (say, for example 5% increases every 3 years).  As inflation accelerates and persists at high levels, landlords will hope they had full CPI adjustments built into their leases past and will start demanding then in leases in the future.  Conversely, tenants will cherish fixed-rate, longer-term leases that create a benefit to them of inflation (but the rapidly-changing office and retail markets might cause devaluation of spaces that previous saw decades of stability and strength).  As always, we recommend that tenants consider asking for an early termination provision in all commercial leases.
  2. Anticipate and avoid mortgage interest rate surprises. Many residential mortgages and most commercial mortgages have fixed interest rates only for a few years.  As to residential rates, after the period of the fixed rate, frequently rate increases are capped, but will still be painful.  But for commercial borrowers, when the fixed term expires, the rate increase is typically unlimited.  As a result, commercial borrowers locked into mortgages that might not be paid off for a decade or more could have dramatic, uncapped and unanticipated increases in the interest portion of the mortgage payment that continues to escalate each adjustment period.  To mitigate these impacts, consider refinancing into a new fixed-rate term that gives you breathing room before the impact of higher rates hits with full force.  Also, the sale of parts of your portfolio to pay down debt could lift your P&L from the greatest impacts of interest rate hikes.
  3. Be careful of fixed-rate pricing.  Home builders, contractors and manufacturers are experiencing difficulties fulfilling obligations under fixed-price contracts for matters that have a delivery date well into the future, shrinking their profit margins or turning winning contracts into losers.  Our office then is seeing instances of home builders trying to walk away from contracts and contractors seeking to convert fixed-price contracts into cost-plus agreements, shifting material and subcontractor pricing increases to buyers.  If you are that builder or contractor, consider adding an automatic or negotiated inflation adjustment in the contract and as a buyer, you want to lock in that fixed pricing firmly.
  4. Anticipate suppliers walking away from contracts. Similarly, we have seen manufacturers and distributors of certain products avoiding their obligations to supply certain goods or equipment.  As a buyer, do you have your supply contracts documented correctly and have you diversified your supply pipeline to protect yourself if a supplier lets you down?  Is the party with whom you are contracting sufficiently capitalized to stand behind their contractual obligations?
  5. Consider inflation and interest-rate contingencies.  The Cincinnati Area Board of Realtors/Dayton Area Board of Realtors form residential purchase contract allows a buyer to state the specific terms of the mortgage it is seeking as a contingency to ia buyer’s performance under the contract.  If you specify a “fixed rate loan for 80% of the purchase price at a rate below 3.5% per annum fixed for a period of 30 years,” and interest rates rise before the closing, the buyer has a perfect out.  Similarly, buyers and sellers can include in any contract an “out” for high rates of inflation and higher interest rates.
  6. Be wary of options.  Options to renew leases and options to purchase may seem innocuous and predictable in stable times.  But in a dynamic high-interest rate marketplace, an option acquired today to buy a property at a fixed price three, five or ten years into the future (say under a long-term commercial lease) can unexpectedly enrich the option holder.  Options can be a way a way to leverage dramatic profits to the option holder.
  7. Be prepared to offer seller financing.  A close partner to higher interest rates are tighter lending standards.  Fewer and fewer buyers can afford to buy at inflated interest rates, and lenders also frequently tighten their loan eligibility standards.  As a result, a eligible buyers — abundant today — become frighteningly scarce.  In the worst of the inflationary period at the end of 1977 to 1981, sellers had to offer loan assumptions, land contracts, leases with options (or obligations) to purchase (with the warning noted above) and simple notes with accompanying mortgages to get any property sold.
  8. Be prepared to buy at foreclosure sales.  Foreclosure sales, which have virtually disappeared for the past two years, could come roaring back as commercial and residential owners cannot afford their new, higher mortgage payments, and, of course, mortgage foreclosure moratoria have been lifted.
  9. Be prepared to offer seller financing.  A close partner to higher interest rates are frequently tighter lending standards.  Fewer and fewer buyers can afford to buy at inflated interest rates, and lenders also frequently tighten their loan eligibility standards.  As a result, a eligible buyers — abundant today — become frighteningly scarce.  When lending is loose (as today), it seems readily available to anyone.  And when it tightens, it seems to strangle the marketplaces.  In the worst of the inflationary period at the end of 1977 to 1981, sellers had to offer loan assumptions, land contracts, leases with options (or obligations) to purchase and simple notes with accompanying mortgages to get almost any property sold.

We saw with the rapid deterioration of the real estate market from 2006 to 2010 that buyers many times would willfully breach their contractual obligations to buy or rent.  In this process, they would search for a contingency or loophole — any argument whatsoever — to evade their contractual promises.  And in other instances, they would just outright walk away.  Accompanying these contractual breaches were also insolvency and bankruptcy, making collection impractical or impossible.  Similarly, as the real estate marketplace has heated up over the past five years, we have seen sellers work to evade their contractual obligations so they could retain an appreciating investment or simply realize a higher price from a second buyer.

How can you protect yourself in this type of dynamic market to assure performance by a buyer or seller?

  • Consider escrow deposits, guarantees and other security. Sellers can demand higher earnest money deposits, non-refundable deposits and short contingency periods. Buyers can use tools we have written about here and here of Affidavits of Facts Relating to Title and legal actions for specific performance. Further, consider adding personal guarantees to contractual promises from corporate and LLC buyers or sellers.  Additionally, the performance by buyers and sellers can be further secured with mortgages against real property and secured positions in other assets.
  • Add an attorneys fee provision.  Also, consider adding a contract provision shifting the expense of attorneys fees to the breaching party in a contract.  That can sometimes change the calculus of a prospective breaching party.
  • Tighten your contract language. To lock buyers and sellers into real estate and supply contracts and leases, carefully consider ways the other party might find a contingency or loophole in their performance. Contingencies (commonly for inspection or financing) are the tunnel through which most buyers drive to walk away from a contract.  Ohio law provides that a buyer must “reasonably” attempt to fulfill a contract contingency, but many still attempt to use contingencies to artificially and intentionally avoid their legal obligations.  Fraud on the part of a seller (such as an undisclosed material defect discovered before closing) can also arguably be the basis for a buyer not performing.  Conversely, typically there are no contingencies to a seller’s performance under a contract.  But consider everything in the instrument — the date, the property description, the parties’ names, the “acceptance” language and timing, in considering how the other party might try to squirm away from their promises.

As the economy becomes more unpredictable and more dynamic in terms of pricing, supply shortages and interest rates, market participants would be wise to carefully think about the impact of inflation and interest rate hikes on their contractual obligations and market positioning.

 

 

Fraud, fraud and cyber fraud!

Author By Christopher P. FinneyPosted on

We all know of creative and incessant attempts to defraud us of our hard-earned money, many (but not all) internet- and email-based.  But nonetheless (i) the efforts of snooker us never stop, and (ii) we must constantly tell others in our family and our organization to be wary.  Eternal vigilance is a business and personal requisite these days.  The criminals are absolutely relentless.

Just this last week, our firm and my family were “almost” taken in by two of these international criminals:

  • Our firm (because we have a great web site and use internet marketing tools) constantly gets “new client inquiries” (usually via our web portal or regular email) from fraudsters asking us “do you review contracts?” or “can you sue someone for us?,” pretty generic and bland (but transparently fraudulent) inquiries.  I generally just “delete,” but one of these made it to one of our newer associates.  It was a client from Dubai who wanted us to assert certain contractual claims against another party.  We did so, and the matter instantly settled with a $385,000 certified check payable to our firm escrow account.  The fraudulent client then wanted us to wire the escrowed monies to him and a third party, both overseas (major red flag there!).  Fortunately, our crack bookkeeping staff saw the certified check was dishonored before we wired out the funds — disaster averted!.  But it was a close call.

[Something to note about these fraudulent inquiries: (i) they never want to communicate via telephone (but rather by email), (ii) the phone number they provide is always bad, and (iii) they always have some bland *@Gmail address.”  I sometimes respond to the email address they provide “please call me,” and they never do.  I call the phone number and it is bad for one reason or another.]

  • Sunday, right before the Superbowl, I stopped to have lunch with my wife.  She related to me that a piece of furniture she had for sale in Facebook Marketplace had sold to a buyer in California.  He was going to send us “certified funds” and then wanted us to pay his moving company to bring the piece to California.  “Wait a minute,” I said.  “why would we pay his mover,” and it vaguely reminded me of a fraud scheme I had heard from a client or read about on the internet.  Sure enough, I Googled “pay the mover” and found out this is a common scam.  You wire or pay funds to a mover, and later the “certified funds” are dishonored.  The victim is “out” the moving fee and the scammer never intended to pay for your furniture!  My wife told the would-be buyer that we would hold the “certified funds” for 10 days before shipping the goods, and he went radio silent immediately.  Fraudster!

Our firms, and our title company in particular, are attacked by fraudsters almost daily.  Fortunately, we are alert to the most common scams, and have avoided them all (we have clients who have not been so lucky).  But these two close calls — at the office and at home – remind us that vigilance is required and gullibility, and trust, in the internet era are simply foolish!

Be cautious with your funds and your property.  There are loads of fraudsters — some anonymous on the internet and some that you think are your friends — who will gladly and shamelessly steal your money and leave you wondering why you fell for their scam!

Be cautious!  Be aware!  Trust very few.

Should You Acquire a Business by Stock Purchase or Asset Purchase?

Author By Todd McMurtryPosted on

In the small business arena, companies are usually bought and sold in one of two ways: by stock purchase or by asset purchase. In a stock purchase, the buyer assumes ownership of the target company, acquiring all its property and taking on its debts and liabilities. In an asset purchase, only specified property is transferred and the target company continues to exist. Each method has advantages and disadvantages for both the buyer and the seller. If you’re planning to buy an existing business, your choice of method will depend on the purpose of the acquisition, the financial health of the acquired business and other relevant circumstances.

Stock Purchase

The foremost advantage of a stock purchase is that it promotes continuity of the acquired business. This method makes sense when the business is running well and there are valuable intangible assets like a trade name and goodwill that you want to preserve. All of the existing customer contracts, vendor agreements, debt obligations and employment agreements can likely continue without interruption.

However, stock purchases have inherent risks, since the buyer takes on all of the target company’s actual and potential liabilities. The buyer is responsible for paying off any outstanding loans, including mortgages and finance agreements. If, after the closing of the stock sale, the company is sued over something that happened previously, the new owners must defend against the suit and may have to pay damages and other costs. It is up to the prospective buyer to conduct a thorough examination of the target company’s books and operations. This is called “due diligence” and it takes significant time, money and effort.

Asset Purchase

An asset purchase can be of greater benefit for a buyer that only wishes to take over selected property without concern for keeping up the target company’s operations. It is also less risky. The purchaser takes over only the debts and obligations that are associated with specific assets purchased or that are voluntarily assumed, such as leases or contracts. This can greatly lessen the buyer’s need for due diligence and reduce its costs. There is also a tax advantage. The buyer acquires the assets on a cost basis and can immediately begin taking depreciation deductions, thereby lowering income tax.

One disadvantage of an asset purchase is that not all assets of the target company can be easily transferred. Even if customer and vendor lists are made part of the sale, contracts with vendors and customers may have to be revised or even renegotiated entirely.

Before purchasing a business, you should seek the advice of a qualified acquisitions attorney for help in deciding which method is right for your situation.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; [email protected]; 513.797.2850.

 

How to Survive a Business Divorce

Author By Todd McMurtryPosted on

Nobody enters into a commercial venture anticipating that the enterprise will fail. Nevertheless, small and start-up businesses are particularly susceptible to dissolution or drastic changes in ownership. Relationships sour, peoples’ priorities change, someone gets sick or dies or the business suffers poor profitability or takes a different course than originally planned. There are innumerable factors that can lead to a dissolution or ownership change that is commonly known as a “business divorce.”

Like a dissolution of marriage, a business divorce can get messy and contentious. Company owners almost always have emotional attachments to a business that they manage hands on and may have founded. In addition, it’s common for small business owners to hold equal or nearly equal shares, making it difficult to agree on an exit strategy for any one of them. Every small business owner should be prepared to handle a potential breakup in a way that won’t disrupt or jeopardize the business.

Most importantly, you should have a breakup contingency plan in place. A comprehensive partnership or shareholder agreement should include a process for the orderly withdrawal or buyout of one or more of the owners. Written agreements can set out procedures to be followed and a method of determining suitable compensation. A competent business lawyer can help with negotiating and drafting an agreement appropriate for your organization.

Another element of an effective business divorce strategy is to be reasonable and level-headed. Just like marital divorces, business breakups can get very emotional, which can easily derail discussions and cause unnecessary harm to everyone involved and to the business itself. Infighting among owners can cause disputes to end up in court, which often leads to tremendous waste of valuable time and money.

Communication among the owners is also critical. A qualified business and commercial mediator can be of great assistance, getting the owners past the impulse to blame each other and to focus instead on the essential issues at stake — such as coming to a fair agreement concerning the firm’s assets and  liabilities. A mediator can be instrumental in keeping discussions on track toward a productive outcome.

Finally, the parties should decide what their priorities are moving forward. If the divorce is resolved fairly, there is a better chance that nobody will be unnecessarily harmed. For the departing business owners, it is advantageous to wind up the existing affairs so that he or she can concentrate on another venture. For those remaining, making sure the departing owner is well compensated, although expensive, is a way to avoid creating a disgruntled competitor. All involved should stay focused on achieving their long-term goals.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; [email protected]; 513.797.2850.

 

Real Estate Legal Pro Tip: How to avoid Ohio mechanics liens on construction and renovation projects

Author By Christopher P. FinneyPosted on

Buying real estate improved by an existing building is in itself a legally intricate undertaking. However, new construction and renovation introduce a whole new level of complexity, difficulty, legal complication and financial risk.

This blog entry explores just one of those categories of added risk in the construction and renovation arena: mechanics liens. This article also is not the definitive, all-encompassing explanation of the Ohio mechanics lien statute (it has a multitude intricacies).  Rather, we provide herein three (or four) simple steps to assure that the extraordinary “muscle” added by mechanics lien claims is not applied against you as a property owner.

General risks of real estate investing

In short, real estate investing is not for amateurs or the faint of heart.  Many of the entries on this blog explore how to avoid pitfalls associated with real property acquisitions involving existing improvements, such as issues relating to matters of title, tax, physical defects in the property and improvements (and seller fraud relating to the same), zoning, land use and other regulatory hurdles,  and seller fraud in financial misrepresentations, just to name a few.

Additional risks inherent in new construction and building renovation

However, taking raw land or a developed lot (the difference being built roadways, utilities, addressing zoning and full subdivision) and building a new structure, or renovating an existing structure, are fraught with a host of added risks: Proper planning and design, zoning and land use restrictions, utility access, building code permitting and inspections, selecting an honest and qualified contractor who has a corral of qualified subcontractors, materialmen and laborers.  The list of added complexities associated with adding improvements to real estate is almost endless.  Properly executing a construction project from beginning to end is difficult.  That difficulty today is enhanced by the lack of availability of skilled labor and subcontractors, increasing pricing and drawing into the field entirely unqualified, untrained and unsupervised laborers.

The special risks associated with mechanics lien

One of the biggest legal challenges is protecting property owners and lenders against mechanics liens from contractors, subcontractors, materialmen and laborers on the project.

What is a mechanics lien?

Mechanics liens (not at all for what we think of as “mechanics” in normal parlance) are purely creatures of statute, meaning they don’t exist as a matter of contract nor are they common law rights.  Rather, R.C. §1311.011 (one- and two-family residential dwellings) (addressed partially in this blog entry)  and R.C §1311.02 (commercial properties) provide statutory lien rights to unpaid contractors, subcontractors, laborers and materialmen.  All of these rights are strictly limited in time, amount and circumstances allowed by statute.

These statutes provide a tremendously powerful tool for these parties to assure payment from the property owner, secured firmly by the equity in the property, so long as their claim is narrowly allowed under the statute, and those rights will not extend beyond the statute. (The effective date of priority of liens as against mortgages and other lien holders is yet another a matter not addressed in this entry.)

These lien rights can transcend the contractual obligations of the property owner, meaning an owner can in fact owe money to someone with whom he has no contract at all (the owner may never have known their name or that they did work on his job, or supplied materials to his job).  An owner can, under some circumstances, owe money to a subcontractor, materialman or laborer even though he already has paid everything he owes to the general contractor (this principle applies to commercial projects only).   These can be jarring revelations to an unsuspecting property owner who has not taken the simple steps in this blog entry to protect himself from mechanics liens.  In other words, unaddressed, this is dangerous territory for a property owner making improvements to his property.

Three simple steps an owner can employ to protect himself from mechanics liens

Again, the Ohio mechanic’s lien statutes are tremendously involved, and this blog entry is not attempting to explore the many intricacies in that statute.  That’s for another day.  Rather, this article offers a few simple steps that a property owner undertaking a construction project can employ to avoid the potential of financially and legally catastrophic consequences from liens sinking a project or ruining the finances of a property owner.

  1. Pay no more to the contractor than the true value of work actually completed as of the draw, and perhaps less.  In some ways, this step is self-explanatory. As a construction project progresses, the owner should take great care to pay the contractor only for the value to the owner and the project of the work finished at the time of payment. In a reverse analysis, the owner should always have enough money left in his construction budget to finish the job if the contractor walks away after the most recent payment.  Now, estimating these two amounts (the value of work completed and remaining cost to complete) is tricky, and the owner should realize that the contractor — knowing the construction costs and business better than him — is in a superior position to estimate this, but relying on the contractor’s “word” is equally risky.  So, this step requires the owner to have a good understanding of the real cost of each stage of the work.  It also requires assuring the work completed at each stage is code compliant, contract compliant, and of good quality and workmanship.  Beyond this step, many owners will require “retainage” of an addition 10-20% from the “actual value of the improvements to date” to assure there is always enough left in the construction budget to complete the project.  This retainage is then paid at the end of the project (usually upon issuance of a certificate of occupancy, “substantial completion” as certified by the architect or some other objective metric).
  2. Affidavits of full payment. As each installment (or “draw”) of the construction budget is paid to the general contractor, the general contractor should provide an affidavit — a sworn statement, the falsity of which is a felony and the basis for a civil fraud claim– of what he is owed, and critically, the names of each subcontractor, materialman, and laborer, and the amounts owed at that stage to each.  In good practice, that “master affidavit” is then also accompanied by further affidavits from each subcontractor, materialman and laborer as to the amounts they are owed at that point in the project.
  3. Joint checks.  Then, the owner should cut joint checks to (a) the contractor and (b) each subcontractor, materialman and laborer, to assure that the amounts they themselves swear are due and owing are in fact paid in full.  These joint checks should track the sworn statements in the various affidavits.

If a property owner on a project follows these three simple steps, the risk of a mechanics lien is limited to (a) those subcontractors, materialmen and laborers not listed on the affidavits (falsely) and (b) only those claims for additional work arising from the most recent payment.

Beyond these three simple steps, a one-to-two family residential property owner is also protected from liens of subcontractors, materialmen, and laborers to the extent that he has paid the general contractor in full, or is limited only to the amounts owed under the master contract to the general contractor.  That statutory principle is more fully explored here.

  • Lien waivers.  A drastic fourth protection that can be employed by a property owner is to allow no contractor, subcontractor, materialman or laborer to step foot on the job or to supply materials to the job unless they have signed in advance a lien waiver, saying (a) in the case of the contractor, they will look only to the contract (and the courts in a typical collection action) to assure payment and (b) in the case of subcontractors, materialman and laborers, saying they will look only to the general contractor for payment, not to the owner and not to a lien against the property.  These lien waivers, heavy-handed and unusual as they may be, are legally effective.

So, there is much much more, legally and business-wise to being successful in the execution of a of residential or commercial construction project, and so much more of a winding path in the Ohio mechanics lien statutes, but these three (or four) simple steps can change the dynamics of a construction project strongly in favor of the property owner.

For assistance with mechanics lien issues or other legal challenges relating to new construction, feel free to contact me at 513.943.6655.

How One Business Can Sue Another for Defamation

Author By Todd McMurtryPosted on

Businesses can live and die by their reputations. A commercial enterprise can spend decades building a reputation as a trustworthy provider of quality goods or services. Although robust competition is a fundamental aspect of doing business, some people will resort to illegitimate tactics against a rival, such as spreading falsehoods that can greatly harm a company’s standing among customers, suppliers and vendors and lead to severe financial losses. This is called business defamation. Just like an individual, a business can take legal action if its reputation has been hurt by false statements.

If certain requirements are met, a business that claims to be a victim of defamation can sue the offender and collect damages for loss of reputation. The risk of a lawsuit serves as a deterrent to making false statements. However, there are still people who ignore the risk and defame otherwise innocent companies.

Business defamation cases have stringent requirements and complex legal hurdles. In most jurisdictions, the elements of a lawsuit include:

  • Demonstrably false statements — The falsehoods must be provably inaccurate statements of fact rather than opinions.
  • Intent — Depending on the jurisdiction, the speaker or publisher of the statements must have known or reasonably should have known that they were false.
  • Actual harm — The victim must have suffered actual economic damages that can be quantified.

Business defamation cases are difficult to win. The legal burden of proof is heavy because of the need to show knowledge of falsity, which is a higher standard than simple negligence. Also, to make a claim, the victim must identify the person who made the false statements or caused them to be published. This can be challenging, as people can post statements on the internet anonymously or use fake identities. In addition, proving damages gets complicated. The concept of reputation is inherently subjective and putting a monetary figure on damages is not an exact science.

Business defamation is just one of several ways of seeking redress for business injuries. Many jurisdictions recognize causes of action for tortious interference, unfair trade practices and fraudulent misrepresentation, among others. The elements and requirements for these cases vary. A highly qualified business litigation attorney can advise your company about the legal remedies available in your situation.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; [email protected]; 513.797.2850.

 

What are Your Legal Remedies When Someone Defames You on Facebook?

Author By Todd McMurtryPosted on

Facebook, a social media platform that its founders said would unite the world, unfortunately provides a forum for spreading misinformation and smearing reputations. If you believe you have been defamed on Facebook, there are things you can do to fight back.

A statement about a person or entity is defamatory if it is false, is communicated to a third party and causes injury. Defamation can be in the form of slander (spoken words) or libel (written communication). Both are possible on Facebook.

It is generally not possible to hold Facebook itself liable for defamatory posts by users. The Communications Decency Act gives Facebook and other social media platforms immunity from liability for users’ statements online. However, there are some narrow exceptions. For example, Facebook could be sued if it promises to remove content and then fails to do so.

In most cases, you must focus on the Facebook user who posted the material. The first thing you should do is take screenshots of the offending material and copy the URL of the Facebook user’s profile page,, saving this as evidence in case you need it in the future. Then, use Facebook’s tools to report the defamatory material. Facebook will review the material to see if it violates their Community Guidelines. If Facebook deletes the content, then you should consider that a victory. If, however, Facebook decides the content does not violate its terms, then you may wish to pursue legal options.

Legal action may not be productive in the case of an isolated incident of defamation but can be effective if the libel or slander is ongoing. Making a claim of online defamation can be complex. It requires a litigation attorney with technical savvy to identify the defamer and to get the content removed. A lawyer can do two things to help you combat defamation on Facebook:

  • Send a demand letter to the posting Facebook user, explaining the problems with the content and requesting removal. This letter, also known as a takedown request, can warn the user that you intend to file a lawsuit if they refuse to do so.
  • File a lawsuit. To prevail, you must prove that the content was false and that you have suffered actual injury, which can be difficult. A lawsuit is a big commitment financially and you’ll want to discuss the likelihood of success with your lawyer before going ahead.

About Finney Law Firm, LLC

Founded in 2014, FLF has grown to 15 attorneys located in offices in Eastgate and downtown Cincinnati with five major practice areas: Corporate Law, Real Estate Law, Employment Law, Commercial Litigation and Public Interest and Constitutional Litigation.  FLF has the unique claim to three 9-0 victories at the United States Supreme Court for its public interest practice along with breakthrough class action work.

FLF also has an affiliated title insurance company, Ivy Pointe Title, LLC, that closes and insures nearly a thousand commercial and residential real estate transactions annually.

For more information about Finney Law Firm, visit finneylawfirm.com.

Media Contact: Mickey McClanahan; [email protected]; 513.797.2850.

 

Jennings Kleeman

Ohio’s statute of conveyances: Its application to real estate leases and its exceptions

Author By Jennings D. KleemanPosted on

For most contracts, an agreement is an agreement: If the parties agreed, orally, on paper, or even just electronically, in an email, text message, or through social media, generally, the agreement can be legally binding.

However, agreements relating to the purchase, sale and leasing of real estate can have special requirements for their enforceability. Here, we explore the Ohio Statute of Frauds (O.R.C § 1335.05), which requires certain agreements (i) be in writing and (ii) signed by “the party to be charged therewith,” i.e., the buyer, seller, landlord or tenant. And for real estate instruments, the Ohio Statute of Frauds has those requirements for contracts for the purchase and sale of real estate and for leases (residential or commercial) extending beyond one year. Many people are familiar with the requirement of the Ohio Statute of Frauds as it relates to real estate.

Less familiar to laymen and even real estate professionals is Ohio’s Statute of Conveyances, which requires deeds, mortgages, land installment contracts and leases with a term in excess of three years to be “acknowledged” before a notary public (i.e., “notarized”).  This derives from O.R.C. § 5301.01, which requires these instruments to be notarized and O.R.C. § 5301.08, which then excepts from that requirement leases for less than three years.

 But what does the Statute of Conveyances mean? Is it that, if you have a signed lease, residential or commercial, that is not notarized, and (i) a tenant has moved in, (ii) a landlord or tenant has made expensive improvements to a premises, or (iii) a tenant has made a long-term commitment to having its operations at a specific location, the other party can simply terminate the lease due to it not being notarized?  Despite this seeming like a harsh outcome, the answer is yes, to a degree.

To bypass such harsh outcome, the Courts have carved out equitable exceptions to the Statute of Conveyances. This blog entry explores the enforceability of non-notarized leases in excess of three years in Ohio under the Statute of Conveyances on the one hand and those common law exceptions on the other.

Enforceability of non-notarized leases in excess of three years in Ohio

Where parties execute a lease without notarizing it, the lease is considered defectively executed. A defectively executed lease is invalid and does not create the exact lease sought to be created. That said, the terms of the defectively executed lease are controlling once the tenant moves in and starts paying rent under said lease, except for duration. The duration is determined by the provision for the payment of rent. For example, a lease with monthly rent payments results in a month-to-month lease, while a lease with annual rent payments results in a year-to-year lease.

Where parties do sign and notarize a lease as required by the Statute of Conveyances, and such lease contains an option to renew, the act of accepting an option to renew does not require a second formal execution.  However, where there is not an option to renew, a grant of an additional term is an independent and separate transaction requiring its own compliance with the Statute of Conveyances.

Common law exceptions

The applicable law in a defectively executed lease case depends on the type of the relief pursued. If the party suing seeks to recover damages for breach of the lease, then the applicable route is that of the equitable doctrine of Partial Performance. If the party suing seeks to have the defective lease treated as a contract to make a lease, then the applicable route is that of the equitable doctrine of Specific Performance.

(A) Partial Performance:

A defectively executed lease can be validated through Partial Performance. Partial Performance is based in fairness and is utilized where it would be unfair to permit the Statute of Conveyances to invalidate the defectively executed lease. Partial Performance validates a defectively executed lease where the following four factors are present: (i) unequivocal acts by the party relying on the agreement; (ii) the acts are exclusively referable to the agreement; (iii) the acts change the party’s position to his detriment; and (iv) the acts make it impossible to place the parties in “statu quo”. The party wishing to benefit from Partial Performance must show that the facts of their particular matter meeting the aforementioned four factors are, more likely than not, true.

Generally, the facts of the cases, where the courts allow Partial Performance to validate defectively executed leases from the Statute of Conveyances, include: (i) expending sums of money, (ii) extending credit, (iii) making improvements, and (iv) following what the parties called for in the defectively executed lease. That said, it is important to note that moving in and paying rent is not sufficient to relieve the parties from the Statue of Conveyances.

(B) Specific Performance

Courts may allow for Specific Performance of defectively executed leases where no adequate remedies at law exist. Whether courts will allow for Specific Performance of defectively executed leases is within each respective court’s discretion. As such, Specific Performance is not guaranteed.

Where parties seek to enforce defectively executed leases through, and courts allow for, Specific Performance, the Statute of Conveyances does not impede such enforcing parties’ right to recovery. This is because defectively executed leases are enforceable, as a matter of fairness, as contracts to make a lease between the parties who intended to be bound by them. Courts may order Specific Performance of such contracts.

Conclusion

So, if you are a party to a defectively executed lease, and you are concerned with its enforceability, it is prudent to take some time to call the Finney Law Firm. We can help determine whether your lease is compliant with the Statute of Conveyances, and what you might be able to do if it is not.

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