New Jersey Lawyer & Attorney : Stark & Stark Law Firm : New Jersey Law Blog

Timothy P. Duggan, Shareholder and member of Stark & Stark's Bankruptcy & Creditor's Rights group, will present a seminar entitled Insolvency in Franchise Businesses: Minimizing Risk and Maximizing Recovery Under the Bankruptcy Code in conjunction with the Legal Publishing Group of Strafford Publications. The 90-minute tele-seminar will be held Thursday December 4, 2008 from 1:00 PM - 2:30 PM.

The seminar will feature a discussion of the weakening economy and it's effects on many franchises, ranging from restaurants to convenience stores to staffing services who are now seeking bankruptcy protection. The Bankruptcy Code addresses how franchise agreements are treated in bankruptcy; however, the Code does not resolve all of the unique issues that arise for franchisors and franchisees. It is critical that franchise counsel develop strategies to anticipate and protect against the fallout from bankruptcy.

This teleconference will highlight key legal issues that arise during a franchisor or franchisee bankruptcy. The program will also offer best practices for creating a franchise agreement in order to protect their respective interests and maximize their recovery under the Bankruptcy Code.

You can access additional information and a registration form here.
 

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During the 2008-2009 Legislative Session, the New Jersey State Legislature has introduced a handful of proposals for initiatives relating to what has come to be known as “green building” - a term that was inserted in the State Uniform Construction Code Act (“UCC”)  by amendment last year and defined to mean “[b]uilding construction practices that significantly reduce or eliminate the negative impact of buildings on the environment and their occupants and may consider, but need not be limited to five broad areas[.]”   These five “broad areas” include “[s]ustainable site planning; safeguarding water and water efficiency; energy efficiency and renewable energy; conservation of materials and resources; and indoor environmental quality.”   For example, Assembly bill A1559, which was signed into law by Governor Jon S. Corzine on August 5, 2008, relates to the first “broad area” of green building - “sustainable site planning” - and amends the Municipal Land Use Law (“MLUL”)  to authorize a local planning board to include in its master plan a “green buildings and environmental sustainability plan element.”   The purpose of this new master plan element is to encourage and promote, among other things, “[t]he efficient use of natural resources [and] . . . the impact of buildings on the local, regional and global environment . . . through site orientation and design.”   This enactment will likely eliminate any vestige of apprehension that municipalities may have had about their legal authority to enact green land use ordinances and could open the floodgates to new regulation.

 
Another recent green building initiative, introduced as Assembly bill A3062 on June 23, 2008, is designed to improve “energy efficiency and renewable energy” - the third “broad area” of green building - and would also amend the MLUL  adding to the statute a definition of “inherently beneficial use.”  The proposed definition, if enacted, would specifically designate certain uses as being inherently beneficial, such as “a wind, solar or photovoltaic energy facility.”  The Legislature is also proposing, among other things, a host of low interest loans and tax incentives for green building.  One such proposal was introduced in the Assembly on February 7th as A2065, which requires the New Jersey Economic Development Authority (“EDA”) in consultation with the Commissioner of the Department of Community Affairs (“DCA”) to “[e]stablish and administer a program that makes low-interest loans available to a developer or redeveloper, who constructs a new building or renovates an existing building that, when completed, qualifies as a high performance green building.”   A “high performance green building” is defined as “[a] building having at least 15,000 square feet in total floor area that is designed and constructed in a manner that achieves at least a silver rating according to the Leadership in Energy and Environmental Design Green Building Rating System as adopted by the United States Green Building Council.”

 
As for tax incentives, the proposed Green Building Tax Credit Act introduced in the Assembly as A2070  provides a “taxpayer” with “[a] credit for allowable costs paid or incurred by the taxpayer in connection with a green building[]” computed in accordance with the provisions of the act.   Under this proposal, a taxpayer may be eligible to receive as much as 4% of allowable costs plus “[0.]5%, 1.0%, 1.5% or 2.0% of allowable costs, attributable to buildings but not to other site improvements, qualifying as Certified, Silver, Gold, or Platinum status, respectively, under the LEED Green Building Rating System or the LEED Residential Green Building Rating System.”   The term “allowable costs” is generously defined under this legislative proposal and includes such expenses as “legal, architectural, engineering and other professional fees allocable to construction or rehabilitation, site costs, such as temporary electrical wiring, scaffolding, demolition costs and fencing and security facilities . . . not to exceed $280 per square foot of interior space, for both commercial and residential space.”   A taxpayer may apply up to 20% of the total amount allowed under the credit in any one tax year and shall have the right to carry forward unused portions to succeeding tax years.   Furthermore, in the event a taxpayer conveys the property to which a credit relates, the taxpayer may retain the unused portion of the credit or transfer it to the grantee.

  
A peculiarity about the proposed Green Building Tax Credit Act, which may serve as an obstacle for builders, is an overly complex and potentially contradictory definition of “green building,”  - one that is dissimilar to the definition of green building in the UCC.  Indeed, the proposed statute allows a taxpayer to become eligible for the credit upon a showing “[t]hat the building with respect to which the credit is applied meet[s] either (a) the green building standards . . . or (b) the criteria required for Certified, Silver, Gold or Platinum status under LEED Green Building Rating System or LEED Residential Green Building Rating System[]”  - even though the act defines “green building” only as “[a] building meeting the standards prescribed and adopted [by the DCA].”   It remains to be seen whether the Legislature will revisit the “green building” concepts presently embedded in the text of this proposed legislation to make them less cumbersome and reconcile any inconsistencies.
  

The foregoing demonstrates how interested the Legislature and our State has become in promoting energy efficiency in the design and construction of buildings.  This enthusiasm will likely produce even more legislative initiatives in the near future.  While the fate of the above-cited proposals not already enacted into law is yet uncertain, one thing at least is clear.  The push to become ever so green will present many legislative (and other) challenges and will undoubtedly soon transform the legal landscape.

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Thomas B. Lewis, Shareholder of Stark & Stark's Employment and Litigation groups, authored the article Protocol for Broker Recruiting: How a Financial/Investment Advisor Can Use the Protocol to Transition Accounts for the September/October 2008 edition of the Investment Management Consultants Association's Investments & Wealth Monitor.

The article gives a brief history of the origination of the Protocol for Broker Recruiting in 2004, and includes a question and answer section for recruiting and a list of do's and don'ts to follow under the Broker Protocol. You can read the full article here. (PDF)

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With a 46% increase in residential foreclosure filings over the last 12 months, the New Jersey Court system unveiled a new mandatory mediation program in all foreclosure matters. 

The Chief Justice of the New Jersey Supreme Court, Stuart Rabner, announced the roll-out of a statewide Judiciary program to assist homeowners in foreclosure actions. The program will provide mediators to help homeowners and lenders negotiate with one another and try to work out agreements to avoid foreclosures.

Under the program, the courts will require mediation in all cases in which homeowners contest owner-occupied foreclosure actions. Volunteer mediators will meet with eligible homeowners and their lenders in an effort to resolve the foreclosure action and renegotiate the terms of mortgage agreements.

In uncontested actions, where the homeowner has failed to respond to a foreclosure complaint, the courts will notify the homeowner of the mediation program and encourage participation. If the homeowner fails to respond and a default judgment is entered, mediation will remain an option before the matter proceeds to a sheriff’s sale.

The program began in the Middlesex County vicinage and over the next few months will be expanded throughout the state. In the next 30 days, the program is to be expanded to Essex, Union, Ocean, Camden, Bergen, and Hudson counties, which had the highest number of recent foreclosure filings. Within 60 days, the project will be in place in all 21 counties.

According to the court, this program does not apply to foreclosure actions instituted by condominium and homeowner associations for non-payment of maintenance fees. The program is specifically for owner-occupied residential mortgage foreclosures.

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Bill A2491, which was originally filed in March 2008, was “introduced” on Thursday October 23, 2008 and then referred to the Assembly Commerce and Economic Development Committee on Friday October 24, 2008.  It will likely have a “second reading” before proceeding in the substantive legislative process. 

Members of the International Franchise Association gave a thorough argument against the bill, despite some tough questioning by the Committee members. I also gave some brief testimony on the technical aspects of the proposed bill. The fight against this bill is just beginning – and since passage of this bill could have a chilling effect on all types of franchising in New Jersey – this is a fight the franchising community needs to win.

 

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Michael J. Fekete, member of Stark & Stark's Business & Corporate group, will be a featured guest on the Camden County Bar Foundation's weekly television talk show Legally Speaking. Mr. Fekete will discuss the New Jersey Home Improvement Law,  the Consumer Fraud Act and the Contractor's Registration Act. The show will air Saturday November 9, 2008 at 12:30 PM and Wednesday November 12, 2008 at 5:00 PM, on Comcast channel 190 (WPSJ-TV).

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Adam J. Siegelheim, member of Stark & Stark's Franchise group, was quoted in the article Bankruptcy: Who's next in line? in the October 2008 edition of Franchise Times.

Mr. Siegelheim comments on the recent trend of franchise bankruptcies among large restaurant systems. Mr. Siegelheim discusses the impacts these recent bankruptcies have had on the franchise industry as a whole, as well as what this could mean for franchisees and franchisors in the future if this trend continues.

You can read the full article here (PDF).

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David J. Byrne, Shareholder in Stark & Stark’s Community Association group, presented materials related to Community Associations and having successful Board elections at the New Jersey Chapter’s 2008 Conference and Expo seminar, held at the New Jersey Convention and Exposition Center, in Edison, New Jersey, on Saturday, October 18, 2008.

Mr. Byrne focused his presentation on the legal issues surrounding the election of Board members and how to have a successful election.  Mr. Byrne also discussed the provisions of New Jersey’s Non-Profit Corporate Act and New Jersey’s Planned Real Estate Development Full Disclosure Act in relation to those elections.  Mr. Byrne discussed legal standards and issues related to campaigning, eligibility and the casting and counting of ballots.

You can view a copy of the written materials from this seminar here.
 

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Adam J. Siegelheim and Cary S. Kvitka, members of Stark & Stark's Franchise group, will present a webinar entitled New Franchise Disclosure Laws in conjunction with the New Jersey Institute for Continuing Legal Education. The webinar will be held Wednesday November 12, 2008 from 12:00 PM - 1:15 PM.

The webinar will focus on the newly revised FTC Franchise Rules, which require that all franchisors provide for certain disclosures to prospective franchisees. Under the new rules, a franchisor is now required to file basic information about the franchisor, the franchised business, and the franchise agreement. Mr. Siegelheim and Mr. Kvitka will review the recent trends in franchise law, and will discuss the impact of the new law on the preparation of disclosure documents, franchise agreements, and state registrations.

You can access additional information and a registration form here.

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Martin P. Schrama and Michael T. Pidgeon, members of Stark & Stark's Litigation group, authored the article Identifying When Your Trademark Has Been Infringed Upon for the October 13, 2008 edition of the New Jersey Law Journal.

The article discusses several pieces of statewide legislation designed to ensure trademark protection and the federal Lanham Act, which is the most comprehensive piece of trademark legislation. The article states that only through the selection and establishment of a strong trademark under the Lanham Act, will owners of a mark be able to determine when its trademark has been infringed upon.

You can read the full article here.

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The “Mobile Franchise” Act has been scheduled for a legislative session on October 23, 2008 at 2:00 p.m. The session will take place in front of the Commerce and Economic Development Committee, Room 9 on the Third Floor of the State House Annex located in Trenton, New Jersey.

As I mentioned in a previous blog post:

House Bill 2491 and Senate Bill 1539 of the New Jersey Legislature seek to expand the type of franchises, which are subject to the New Jersey Franchise Practices Act. In general, the New Jersey Franchise Practices Act currently applies to franchises where: 1) the franchisor has granted the franchisee a license, mark, trade name, etc.; 2) there is a “community of interest” in the marketing of goods and services; 3) where the franchisee has established or maintains a “place of business” in New Jersey; 4) where the gross sales between franchisor and franchisee are more than $35,000 in the prior year; and 5) more than 20% of the franchisee’s sales are derived from the franchise. The proposed change in the statute would apply the provisions of the Franchise Practices Act to “mobile” franchises, in other words, franchises that do not have a brick and mortar location. Under the proposed Bill, a “place of business” would include a location where the franchisee “displays for sale or at which or from which the franchisee sells the franchisor goods.” This would include an office or warehouse from which franchisee personnel visit or call upon customers or, perhaps more importantly from which the franchisor’s goods are delivered to customers.

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The Local Redevelopment and Housing Law (“LRHL”) requires an application for approvals under a redevelopment plan to be directed to the municipal planning board, but fails to state how one acquires standing to maintain such an application. Certainly, an argument can be made that the standing requirements applicable to an application for development brought under the Municipal Land Use Law (“MLUL”) apply equally to applications brought before municipal planning boards under the LRHL, since the LRHL requires planning boards to review all such applications in accordance with local ordinance requirements for subdivisions and site plans adopted pursuant to the MLUL. However, the courts have yet to validate this position in a reported decision and, as such, the issue of standing to seek approvals for a redevelopment project is still very much an open question.

 

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If the Governing Documents of a Condominium Association provide that the powers and duties of such Association are to be exercised through a Board of Directors/Trustees, elected by the Association’s membership, then all meetings of that Board (except conferences or work sessions where no votes are taken), shall be open to the Association’s membership. However, Boards may restrict attendance of the membership at meetings, at which certain topics are discussed. Indeed, an open meeting is not the “PLACE” to discuss the following topics:
 

P- Privacy: any matter that, if disclosed, would constitute an unwarranted invasion of individual privacy;

L-Litigation and Contract Negotiations: any pending or anticipated litigation, or contract negotiation;

A-C- Attorney Client Privilege: any topic that falls under an attorney client privilege, to the extent that confidentiality is required in order for an attorney to exercise his duties as a lawyer to the Association;

E-Employment: Any matter involving the employment, discipline, dismissal or promotion of an officer or employee of the Association.
 

The PLACE for discussion of any of the above topics is a meeting where attendance is restricted to Board members. 5:20(1.1).

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Commercial landlords need to be vigilant in protecting their interests in these uncertain economic times.  Getting and keeping paying commercial tenants is the name of the game.  However, its not always that simple.  Sometimes, landlords have to make the difficult decision of whether to evict and try to collect against a non-paying tenant. The commercial landlord could be left with the tough choice of evicting a tenant and have a "dark store" until a new tenant can be found or working with their tenant by offering more favorable terms or concessions. 

Whatever business decision a commercial landlord makes, its advisable to know what your rights are, and what steps you have to make, before you proceed with a litigation strategy.  A clear strategy for dealing with non-paying tenants can help determine the success of your commercial property with existing, new and potential tenants. 

Following is a quick primer of questions to ask your attorney about both the eviction and collection process in New Jersey before proceeding with litigation.  Asking these questions ahead of time can help you make a more informed decision on how to proceed with a non-paying tenant.

EVICTION
In New Jersey, commercial landlords have the right to have a tenant evicted through a summary dispossess action (aka "eviction") for non-payment of rent.  Before attempting to evict tenants, the landlord should confirm with their attorney a number of questions, including:

1. Has a New Jersey attorney reviewed the lease?  It is important to have an attorney licensed to practice law in the State of New Jersey review the lease to make sure that it complies with State and Federal law.
2. Do any Federal or State statutes preempt?  Your attorney should be able to advise if any Federal or State statutes specifically define rent, which would only allow a certain portion to be collected.  If so, then you may need to re-inform the tenant of the amount due and owing before commencing suit.
3. Does the lease provide for collection of attorney fees as additional rent? To collect attorney fees, generally there must be either a contractual arrangement or a statute that provides for such collection.  For eviction actions, to include attorneys fees as rent in the eviction complaint, it must be specifically defined as additional rent.  Just having a provision that allows the collection of attorneys fees, but not defined as additional rent, will not permit the landlord to call a default and institute an eviction.
4. Who will testify to the amount owed? If the matter is contested, you will need to submit proofs and testimony to show the amounts due and owing.  It's a good idea to have your attorney review the lease and accounting with whomever is to testify.  Further, its important that the person testifying have actual knowledge of the books and records, as well as authority to testify.
5. Have all notice provisions been complied with? Before your file the eviction action, make sure you've complied with all notice provisions.  Your attorney should advise of the specific notice provisions that need to be followed under the lease, as well as if the Fair Debt Collection Practices Act and New Jersey Anti- Eviction Act, may be applicable.

COLLECTION
Commencing the eviction action is only half the battle for commercial landlords.  Once a landlord has obtained an order for summary dispossession, the next step is to actually evict the tenant and then try and collect money.  Following are questions to ask your attorney about what to do after the summary dispossession order (eviction order) has been entered.

1. Is settlement possible?  At this point it may be worth attempting to speaking with the tenant one more time before the actual eviction takes place. Sometimes just getting the order for possession will bring the tenant to the bargaining table.
2. Has the warrant been posted?  It is essential to go through with the entire eviction. This means not only obtaining the order for possession, but also enforcing it through a warrant of removal and actual eviction.  Its advisable to confirm your attorney has followed-up with the Sheriff to make appropriate arrangements.
3. What to do with left over items?  When the eviction takes place, you may want to check with your attorney on what to do with items left in the premises. For instance, if a copy machine has been left in the premises, do you know who owns it?  If not, how do you find out?  Further what rights do you have in that equipment?  These issues should be thoroughly discussed with your attorney.
4. How do you get paid? After the landlord has gotten possession, the next steps is getting paid.  In New Jersey, landlords usually have to commence a separate action to collect all sums due and owing.  However, before you authorize a collection action you may want to ask your attorneys about what steps you've done or have to do to mitigate damages.  For instance, if the lease term was 10 years and you evicted the tenant after three years, how much can you collect?  Are your attorneys fees provided to be collected in the lease?  What about improvements?
5. Are there guarantors on the lease?  Besides suing the tenant, you and your attorney should thoroughly review the lease to see if there are other parties that you can try and collect for arrears and damages owed.

Prior to making that decision to evict a non-paying tenant, it is advisable that a commercial landlord reviews these and many more questions with a licensed New Jersey attorney.  Answering these questions beforehand can help you with the proper strategy to keep your commercial property(s) profitable in these cautious economic times.

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Vincent J. Mangini, Shareholder of Stark & Stark's Real Estate, Zoning & Land Use group, will present a seminar entitled, Going Green - Here to Stay or Gone Tomorrow? Reflections on the State of Green Building Law, for the Mercer County Bar Association's X-Treme CLE Program. The seminar will be held Friday November 7, 2008 from 1:00 PM - 3:00 PM at the Marriott Princeton Conference Center at Forrestal, located in Princeton, New Jersey.

The seminar will focus on topics including:

• Moving from dependency on fossil fuels to alternative technologies
• Rebates and promotions for energy-efficient structures
• Federal tax incentives
• State initiatives, proposals and newly enacted legislation, such as the newly enacted amendment to the Municipal Land Use Law authorizing localities to include green buildings and environmental sustainability plan elements in their master plans
• Current protocols for green building, such as the U.S Green Building Council's Leadership in Energy and Environmental Design (LEED) Green Building Rating System
• Green building contracts

You can access additional information and registration form here.

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When selling a home, whether due to an employment move, trading up, or downsizing, a homeowner-taxpayer should be aware that special tax treatment applies under certain situations when the sale is of the taxpayer's principal residence.

Under certain circumstances, a single taxpayer can exclude up to $250,000.00 of gain on both federal and state income tax returns and married taxpayers can exclude up to $500,000.00. For married couples, the $500,000.00 exemption requires that they file a joint return in the year their residence is sold.
 

The determination of whether gain on the sale of a residence can be excluded from a homeowner's income for tax purposes depends on whether the property has been owned and used by the taxpayer for a period of two or more years during the five year period preceding the sale. The five year period ends on the date title is transferred. The two year time period, for both ownership and use, does not need to be a consecutive. The time can be aggregated over the five year period. There is, however, a limitation on how often this exclusion of gain can be used. The exclusion can only be applied to one sale every two years.

For married couples to qualify for the up to $500,000.00 exemption, in addition to filing a joint return, either the husband or wife must meet the ownership requirement and both spouses must meet the use requirement. In addition, neither spouse shall be ineligible for the exclusion because he or she sold a property within the past two years. If the married couple does not share a principal residence, an exclusion of up to $250,000.00 is available on a sale that qualifies as the principal residence of one of the spouses.

If a single homeowner, who is eligible for the exclusion of gain benefit, marries someone who elected to use the exclusion benefit within the two years prior to the marriage, the now married taxpayer is only allowed a maximum exclusion of $250,000.00. If a taxpayer has more than one home, only the sale of the principal home qualifies for the exclusion of gain benefit.

There is an exception to the two year requirement for sales which permits a reduced amount of gain to be excluded from income. A reduced exclusion can apply to a sale resulting from a change in the taxpayer's place of employment, health, or certain unforeseen circumstances. In such situations, a taxpayer is provided a reduced exclusion based on the portion of the two year period for which ownership and use requirements are met.

The Taxpayer Relief Act of 1997 modified Section 121 of the Internal Revenue Code to provide this exclusion of gain benefit. It replaced the prior law which provided rollover and one-time exclusion provisions for the sale of taxpayers' residences and replaced it with a simpler law which no longer requires a taxpayer to continually "trade up" to benefit from substantial tax savings.

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Condominium boards and managers are often frustrated by unpaid common charges. Once a unit owner falls more than sixty days behind in his or her common charge payments, it is recommended that this problem be turned over to the condominium association's attorneys to resolve.

A variety of legal methods can be used by a condominium association's attorneys to attempt to collect common charge arrears. Which method or combination of methods will be best for a particular situation will vary.

Regardless of which method or methods are used, the first step in the process is sending a Thirty Day Notice of Debt Collection to the unit owner. One benefit of sending a Notice of Debt Collection prepared by an attorney is that it conveys the seriousness of the common charge arrears to the unit owner. In addition, it provides the unit owner with an opportunity to examine the breakdown of the amount he or she owes. This may expedite an amicable resolution to the matter, as sometimes owners do not read their monthly common charge statements and do not realize they are in arrears. It may also motivate an owner to make an inquiry regarding a particular charge her or she wanted answered before paying it.

 

In the event payment is not made within the thirty day period provided under the Notice of Debt Collection, the next step is filing a common charge lien against the unit pursuant to NY Real Property Law Section 339-aa. Common charge liens are security interests similar to mortgages. Like a mortgage, a common charge lien is filed in the property records of the Office of the County Clerk where the unit is located. A properly filed lien provides notice to the world that the common charges are owed and in most cases will prevent the sale or refinance of a unit until the common charges owed by the unit owner are paid. In addition, a common charge lien can be foreclosed like a mortgage. That is, a condominium association can start a foreclosure action that will result in an auction sale of the unit with the auction proceeds being used to pay off the common charge arrears.

Unfortunately, common charge lien foreclosure actions can drag on for several years, and the condominium's lien will be subordinate to any mortgages filed before it. This puts condominium associations in New York at a great disadvantage compared to other states where a certain period of common charges (e.g., six month's worth) will take priority over mortgages on the unit. Therefore, attorneys representing condominium associations in NY should ascertain whether there are mortgages against the unit and the value of the unit and then consult with their clients in order to determine whether a lien foreclosure action makes sense before proceeding.

Even if the condominium association's attorneys evaluate the situation with their client and conclude that a lien foreclosure does not make sense, they should still file a common charge lien against the unit. As well as making the unit unsaleable, filing the lien will make the condominium association a "secured creditor" under Federal Bankruptcy law. Having the status of secured creditor will generally allow for the recovery of amounts due at the time. This will ultimately result in a higher percentage of the common charges being repaid to the condominium association if the unit owner files for bankruptcy protection.

For the past few years, rather than going the foreclosure route, I have generally recommended that condominium associations sue unit owners in arrears in Civil Court for money judgments. This is much faster and less expensive and can still result in an auction sale of the unit. It also provides the condominium association with access to other assets such as bank accounts and wages to satisfy the common charges arrears once a judgment is entered.

Taking this a step further, I have recently begun recommending that lawsuits for money judgments be filed with the Small Claims Part of the Civil Court. While the amount of the recovery is limited by the $5,000.00 jurisdictional limit of the Small Claims Part, it is much quicker and less expensive than regular Civil Court. Rather than litigating for months or years, your attorney can literally spend a few hours in court at a hearing where a repayment agreement with the delinquent unit owner can often be negotiated. If negotiations with the unit owner fail, your attorney can present your case to an arbitrator who renders a binding decision (and judgment if you prevail), which your attorney will receive in the mail within a few days of the hearing date--quick justice indeed!

Lastly, a little known, but attractive, method to collect common charge arrears is available where a unit owner rents his or her unit to a tenant. Real Property Law Section 339-kk authorizes condominium associations to collect rent payments directly from the tenants of unit owners in arrears. This is accomplished by sending a notice to the tenants pursuant to the statute. Since a tenant's monthly rent for a unit is usually several times the amount of the common charges for the same unit, if the tenant obeys the notice the arrears are usually paid off within two or three months. Unfortunately, the statute does not provide the condominium association with any legal remedy against the tenant if he or she disregards the notice. This flaw in the statute can be remedied by putting language in a condominium association's lease application, which authorizes the condominium association to sue a unit owner's tenant directly.

It is evident that Real Property Law Section 339-kk, which authorizes condominium associations to collect rent payments directly from the tenants of unit owners, and Real Property Law Section 339-aa, which authorizes lien foreclosures, both need to be amended by the legislature in order to give them more teeth. As written, these statutes require creative lawyering to get results, which leaves many condominium associations operating under tight budgets with chronic arrears problems. A few minor revisions to these statutes would dramatically increase their effectiveness, and I hope to petition the NY State Legislature to effectuate these changes in the not so distant future.

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In New Jersey, a person seeking to modify a child support or alimony obligation must show that a significant change in circumstance has occurred since the time the award was entered.  It is the party who is seeking the modification that has the burden of proving that they have incurred a change in circumstances sufficiently substantial to warrant a modification of support.  Court’s have held that a decrease in the obligor’s income may constitute a substantial change in circumstances.  However, a reduction in income due to a voluntary retirement may not be sufficient. 

In regard to alimony, the Courts have held that the pivotal issue is whether the advantage to the retiring spouse substantially outweighs the disadvantage to the receiving spouse.  For instance, a situation where the obligor is retiring due to health concerns where the effect of the termination of the alimony would be minimal to the receiving spouse favors the payor.  However, if the obligor simply does not want to work, and the termination of alimony would substantially effect the receiving spouse, a Court would be less likely to grant the application to modify alimony.  In determining this issue, New Jersey Courts have set forth a number of factors that the deciding Court should consider, including:

• the ages of the parties
• the health of the parties
• the motivation which led to the decision to retire
• the timing of the retirement
• whether the retirement was mandatory or voluntary
• the financial impact of the retirement upon the financial positions of the     parties
• the expectations of the parties   

The right to receive alimony belongs to the receiving spouse.  Therefore, that spouse may agree to the retirement and effectively waive their right to support.  However, the right to receive child support belongs to the child, and may not be waived by the receiving spouse.  Therefore, when an obligor seeks a modification of child support due to voluntary retirement, the Court must determine whether the modification is in the best interests of the child.  The Court must again weigh the advantages to the retiring parent and disadvantages to the child.  Specifically, the Court must consider similar factors, as set forth above, such as the retiring parent’s age, health, finances, assets, and reason for retiring.  The Court must also consider the impact of the reduced support on the child, such as the child’s needs, age, health, assets, and standard of living.  Finally, the Court must determine the fairness of the decision, taking into account the obligor’s motivation for retirement, good faith, and voluntariness of the retirement. 

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A redevelopment entity may authorize a redeveloper to negotiate directly with the owners of properties slated for condemnation under a redevelopment plan. This authorization may be granted by way of a redeveloper’s agreement with the condemning authority. The redeveloper should be aware, however, that it will be held to the same legal standards as the redevelopment entity. Additionally, a redeveloper must take care not to tie the hands of the condemning authority in making a good faith offer if, later, the redevelopment entity must institute formal condemn proceedings under the Eminent Domain Act of 1971.

For example, it would be unwise for a redeveloper to insert a provision in its redeveloper’s agreement with the redevelopment entity that allows the redeveloper to place a cap on just compensation or make settlement in excess of a specific purchase price contingent upon the redeveloper’s consent. Indeed, the trial court in City of Long Branch v. Brower (an unreported decision issued on June 22, 2006) spoke disapprovingly of such arrangements indicating that “[h]ad the offer for fair market value been stunted by this ‘ceiling’ the court would have no choice but to dismiss the action for failure to engage in bona fide negotiations.

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The rise in bankruptcy filings has heightened the angst of contractors and suppliers working with residential builders who are worried that more companies will follow the path of Kara Homes and Elliot Builders and seek bankruptcy protection. The Fed’s proposed $700 billion bailout may jump start the residential real estate market and help some smaller builders avoid bankruptcy, however, for those contractors and suppliers tied-up in the Kara Homes case, lookout for the recently filed preference lawsuits.

On October 1 and 2, 2008, the Liquidating Trust formed in the Kara Homes bankruptcy case filed numerous complaints seeking to compel contractors and suppliers to return money they received during the 90 days before the filing of the bankruptcy case. In the end, many contractors and suppliers will be searching far and wide to understand why they have to return money to a company who stiffed them by filing for bankruptcy. This seemingly unfair consequence is the result of Congress’ inclusion of the preference laws in the United States Bankruptcy Code.

What Was Congress Thinking? One of the fundamental objectives of the bankruptcy law is to make certain that similarly situated creditors are treated equally and share in the distribution of the debtor’s assets on a pro-rata basis. To meet those objectives (and others) and avoid the pillaging of weak debtors during the slide into bankruptcy, Congress targeted certain types of pre-bankruptcy transactions, which result from the debtor providing preferential treatment to one or more creditors in the period leading up to the filing for bankruptcy. These transfers are known as “preferential transfers” and result in the debtor or trustee filing “preference actions” to attack the transactions and recover payments.

Policies and theories are often times hard to stomach, especially when you are a creditor subject to a preference action. Nevertheless, it is the law and many creditors involved in the Kara Homes bankruptcy case are about to feel the pain of being sued by a trustee.

What is a Preference Payment? The 90 days prior to the filing for any bankruptcy case is referred to as the “preference period.” The United States Bankruptcy Code allows a trustee to recover payments made to unsecured creditors during the preference period if certain conditions are met. To recover a preferential transfer, a trustee must prove the following five (5) factors:

1. A transfer of an interest in the debtor’s property;
2. Made within 90 days of the date of the bankruptcy filing;
3. Made on account of an antecedent debt (past due);
4. Made while the debtor was insolvent; and
5. Enables the creditor to receive more than it would receive if the debtor was liquidated in a Chapter 7 case (i.e. the assets sold).

The trustee must prove all five (5) elements. However, the trustee gets the advantage of a statutory presumption, which provides that for preference purposes, that the debtor is presumed to be insolvent during the 90 days before the bankruptcy is filed. Also, note that “transfer” does not just cover payments, but any transfer, including the granting of certain liens.

How Do I Defend a Preference Lawsuit? If you are a supplier to a company who has filed for bankruptcy protection and you receive a preference complaint, there are several practical tips for defending a preference action.

1. Defend The Case, Do Not Ignore It. It is very important to seek an attorney with bankruptcy experience immediately in order to avoid allowing the trustee to win by default. Under the rules governing bankruptcy cases, you have 30 days from the issuance of the summons to file an answer. Do not delay - get an answer filed or contact the plaintiff’s lawyer to obtain an extension of the deadline to file an answer.
2. Do Not Confuse a Preference Claim With a Fraud or Breach of Contract Case. Do not confuse a preference claim with any other type of litigation you have experienced - it is a world unto itself. It does not matter that you fully performed under the contract or delivered conforming goods or services. It also does not matter that your intentions were noble and your good graces allowed the debtor to string out your payments. Preference claims are very rigid and once the five (5) elements described above are satisfied, a preference claim has been established, subject to certain defenses. You need to focus your attack on the five (5) elements the trustee needs to prove and the statutory defenses set forth in the Bankruptcy Code.
3. The Facts. The facts, and nothing but the facts, are what may save the day. It is very important to explain to your attorney all of the facts surrounding the transfers. In terms of general facts, you need to explain to your attorney the nature of your business, how transactions are generally performed within your business, and how you generally bill and collect invoices. In terms of specific facts, you need to prepare a complete payment history of your relationship with the debtor, assemble all invoices and shipping documents, verify payments, assemble all letters, emails and faxes relating to any billing and collection activities, and any other appropriate documents.
4. Chart the Invoice and Payment Dates. To evaluate defenses to a preference action and to be prepared to meet with your attorney, you need to organize the most important information. The best way to do this is to prepare a payment history chart. The chart should have at least five (5) columns, showing the invoice number, invoice date, date check was received, date check cleared, amount of check and time between invoice date and payment date (measured in days). The last column which shows how many days after the invoice date the payment was made is crucial information in evaluating the ordinary course of business defense and new value defense. A properly prepared chart with supporting documentation will save you time and money when meeting with your attorney.
5. Think About Potential Expert Witnesses Within Your Industry. You may need an expert witness to give you a report that the payments made during the 90-day preference period fall within ordinary business terms. Your attorney will explain that one of the main defenses to a preference action is that the payments were made in the ordinary course of business. You may want to look to competitors or local trade groups to find an expert in your particular industry. Not all cases require experts, but some do. Get a jump on the selection of an expert by reviewing your files and identifying capable experts in your industry.
6. Retain Experienced Bankruptcy Counsel. Preference cases are very unique and outside the experience of many lawyers. Bankruptcy lawyers are a somewhat tight group and is helpful to have an attorney who has litigated cases with the trustee in other matters. Also, you want to make certain that the trustee is forced to prove his entire case and all affirmative defenses are analyzed.
7. Reality Check - Some Cases Are Hard to Defend. Sometimes the trustee has a strong case and there are no affirmative defenses available. In this situation, your attorney needs to attempt to settle the case early at a favorable number. If you let emotion get in the way of sound business judgment, the end result may be unpleasant. An experienced lawyer can give you an honest opinion of your case and if it is very weak, find a way to gain some leverage to settle the case before you incur substantial legal and expert fees.

Preference claims often times result in unfair results. However, the fact remains that most large Chapter 11 cases end with a slew of preference actions. If you receive a preference complaint, immediately start working on your defense and get to an experience lawyer who can help you go on the offensive.

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Many New York City cooperative and condominium owners consider their pets to be members of their families.  At the other end of the spectrum are people who may have violent allergic reactions when they come into contact with dogs, or who just prefer not to share their common living space with someone else's four-legged friend.  The boards of directors of cooperatives, and the boards of managers of condominiums, weigh these competing interests and try to enact and enforce pet policies and rules that best serve the residents of their buildings while also taking into account applicable laws.

The focus of most pet policies and rules enacted by cooperative and condominium boards is dogs.  Some of the more common rules require dogs to be kept on leashes while in common areas, prohibit dogs in elevators, limit the number of dogs per apartment and limit the size of permitted dogs.  In most cases, a majority vote by a board is sufficient to amend these rules and policies, and to completely prohibit dogs. 
 

Enforcing policies and rules relating to dogs is often more difficult than passing them.  To a large extent, this is due to Section 27-2009.1 of the Administrative Code of the City of New York, which is commonly known as the "Pet Law."  The Pet Law was originally passed by the New York City Council in 1983 to prevent landlords from trying to use "no-pet" clauses in Rent Stabilized leases as a pretext for commencing eviction proceedings against tenants with below market rents who coincidentally had pets.  In basic terms, the Pet Law prohibits landlords from enforcing "no-pet" clauses in leases against tenants who have "openly and notoriously" harbored a pet for a period of three months or longer.

A significant body of case law involving various courts' interpretations of the Pet Law has evolved in the cooperative and condominium context.  Based on this case law, it is clear that the Pet Law applies to cooperative proprietary leases and house rules.  More specifically, if a cooperative's board of directors fails to commence legal action to remove a dog from a shareholder's apartment that his been kept "openly and notoriously" in violation of the cooperative's policies or rules for three months or longer, then the cooperative board will usually be prevented from removing the dog pursuant to the Pet Law.

There are many cases where courts have interpreted the meaning of "openly and notoriously."  Each case is fact specific, but in broad terms the courts have held that as long as one member of a building's staff is aware that someone is harboring a dog in his or her apartment, then such knowledge is imputed to the building's board and the "openly and notoriously" requirement of the Pet Law is satisfied.  It is important to note that a board must commence a lawsuit within three months of its actual or imputed knowledge of a dog being illegally harbored in an apartment in order to defeat a Pet Law defense.  Sending a warning letter or a notice to cure is not sufficient.

It is also important to note that even if a Board fails to commence a lawsuit within the three month window required under the Pet Law, this will not prevent a Board from removing a dog whose behavior is causing problems in a building.  The Pet Law specifically states that it will not be applicable where the harboring of a pet causes a nuisance or interferes with the health, safety or welfare of a building's other occupants. 

Interestingly, whether the Pet Rule applies to condominium boards and condominium unit owners depends where the condominium property is located.  There is a split in the decisions by the appellate courts that cover different geographic areas of New York City.  The appellate court that has jurisdiction over Manhattan and the Bronx has ruled that the Pet Law does not apply to condominiums.  On the other hand, the appellate court that has jurisdiction over Queens, Brooklyn and Staten Island has ruled that the Pet Law does apply to condominiums.  Eventually this split will probably be resolved by the State's highest court, the Court of Appeals, or by the City Council.

To complicate things a little more, there are additional Federal, New York State and New York City anti-discrimination laws relating to individuals with disabilities.  These laws may trump a board's right to remove a dog, even where a dog is kept in violation of a properly enacted policy or rule and the board seeks to timely enforce such rule within the three month window provided under the Pet Law.  The penalties for violating these anti-discrimination laws are severe and may include the assessment of fines, punitive damages and an award of counsel fees.  However, only a very narrow class of people with dogs fit into the protected categories under these statutes. 

In conclusion, a cooperative or condominium board (in the Bronx, Brooklyn or Staten Island) that fails to commence legal action to remove a dog that is being harbored in violation of its buildings' policies and rules within three months of its discovery will probably be barred from enforcing such policy or rule pursuant to the Pet Law.  Notwithstanding whether the Pet Law is applicable, a Board may be barred from removing a dog under the anti-discrimination statutes relating to people with disabilities.  It is recommended that you consult with legal counsel with regard to any pet-related issues, especially to the extent that disability-related issues are present.

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Despite the fact that the biological father had a history of mental health problems, substance abuse, and criminal involvement, a New Jersey Superior Court recently refused to consider the maternal grandfather’s application to adopt his granddaughter, and thus terminate the parental rights of the father.

Specifically, the biological father of the child in question was arrested twenty seven times, incarcerated on several occasions, and treated for substance abuse and mental health issues off and on for twenty eight years. When the child was five years old, she told the mother that her biological father had sexually molested her. The Division of Youth and Family Services (DYFS) conducted an investigation and concluded that the father probably sexually molested the child one time. Although the father was arrested and charged with sexual assault and endangering the welfare of the child, the State dismissed the indictment and DYFS closed its case. A year later, the parents were divorced, and the mother obtained a final restraining order against the father, which prohibited the father from contacting her or any members of her family, including the child.

Two years later, the child’s maternal grandfather applied to the Court to adopt the child to provide [the child] with emotional, financial and physical stability. In support of his application, the grandfather emphasized that the biological father had accumulated arrears of $11,516.08. The Mother consented to this adoption and filed an application to the Court requesting that the Court terminate the biological father’s parental rights. The application was accompanied by a certification describing the abuse that she and the child endured from the birth father. The biological father filed an opposition to the adoption complaint.

The Court granted the biological father’s application for summary judgment, holding that a grandfather should not be allowed to be co-parent with his daughter when the biological father survives. The Court elaborated that, absent a showing of abuse or neglect, a private party is not permitted to terminate a parent’s parental rights. The only other way to terminate the parental rights of a biological parent is for the parent to voluntarily surrender their rights or if the Court finds that the parent has not fulfilled their parental duties and that adoption in the child’s best interest.

The Court further provided that the legislature did not intend for persons outside of marriage or a partnership to adopt children together. Courts have allowed step-parents or a partner in a same sex relationship to adopt when it is in the best interest of the child. Here, the applicant was the biological mother’s father. While forty eight other states allow same sex adoption, no other state has allowed a grandparent to become a co-parent with their own child by adopting their grandchild. Thus, the Court declined to consider this application.

The New Jersey law does afford grandparents a right of visitation with their grandchildren over the biological parent’s objection, provided that the grandparent provides that the child is harmed by not visiting with them. New Jersey also allows grandparents to adopt their grandchildren over the biological parent’s objection when both parent’s parental rights have been terminated.

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On January 8, 2008, the Assembly and the Senate each introduced a bill (A1629, S702) that would, if enacted, amend Section 5 of the Uniform Construction Code Act (P.L. 1975, c.217) codified at N.J.S.A. 52:27D-123, to empower the Department of Community Affairs to adopt an energy subcode that exceeds national model code standards. Specifically, under this proposed legislation, the Commissioner of Community Affairs “[s]hall be authorized to amend the energy subcode to establish enhanced energy conservation construction requirements, the added cost of which may reasonably be expected to be recovered through energy conservation over a period of not more than seven years.” Any such amendment or supplement to the model code requirements shall be based “upon 10-year energy price projections provided by the Board of Public Utilities.”

In this regard, this legislative proposal seeks to amend Section 9 of P.L. 1977, c.146, codified as N.J.S.A. 52:27F-11, to augment the powers and responsibilities of the Board of Public Utilities and give the BPU a considerable amount of influence over the promulgation of State energy-efficient building standards.

Assembly bill A1629 and Senate bill S702 would also require the Board of Public Utilities to offer qualified buyers of new homes meeting the enhanced energy subcode requirements down payment assistance through its residential facilities energy conservation program in consultation with the Department of Community Affairs and the New Jersey Housing and Mortgage Finance Agency. This down payment assistance shall be limited to either “the additional cost of construction required in order to make a building, which otherwise would conform to the current edition of the International Energy Code, also conform to the enhanced energy conservation construction requirements [to be] established by the Commissioner of Community Affairs” or “the additional down payment required in order to qualify the purchaser or purchasers for mortgage financing without the requirement of private mortgage insurance[,]” whichever is less.

Although Assembly bill A1629 and Senate bill S702 are working their way through the legislative process, their future is yet uncertain. Should this piece of proposed legislation become law it could have a profound impact upon the state of energy-efficient building in New Jersey depending, of course, on the comprehensiveness of the energy subcode that might ultimately be adopted by the DCA.

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