Starting July 1, 2018 the City of Philadelphia has a new reduced local tax structure. It impacts local businesses, employees and residents as follows:
Non-Disclosure Agreements – Protect Your Employees
This week I reviewed three Non-Disclosure Agreements and was surprised when two of the NDAs were silent regarding employee solicitation. Working with clients over the years I have found that in virtually every successful company, it is almost always the employees, along with the technology, that are among the most valuable assets that need protection. Yet in the deals my clients were exploring, these valuable assets were not protected, or at least would not have been protected had my clients not shared the NDA with me before signing. First however, I want to take a step back and discuss why the NDA (also called a Confidentiality Agreement) is used, and identify common NDA scenarios.
Potential clients frequently ask me why they should not buy contract forms online or from an office supply store. Why pay for an attorney when I can buy a legal form for a nominal fee? I understand the inclination to go online because its entirely at your convenience and it is undoubtedly cheaper. However, this comes at a potentially high cost. Legals forms do not always comply with all legal requirements for a given industry and location (federal, state and local). The danger you expose yourself to by avoiding working with a lawyer is the unknown. It is the risks you don’t realize you are taking that frequently come back to bite you the hardest. I am writing this blog today as a cautionary tale why such forms should be avoided because of a recent conversation I had with a potential client.
Last week a potential client came into my office with a complaint that a former tenant had recently filed against him. The tenant claimed damages against the landlord because the lease did not comply with the Philadelphia Lead Disclosure & Certification Law. This law applies to any dust, dirt/soil, paint, and as of March 1 pipes that drinking water may pass through. If the allegations set forth in the complaint are true, the landlord will have to refund all rents received during the rental period, pay for his tenant’s attorneys’ fees and other fines up to $2,000. The landlord in this case thought he followed all of the rules. He even showed me the lead based paint disclosure form that came with his form lease. Unfortunately, Philadelphia has very specific requirements concerning lead disclosures for buildings that were built prior to 1978. Moreover, not only are there requirements for what has to be disclosed; but the manner in which disclosures must be made are also regulated by code. In fact, this is such a prevalent problem in Philadelphia because it is such and old city that it has an excellent publication on this topic. Click here for Philadelphia Landlord’s Guide to Lead Disclosure. While, the form lease that was purchased at the chain office supply store might have complied with Pennsylvania state law, it did not satisfy the Philadelphia Code and this will be an unfortunate and expensive lesson for this landlord.
Tax amnesty is a program where taxpayers (businesses and individuals) who owe outstanding taxes can settle with the Pennsylvania Department of Revenue (“Department”) by paying less than what is owed. Under the program, if the taxpayer pays the entire amount of the outstanding tax due, the Department will waive all penalties and one-half of the interest associated with the underlying tax. This is an incredible opportunity for taxpayers to settle with the Department and take advantage of the savings being offered.
As a professional real estate developer or someone with an interest in purchasing real estate at a sheriff sale, you need to understand how the bankruptcy and foreclosure laws work together. Foreclosure is a process by which a private party (a bank for example) or a municipality bring a lawsuit to collect monies that are past due. This can be taxes or other fees owed. Once a judgment is entered, the sheriff will schedule a sale to satisfy the money owed at a public auction. This is known as a foreclosure or sheriff’s sale. Can a bankruptcy filing stop a foreclosure? The simple answer is yes. However, the investor that fails to perform simple due diligence can make a foreclosure sale purchase a very costly and time consuming proposition. Before turning to this, a little background on the bankruptcy laws.
The day a debtor files bankruptcy (Chapter 13, for example), is the petition date. On the petition date, a legal wall comes down known as the automatic stay. All creditors are now required by federal law to stop collection efforts for debts owed prior to the petition date. This includes all demand letters, lawsuits and sheriff sales. So long as the petition date is prior to the “gavel falling” at the sheriff sale, the real estate remains with its original owner. However, if bankruptcy is filed after foreclosure, even one day after, the real property passes to the successful bidder. The real property is then not part of the debtor’s bankruptcy estate.
For the viewers, reality television offers an escape and a harmless entertaining view of what a new house, fashion choice, or social situation might be like. For participants however, the experience can be anything but harmless. On the HGTV show “Love It or List It”, homeowners turned to the show producer Big Coat TV and contractor Aaron Fitz Construction to renovate their North Carolina home. The couple had deposited $140,000 into an escrow account with Big Coat TV prior to construction to cover the cost of the renovations performed by Aaron Fitz Construction during the course of the taping. Plans were submitted for what the couple was looking for prior to agreeing to have their experience filmed.
In practice however, the episode shows an entirely different contractor who is not licensed in North Carolina. A scaled down and subpar version of the original plans was completed.
The homeowners have since filed a lawsuit in Durham County Superior Court asserting claims for breach of contract and deceptive trade practices. The lawsuit contends that the work completed was shoddy and left the home “irreparably damaged”, with holes in the floor, low grade supplies, windows painted shut and more. It also questions why payments were not distributed as agreed to in the original contract as well as Big Coat TV’s use of unlicensed professionals. Instead of the couple paying for their renovation with a licensed contractor and having it filmed for a television program, they essentially paid for a set to be built that benefits the show and its advertisers that leaves this family with a potentially uninhabitable home.
On January 4, 2016, Pennsylvania Governor Tom Wolf eliminated the Capital Stock Tax and Foreign Franchise Tax for all taxpayers effective for tax years beginning on or after January 1, 2016. Previously, the Capital Stock and the Foreign Franchise were imposed on all limited liability companies (LLC), corporations and a few other entities that were formed or doing business in Pennsylvania. These taxes were not imposed however on an entity that was formed as a state law partnership. As a result, the limited partnership was the entity of choice to own real estate.
President Obama recently signed into law The Fixing America’s Surface Transportation Act also known as the “FAST Act”. What people may be surprised to learn is that this new law also adds Section 7345 to the Internal Revenue Code which provides in part as follows:
“(a) In general.—If the Secretary (of State) receives certification by the Commissioner of Internal Revenue that any individual has a seriously delinquent tax debt in an amount in excess of $50,000, the Secretary shall transmit such certification to the Secretary of State for action with respect to denial, revocation, or limitation of a passport….”
Think about this for a second. Your passport will now be used against you as a collection tool. If notified by the IRS, the Secretary of State may pull your passport; refuse to renew it or even to issue you one in the first place. The monetary threshold for a “seriously delinquent tax debt” is only $50,000. Once you consider this includes interest and penalties, it is easy to see how quickly this threshold can be met.
Over the past few weeks several landlord clients called and asked the same question, “My tenant bolted and left some of his junk behind. Can I throw it out?” The answer to each landlord was slightly different but came from the same source – 68 P.S. § 250.505a – better known as Pennsylvania’s “Disposition of Abandoned Personal Property Act.” This Act became effective a little more than a year ago in December 2014 and actually is the second attempt by the Pennsylvania legislature to provide guidance to both commercial and residential landlords on how to properly get rid of property that has been left behind.
The Act starts off by identifying five distinct circumstances when personal property remaining on leased premises may be deemed abandoned.
(1) The tenant has vacated the unit following the termination of a written lease.
I was driving into work this morning and I heard on the radio a caller complaining that the secret service cancelled her wedding just 8 days short of the big day because of the Pope. So I started thinking, what happened to all the deposit money? Did she lose it all-the money-not her mind. What about the caterer or the photographer? Did she owe more than just the deposit money? And then I thought-is this the ultimate Act of God defense?
In contract law, when party fails to perform according to the terms of the agreement it is viewed as a breach of contract. However, sometimes there are justifiable reasons that will allow or excuse a party from performing according to the terms of their agreement. For example, when Hurricane Sandy destroyed most of the hotels along the Jersey Shore, these hotels were excused from liability based upon their failure to provide accommodations or being able to host wedding receptions. In essence, an act of God may be interpreted as a defense for failure to perform based upon impossibility or impracticality. So I ponder, is the Pope being in Philly the ultimate Act of God defense.
If you have any questions regarding your legal obligations under a contract you are a party to or any other issue affecting your business, please feel free to contact us at Danziger Shapiro.
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