Uniform Commercial Real Estate Receivership Act Is NOW THE LAW IN FLORIDA

The Uniform Commercial Real Estate Receivership Act (hereinafter “UCRERA”) became law July 1, 2020, marking a new era for Florida courts.

“Of course, this couldn’t have been anticipated, but with the economic fallout from COVID, and all the closures, the first thing that will be effected when people stop paying their rent is commercial real estate.”

Florida is one of only nine states that have adopted UCRERA since 2017.

UCRERA creates a process for state courts to appoint a receiver in disputes that arise over commercial real estate, typically a default. Once appointed by the court, a neutral receiver can manage an asset and prevent it from falling into disrepair.

Florida judges have the power to appoint receivers, but before UCRERA, there was no statute that addresses the process for commercial real estate disputes.

HB 783 and a companion, SB 660 by Sen. Lori Berman, D-Boynton Beach, passed both chambers unanimously.

For more questions regarding your Commercial Real Estate investment, call Gulati Law today!

Source: Florida Bar Article

The Biggest Estate Planning Mistake

The most common mistake that can be made when estate planning is the failure to keep your forms and documents up to date.  As simple as it sounds, there are countless instances where people who did not have updated beneficiary forms inevitably ran into complications later in the process.

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Without proper documentation, the money and property you saved for your loved ones may fall into the hands of ex-spouses, irresponsible or untrustworthy family members, or other unintended heirs.  Besides having control over who gets your money and how much, designating a beneficiary also avoids probate in some circumstances.  Updating your estate plan regularly, you can be certain your wishes will be carried out in your absence the way you want them to.

Here are some of the forms that you should update regularly: bank accounts beneficiary lists, retirement accounts, life insurance benefits, and so on.  If a divorce, death, or any other life or relationship change occurs that will affect how you plan your estate, it is imperative you make those document changes immediately.  Contact us today to speak with a Florida Estate Planning Attorney and ensure you are protected in all aspects of your estate planning.

Source: Estate Planning Digest 

How A Super Lien Can Affect the Sale of Your Home

If you have never heard of a super lien, do not be surprised.  Many home and property owners do not understand the implication of the “super lien” until it comes time to sell their home or property.  Liens usually occur following a violation filed against real property.  This happens when the city believes there is a breach in laws or codes, such as allowing construction without a permit or causing disturbance after hours.

If the violation is not acknowledged or fine is not paid, a lien is placed to secure the debt payment or resolution to the issue at hand.  A super lien is a statutory lien that is superior to all others, in that once it is placed against a property owner, it occurs on all properties within that county the individual owns. Those properties cannot be sold once the lien is in effect, and the price to remove it can be very steep if not handled immediately.  On top of what is already owed, a super lien may also include late charges, interest, and fines. This can be hundreds to thousands of dollars a day.

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Neglecting these fines could result in a foreclosure, except in the case of a homestead.  A homestead is protected against forced sale by law. This does not include implications like title defects associated with a super lien.  If the property owner cannot pay the full amount of the lien, they may be required to hire an attorney to negotiate a release or an affordable amount. This means higher closing costs when selling the house, and a release or “no action” letter from the city attorney must be obtained beforehand, which would indefinitely delay the process.

Many have noted the inconveniences of the super lien, and in 2011, Senator Jack Latvala proposed a Senate bill that would have made code enforcement liens similar to judicial liens in the case of a homestead, where the owner is able to file with the local court and wait for a response from a judicial creditor.  His proposal was replaced with a new bill that did not allow for the expedited release of code enforcement liens.  As of now, there is no easy fix for the resolution of a super lien.  If your property or properties may be affected by a super lien, contact us at Gulati Law to see what your options are and how to keep it from preventing the sale of your home. We have helped many sellers and buyers of residential and commercial property clear these liens to conduct a successful closing.

Inheriting A Business? Be Prepared and Start Now

Having a business passed down to you can be an exciting yet scary endeavor, and the situation varies widely depending on how well prepared you are for the transition.  Hopefully, you have spent enough time with the business to understand the plans, key players, and how to best serve your clientele.  Reviewing and updating documentation, creating rapport with clients, and developing relationships with accountants, employees, and managers can be crucial when undergoing a smooth transition. Exposure to all aspects early on can make the process go much easier for all parties involved.

file000941596447If you happen to be in a situation where inheriting the family business was unexpected or you did not have enough time to fully make provisions for the future, the best way to get started is by talking with some of the main team members involved.  You should consider talking to the following types of professionals during the set-up and transition:  business advisors, attorneys, accountants, financial planners, managers, and everyone involved in decision making for your business.  It can also be beneficial to hire advisors with your best interest in mind that can provide a third party perspective on where to start.

Getting everyone on the same page can be a challenge, but meetings and open discussions are vital in gaining a mutual understanding of the company’s short and long-term goals.  Now would also be a good time to discuss your new role in the business and the plans you have for the future.

The best way to get started when taking over the business is to do your research.  Look into documentation that can explain the current financial state of the company and the direction it was heading at the time of the crossover.  Some of these documents include: tax returns, bank statements, budgets, licenses, letters of incorporation or trademarks, and loans, credit, mortgages, and other forms of debt. After taking some time to review the information, start preparing your own ideas and questions about how this transition affects the legal and financial status of the business.  This would also be a good time to address any outside implications of the inheritance, such as disputes about succession, pressure from shareholders, and any other third parties involved.

After you understand the current state of your business, the next step is making sure you have team that is well organized and assured.  Keep communication lines open between employees, stakeholders, and all others involved with your business.  Let them know that you are doing the best you can to stay available and are willing to accept constructive input into the next steps for the business.  Ask for advice from the managers and advisors on how to make the transition easy as possible, and what has been working and not working in the past as far as methods and execution.  Try not to make any big changes yet – it is important to stay mindful of the team’s wishes, as they will be supporting you through a time that may be uncertain for the company.

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The last and most important area of focus is establishing a concrete business plan.  Hopefully before this time comes you have a strong guideline for how the business is run.  Now you can work on making this plan geared towards the plans you have for the future.  According to the Family Business Institute, about 30 percent of family businesses survive in the second generation.  Meeting with advisors and your banker on a regular basis while getting started can lead you in the right direction regarding customer needs and market conditions.  Putting in time and effort into the business will multiply your rewards worth reaping for years to come.

At Gulati Law, we have helped many small businesses transition from old ownership to new, and protect the new assets in the process. We have a private referral network in which we can refer depending on your needs. Contact us today if you have a question or need further information!

Source: http://under30ceo.com/you-inherited-the-family-business-now-what/

Real Estate Investment Tips on Tax-Deferred Exchanges (1031 Exchange)

A tax-deferred exchange is a where property owner trades one or more relinquished properties for one or more replacement properties of “like-kind”. The payment of federal income taxes and some state taxes on the transaction is deferred until a later date, instead of a typical transaction where the property owner pays the taxes on any gain realized from the sale.  The exchange, however, is not tax-free.  When the replacement property is ultimately sold, the deferred gain as well as any additional gain realized is subject to tax.

Section 1031 of the Internal Revenue Code states “that no gain or loss is recognized on the exchange of property held for productive use where the property owner has reinvested the sale proceeds into another property.  For example, if vacant land is exchanged for an apartment building, the taxpayer could not be forced to pay taxes on “paper gain”.  The general guidelines to be met in order to allow the taxpayer to defer all taxable gain are that the value of, equity in, and debt on the replacement property must be equal or greater than the value of the relinquished property.  Also, all of the net proceeds from the sale of relinquished property must be used to acquire the replacement.”

The main reason to exchange property instead of selling is the ability to postpone taxes or potentially eliminate them all together.  That way you are able to use the money saved towards investing in another property, and you receive an interest free loan from the federal government in the amount you would have paid in taxes.

Before considering a tax-deferred exchange, there are a few requirements that allow for this replacement.  First, your property must qualify.  Properties that are specifically excluded are: inventories, stocks, bonds, or notes, properties held primarily for sale, interests in a partnership, certificates of trusts, and choses in action.  Also, both the relinquished and replacement property must be held for productive use in a trade or business investment.  Immediate resales or the taxpayer’s personal residence do not qualify.

Tax Deferred Exchange

For a deferred exchange, the properties must be of “like-kind”.  This means they must both be located in the U.S. and must qualify.  Personal properties must be of like-class.  It is also a basic requirement that the relinquished property must be directly exchanged for the other property and cannot be sold for cash to be used in purchasing the replacement property.

Tax-deferred exchanges can be very beneficial for the taxpayer planning to sell an investment or property.  As long as the IRS guidelines are strictly followed, this method can be used as a wise investment strategy. Avoiding losses potentially as high as 30% due to state and federal taxes means allowing the proceeds to go towards future investments or make improvements to the replacement property. If you are considering a tax-deferred exchange for your property, contact us if you are interested in this type of transaction!

For more information see: http://www.irs.gov/uac/Like-Kind-Exchanges-Under-IRC-Code-Section-1031

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Gulati Law