Consider Zoning Laws for New Land Property

Zoning can easily get lost in the many issues arising when a business thinks about buying, leasing or changing property. But zoning restrictions can derail a company’s plans, so Seattle real estate attorneys recommend that business owners need to consider the issues sooner rather than later.

Zoning Basics

Zoning laws govern the use of land and buildings in a city’s or county’s districts. Every jurisdiction develops its own system, and zoning varies by district.

The laws usually categorize use as residential, commercial, industrial, agricultural or recreational. Some might restrict buildings according to height and overall size, proximity to other buildings, and the types of facilities that must be included with some uses. They also address issues such as parking, signage, waste management, visual appearance and noise.

Special Uses

When use of an existing property violates a zoning law, the property is described as having a “nonconforming” use. The building itself or the activity conducted inside it may not conform. A property owner or tenant can lose the right to continue nonconforming use by abandoning the use or by amortization, where use is allowed for only a limited time.

Zoning may permit a conditional use, but only if some conditions are met, such as provision of parking spaces when a business operates in a residential zone.

A new tenant or owner can’t assume it will be allowed to continue the same activity a previous tenant or owner engaged in. The previous rights holder may have qualified for “grandfathering” when a new zoning law went into effect or may have been granted a zoning variance that doesn’t pass along with the property rights.

Variances

Property owners can seek a variance when a zoning law creates particular problems or unnecessary hardship for them. Obtaining a variance gives owners the right to use their property in a manner barred by zoning laws. For example, an area variance affects property size, while a use variance addresses how land can be used – such as allowing a business in a residential area. To obtain a use variance, the owner may be required to demonstrate that the property doesn’t provide a reasonable return under the zoning law.

Business owners seeking variances often face strong opposition from neighbors. If a variance request is rejected, the owner can appeal the decision in court with the assistance of a qualified Seattle real estate attorney. An owner with specific damage also can challenge a zoning ordinance as unconstitutional.

No Excuses

Business owners should never sign a lease or sales agreement without checking all applicable zoning laws. They won’t be excused from contractual obligations owing solely to zoning issues.

Sidebar: Added Security

Business owners shouldn’t overlook another way to protect themselves against the risks associated with zoning laws. Buyers can ask the title company whether it offers a “zoning endorsement.” Such an endorsement insures buyers against loss if zoning laws preclude them from using the property as they intended.

For more information contact the Seattle real estate attorneys at Lasher Holzapfel Sperry & Ebberson, www.lasher.com.

Cake, Dress, Prenuptial Agreement: Wedding Must-Haves in 2011 (Part 2)

In Washington, prenuptial agreements are generally upheld and enforced unless they are economically unfair or achieved by unfair means. Friedlander v. Friedlander, 80 Wn.2d 293, 301, 494 P.2d 208 (1972); Marriage of Foran, 67 Wash. App. 242, 255, 834 P.2d 1081 (1992). Courts apply a two-pronged analysis to determine the enforceability of a prenuptial agreement. The first prong requires examination of whether the agreement was substantively fair at the time it was executed. The second prong requires examination of whether the agreement is procedurally fair; i.e., whether the circumstances under which the agreement was made were fair. In re Marriage of Matson, 107 Wn.2d 479, 482-3, 730 P.2d 688 (1986); Marriage of Foran, supra, at 259-60.

If the court finds that the prenuptial agreement was fair and reasonable at the time of execution to the party not seeking its enforcement, the agreement will be found to be valid. No further analysis is necessary and the agreement will be enforced. See Whitney v. Seattle-First Nat’l. Bank, 90 Wn.2d 105, 579 P.2d 937 (1978) (post-nuptial agreement providing for spouse enforced); In re Marriage of Fox, 58 Wash. App. 935, 938, 795 P.2d 1170 (1990) (restating the test).

The second prong of the analysis involves a two-part test: First, did the parties make a full disclosure of the amount, character and value of the property held at the time of the agreement, and second, did the parties enter into the agreement voluntarily, with independent advice, and full knowledge of their rights. If both questions are answered in the affirmative, the agreement is enforced regardless of its substantive fairness. In re Marriage of Matson, supra, at 483. Essentially, each party should be represented by counsel, all assets and liabilities must be disclosed, and the prenuptial agreement should be fairly negotiated in advance of the wedding date.

The specific terms of the prenuptial agreement must be something that you can actually live with and follow during your marriage. Courts look to the parties’ actions during the marriage to determine whether they rescinded their contract by their conduct. Fox, 58 Wash. App. 935, at 938 (where neither party observed the terms of their contract during 11-year marriage, community and separate funds were knowingly commingled, the contract was held to have been rescinded).

In summary, although it may not be romantic, a prenuptial agreement is actually a tool that may prove useful in the future. If you are entering into a second or third marriage, have children, or considerable separate assets, I encourage you to call a Seattle divorce attorney four to six months in advance of your wedding date.

Lasher Holzapfel Sperry & Ebberson is uniquely equipped to draft prenuptial agreements, utilizing the expertise of Seattle divorce attorneys, Seattle estate planning attorneys, and Seattle tax attorneys to protect your interests.

 

The Trouble With Single-Member LLCs – PART 1

A limited liability company (“LLC”) is a form of statutory entity commonly used by Seattle Attorneys for its tax benefits, as well as to shield owners from liability for potential debts of the company and to shield assets held by the LLC from creditors of the LLC members. Assuming the LLC is operated legally and not used for improper purposes, assets placed in an LLC are protected from creditors of individual members. While a creditor can still obtain a charging order against a debtor member’s economic interest in the LLC (i.e., the member’s right to receive distributions from the LLC), the creditor cannot touch property held by the LLC and cannot acquire any management rights in the LLC. The LLC form, like that of a corporation, provides a shield against execution by judgment creditors that can only be pierced through misconduct, overreaching, or failure to observe the LLC form. Unless, that is, the LLC is a “single-member LLC”. Court decisions have raised a question as to whether the member’s management rights or even the LLC form must be respected in the case of a single-member LLC. According to the majority of those decisions, the answer is “no”.

While there are no current Washington cases discussing the rights and protections of members and creditors regarding a single-member LLC, commentators have noted that courts are beginning to recognize that single-member LLCs are effectively “alter egos” of their sole members not entitled to the same protections as multiple-member LLCs, and several Seattle Bankruptcy Lawyers have seen bankruptcy court decisions that have treated single-member LLCs differently than they would have been treated if the LLCs had multiple members.

In the case of In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003) (the “Ashley Albright” case), a Colorado bankruptcy court ruled for the first time that the assets of a single-member LLC could be used to pay creditors of the debtor-member who filed bankruptcy. Colorado’s LLC statute is similar to Washington’s statute, granting creditors the right to charge a debtor member’s economic interest in the LLC but treating the charging order as an assignment and requiring consent of all other members to confer any management rights on the charging creditor. Colo. Rev. Stat. § 7-80-703. The requirement of a charging order, under Colorado law (and parallel Washington law), exists to protect other members of an LLC from having to involuntarily share management with someone they did not choose or to have to accept a creditor as a co-manager of the LLC. However, according to Albright, “[a] charging order protects the autonomy of the original members, and their ability to manage their own enterprise. In a single-member entity, there are no non-debtor members to protect.” Accordingly, “[t]he charging order protection serves no purpose in a single member limited liability company, because there are no other parties’ interests affected.” Albright, 291 B.R. at 541. The court further noted:

[T]he Limited Liability Company Act requires the unanimous consent of “other members” in order to allow a transferee to participate in the management of the LLC. Because there are no other members in the LLC, no written unanimous approval of the transfer was necessary…

The charging order limitation serves no purpose in a single member limited liability company, because there are no other parties’ interests affected.


Albright, 291 B.R. at 540, 541.

Based on this rationale, Seattle Bankruptcy Attorneys understood that the bankruptcy court allowed the Trustee, standing in the shoes of the debtor as a hypothetical judgment creditor, to cause the LLC to sell its property and distribute net proceeds to the debtor member’s bankruptcy estate, or distribute the LLC’s property to himself as Trustee and liquidate the property for the benefit of creditors.

The Trouble With Single-Member LLCs – PART 2

The decision in In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003), has been followed by other bankruptcy courts, such as in In re Modanlo, 412 B.R. 715 (D. Md. 2006), which cited Albright favorably for the proposition that because there were no other members to protect, the purpose of preventing a creditor from becoming a substituted member of the LLC does not apply when the LLC is a single-member LLC. “[U]sing the principles of statutory construction and adopting the reasoning of the bankruptcy court in Albright…” the sections of the Delaware LLC Act regarding assignment of LLC interests and rights of assignees to become members “do not apply to single member LLCs.” Modanlo, 412 B.R. at 730.

One cannot simply substitute in someone else who is a stranger without affecting those (personal) relationships among [multi-member LLC] members. That reasoning, however, is substantially undermined, if not meaningless, in the context of single member limited liability companies. By definition, there can be no remaining members of a single member LLC … whose personal relationships (among members) could be compromised by being forced to accept substitute performance from a stranger…

Modanlo, 412 B.R. at 727.

The same reasoning was followed in In re A-Z Electronics, LLC, 350 B.R. 886 (Bankr. D. Idaho 2006), where an Idaho bankruptcy court dismissed a chapter 11 petition signed by the single member of the debtor LLC because he did not have authority to act on behalf of the LLC based on his own chapter 7 bankruptcy filing. The court stated that in a multi-member LLC, when a single member files bankruptcy, the bankruptcy estate is entitled only to receive the debtor members’ share of profits or other compensation and the return of contributions to which the debtor member would be entitled. However, when the debtor is the only member of the LLC, the bankruptcy trustee steps into the shoes of the debtor and can exercise management powers over the LLC to the same extent the single member could do.

Based on this growing line of cases, two arguments could be made by a Seattle Bankruptcy Attorney representing a Washington judgment creditor seeking to collect assets held by a debtor’s single-member LLC:

First, the provisions of the Washington LLC act regarding assignment of membership interests, charging orders, and limitations on assignees or judgment creditors becoming managers of the LLC do not apply to single-member LLCs because there are no other members to protect. A Seattle Bankruptcy court accepting this argument might allow the judgment creditor to execute on and sell the entire LLC interest including the debtor member’s bundle of LLC rights (management and right to receive profits). While there is no appellate decision providing precedent for this, it happens as a matter of course in KingCounty, where the sheriff routinely levies on and sells debtors’ membership interests in single-member LLCs under writs of execution.

Second, Washington’s LLC act permits appointment of a receiver in appropriate cases after entry of a charging order. A receiver could be appointed in the case of a single-member LLC to prevent the member debtor from controlling the LLC assets to his or her own advantage such as by preventing any disbursement under the charging order. By statute, upon appointment of a receiver, the single member of the LLC would be divested of his or her management rights. The receiver would be entitled to manage the LLC, and either sell its property and distribute the proceeds to the judgment creditor after payment of all partnership debts, or manage the LLC property and distribute the profits to the judgment creditor until the judgment was fully satisfied.

A common response to this potential problem by Seattle Tax Attorneys is to add a new member or two to the LLC so that it is no longer a single-member LLC. While this may be appropriate in some cases, if it is done with intent to hinder, delay, or defraud creditors, or for less than fair consideration, the addition of token or “peppercorn” members to the LLC could be avoided by a bankruptcy trustee or as a fraudulent transfer by a state-court creditor. See Albright, 291 B.R. at 541, n.9. This would especially be true where the new member did not buy into the LLC for fair value, was a family member or other entity controlled by the debtor (such as a self-settled trust), or the addition of a new member was done at a time when the original member was faced with a lawsuit, preparing to file bankruptcy, or in financial difficulty.

What to do if you are forming a new LLC or have an existing single-member LLC? First, make sure your LLC has more than one member. If you have an existing single-member LLC, you can add one or more new members, but be sure they are actual members and not just token members added merely as a roadblock for your creditors. The new member should also pay reasonably equivalent value for the membership interest. If the LLC’s value is $100,000 and you add a new 10% member, the new member should pay $10,000. If you add a new member for no consideration or considerably less than the value of his or her percentage interest, a creditor or bankruptcy trustee could potentially avoid that transfer. Of course, whenever forming a new LLC or adding new members to an existing single-member LLC, you should hire an experienced Seattle Attorney to prepare a good operating agreement to best protect the members and the LLC assets from potential creditor claims.

On the other side of the equation, if you are a creditor trying to collect from a debtor who has placed his or her assets in an LLC, your Seattle Bankruptcy Lawyer should investigate the nature of the LLC to determine if it is a single-member LLC or has had new members added recently. If so, then the LLC assets may be fair game.

Finally, if you are a single-member LLC owner in financial difficulty or contemplating bankruptcy, you should consult with an experienced Seattle Bankruptcy Lawyer to help you determine how a bankruptcy filing will affect you and determine how, if possible, to protect your LLC interest.

Reasonable Accommodation Might Require Telecommuting

The Americans with Disabilities Act (ADA) has required some employers since 1990 to provide disabled job applicants and employees with reasonable accommodations. Because of technological advances, accommodations may require employers to consider telecommuting as an option.

But as the EEOC has noted, not every disabled person will need or want to work at home, and some jobs can’t be performed there.

An employment attorney at Lasher can work with you to determine what reasonable accommodation would mean for your company and/or your employee.

What is reasonable accommodation?

If you employ 15 or more employees, the ADA requires you to reasonably accommodate qualified applicants and employees with disabilities. It defines a “reasonable accommodation” as any change in the work environment or the way things are usually done that enables a disabled person to perform a job, unless the change produces undue hardship on the operation of your business.

The EEOC has specifically recognized working at home as a potential form of reasonable accommodation if:

A disability prevents an employee from successfully performing a job on-site, and
An employee can perform all or part of the job at home without creating significant difficulty or expense for you.

The ADA doesn’t require you to offer telecommuting programs to all employees. But it may require you to do so for a disabled employee — even in the absence of a program. If your company has a telecommuting program in place, you may need to waive its eligibility requirements to allow a disabled employee to participate. For example, you may have to forgo a prerequisite such as requiring an employee to work for a year with the company before working at home.

How should you decide?

To determine whether telecommuting constitutes a reasonable accommodation for a disabled employee, you must engage in an interactive process with that worker, beginning with his or her request for accommodation because of a medical condition. You may ask for information about the medical condition — including reasonable documentation — if you’re unsure whether the condition qualifies as a disability. A “disability” is defined as inability to perform a major life function.

You must also determine whether a specific job can be performed at home. Factors to consider include:

How you can supervise the employee at home,
Whether face-to-face interaction is required to perform essential job functions or whether phone, fax and e-mail contact can ensure timely communications with co-workers, clients and others, and
Whether the job depends on immediate access to documents and other information found only in the workplace.

The ADA doesn’t require you to eliminate any essential job duties to facilitate telecommuting. But you may need to reassign some marginal duties that can’t be performed outside the workplace and that present the only obstacle to home performance. And you may substitute another minor task to evenly distribute employee workloads.

All or nothing?

If some duties can be performed only on-site, you may need to allow an employee to work at home part time and at the workplace part time. But the ADA doesn’t require you to offer telecommuting if other effective alternatives are available. Remember, you may select any effective accommodation — even if an employee prefers an alternative.

Lasher Holzapfel Sperry & Ebberson has experienced and reputable employment attorneys to assist you in ADA compliance.

Complying With FMLA Intermittent Leave Requirements

The Family and Medical Leave Act (FMLA) requires some employers to grant eligible employees unpaid leave for family and medical reasons, including intermittent leave. By understanding FMLA’s rules, you, as an employer, can minimize your inconvenience and avoid violating the act. Lasher Holzapfel Sperry & Ebberson has many excellent employment attorneys to ensure compliance with FMLA.

Learn the requirements

If you employ 50 or more employees, the FMLA rules specifically require you to allow “intermittent leave,” defined as “FMLA leave taken in separate blocks of time” because of a single qualifying reason. Essentially, the act enables employees to take predictable or sporadic blocks of time as unpaid leave — in hours, days or weeks — if medically necessary for weekly physical therapy sessions or random flare-ups of conditions such as asthma, for example.

But your hands aren’t completely tied — you retain some rights. When a worker asks for intermittent leave, for example, you can request medical certification, including the projected number and dates of treatments and a projected period of recovery for each treatment. You may request recertification of intermittent leave once every 30 days to ensure the need continues. If not medically necessary, a worker can take intermittent leave only with your consent.

Further, when faced with intermittent-leave requests, you may:

Dock the pay of employees exempt under the Fair Labor Standards Act for the leave without their exempt status,
Limit leave increments to the shortest period your payroll system uses to record absences or leave — as long as it represents one hour or less, and
Require an employee requesting leave to work with you to devise a leave schedule that minimizes operational disruptions.

Bear in mind, employees who can receive treatment during non-work hours must do so.

Consider temporary transfers

Because intermittent leave may be disruptive, the rules also allow you to temporarily transfer employees. If intermittent leave is foreseeable based on planned medical treatment, you may require employees to temporarily transfer to available positions — with equivalent pay and benefits — for which they are qualified and that better fit the leave schedule. The temporary-position duties needn’t be equivalent to the employee’s regular duties, but you can’t transfer an employee in retaliation or to deter the taking of leave.

Alternatively, you may create a part-time position based on the number of hours the employee can work during leave — with the same hourly wage and benefits — even if you don’t typically offer all the benefits to part-time workers. But you may proportionately reduce benefits based on number of hours worked to reflect the hours actually worked during leave.

Give proper notice

Regardless of how FMLA leave is taken, you must notify employees within a reasonable period — say one or two business days after learning of the need for leave — that their leave will count against their FMLA allotment. If an employee is entitled to paid leave, you must designate in writing whether the company will consider it to be FMLA leave. You or the employee may opt to substitute accrued paid leave for FMLA leave under some circumstances. To avoid legal disputes regarding FMLA, contact an employment attorney at Lasher today.


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