Hanlon Niemann Blog | A Freehold, New Jersey Law Firm

By Fredrick P. Niemann, Esq. a New Jersey Contract Lawyer

Contacting an NJ Contract Lawyer will definitely help save you from a lot of trouble in the future. Always make it a point for them to look at any document that you need to sign because there may be certain considerations that needs to be pondered before you go ahead and put your signature to these types of documents.

The Purpose of the Contract
Many individuals forget about the purpose of the contract which they are about to sign. A NJ Contract Lawyer will not minimize this important aspect to be pushed aside. Informing them of the goal of the contract will definitely give your attorney a heads-up on what to analyze in the document you have brought before them.

The Compensation
This must be absolutely clear to all parties to the contract; otherwise you will likely encounter a complicated issue in the future. Let an NJ Contract Attorney look into this matter and discuss it with the other party if there are any portions which you need to be amended.

Clarity of Contract Terms
Any vague and ambiguous terms should be clarified in the contract. This can become very crucial in the interpretation of your contract so make sure this is clear, especially with your chosen NJ Contract Attorney. Any legal terminologies or payment methods which are not fully established should be spelled-out so Statute of Frauds can be eliminated.

Guarantee that all of these factors have been made clear because once it has been signed by both parties then there is much less that your NJ Contract Attorney can do. Be a responsible party to a contract and anticipate the potential issues your draft contract may bring. Never forget the importance of an NJ Contract Lawyer and maintain a regular professional relationship with them to free yourself from legal inconveniences in the future.

Contact me personally today to discuss your contract matter.  I am easy to talk to, very approachable and can offer you practical, legal ways to handle your concerns.  You can reach me toll free at (855) 376-5291 or e-mail me at fniemann@hnlawfirm.com.

By Fredrick P. Niemann, Esq. New Jersey Business Lawyer

What actions can be brought against a management employee and officer of a corporation who secretly forms a competing business while employed by the corporation?

ANSWER
New Jersey courts have found that if a management employee secretly forms a competing corporation, then the management employee may be liable for a breach of duty of loyalty to the employer which can also be imputed to the newly formed competing corporation.

In a recent case, a vice president/director and his wife formed two businesses while still employed at Vibra-Tech. One of these businesses was in direct competition for the same customer base. The other business sold equipment to Vibra-Tech. Vibra-Tech had no knowledge that one of their own executives was competing with the corporation. A suit was brought against the defendants for unfair competition and breach of fiduciary duty. The defendants moved for summary judgment, arguing that there were no fiduciary duties that the two companies owed Vibra-Tech.

The court discussed earlier New Jersey case law on fiduciary duty and stated that “A hallmark of a fiduciary relationship is one party’s placement of “trust and confidence in another.” This relationship is generally one of unequal terms, where one party is dependent on the advice and care of another. This is the duty that management and directors customarily owe their employees. Directors and officers of a corporation also have both a duty of care and/or a duty of loyalty to the best interests of the business entity. Competitors of a business entity contract in their own self interest and have no such fiduciary duty.

The attorney for the defendants argued that the two businesses of the defendant had no fiduciary duty since they had no direct relationship with the plaintiff.

The court agreed that there was no direct fiduciary duty between the businesses, but found that New Jersey courts had in similar cases,” imputed the individual defendants’ conduct to the corporation and held it liable for breach of the fiduciary duty of loyalty.”   Since the proof of a breach of imputed fiduciary duty of loyalty involves an intensive inquiry into the facts, and an inquiry as to whether the individual utilized the corporate veil to facilitate a breach of duties, the court denied summary judgment, since the facts before the court were either missing or disputed.

Contact me personally today to discuss your business law matter.  I am easy to talk to, very approachable and can offer you practical, legal ways to handle your concerns.  You can reach me toll free at (855) 376-5291 or e-mail me at fniemann@hnlawfirm.com.

By Fredrick P. Niemann, Esq. a New Jersey Partnership Attorney

Partnership Disputes are fairly common in the world of business. Trade secrets, embezzlement, conversion and business disparagement are some of the most common causes of partnership disputes. If you suspect that something like that has occurred in your business, you should consult with a qualified partnership dispute attorney in New Jersey.

If you suspect that one of your partners has engaged in some form of wrongdoing, it is important that you investigate immediately. If you fail to do so, this can lead to a more serious dispute. Your partner may be profiting while your business is losing money. That is why is it important for you to consider litigation so that your business is protected from further loss.

A qualified partnership dispute attorney can help your business in several ways. He or she will provide the legal representation that you need to protect your business’s investments and profits. First, the attorney will investigate the breach so that the rights and integrity of your business are protected. After the investigation is complete, he or she will file a claim on your behalf. In order to make sure that your claim will have a successful outcome, the attorney will enlist the help of private investigators, accountants and financial experts. If you decide to dissolve your partnership, he or she will be there to assist you with that. Additionally, an attorney will also be able to help your business recover its losses.

If you suspect that suspicious activity is going on within your partnership, you do not want to wait around because your business could be losing money. Call a qualified partnership dispute attorney in New Jersey so that this issue can be resolved right away.  Contact me personally today to discuss your partnership dispute matter.  I am easy to talk to, very approachable and can offer you practical, legal ways to handle your concerns.  You can reach me toll free at (855) 376-5291 or e-mail me at fniemann@hnlawfirm.com.

New Jersey law is very biased against Landlords.  One unintended and innocent mistake can be devastating to you financially and result in a dismissal of your case.

1. When the Clerk or Judge calls the calendar of all matters scheduled, if the landlord is present in the courtroom and the tenant is not, the tenant will be “in default.” In that case, a judgment granting the landlord possession of the leased property may be entered against the tenant after the landlord has filed an affidavit proving a right to possession.  If the tenant is present in the courtroom and the landlord is not, the landlord’s complaint will be dismissed without prejudice, meaning it will have to be filed again without penalty.

2. In non-payment of rent cases, the tenant has the right to pay the full amount of rent into court (or with the clerk) by the close of the business day that the trial is set for. Then the case will be dismissed.

3. A landlord may not evict a tenant based upon failure to pay any attorneys’ fees, costs or late charges, unless there is a lease provision which states that such fees are collectible as rent. Even if the lease allows such charges to be collected, the amount due as rent may be limited by a rent control ordinance, or in the case of public or federally-assisted housing, by federal law.

4. A landlord may decide to settle a case before court, but the decision is entirely voluntary. Any settlement should be reduced to writing and filed with the court. This will protect both parties in the event of a breach by the other. Most Courts require that the terms of the agreement be “placed on the record,” in open court. This is for the protection of both parties as well. A settlement agreement should be placed “on the record” as a matter of course if there are complex terms, or if the tenant is agreeing to vacate. An experienced landlord attorney like Christopher J. Hanlon should be present to protect you during any settlement.

5. If the tenant wishes to challenge the allegations or accuracy of anything stated in the complaint, including the amount of rent due and owing, the tenant has a right to a trial before a judge.

6. The entry of a judgment for possession means that a landlord may request the court clerk issue a Warrant for Removal to a Court Constable and the tenant can be evicted.

7. If a judgment for possession is entered, a Warrant for Removal may not be issued until three days later. The Warrant for Removal authorizes a Special Civil Part Officer (Constable) to lock out the tenant three days after the Warrant has been served on the tenant. Service of the Warrant is generally accomplished by the Officer leaving a copy at the tenant’s apartment. The lock out may not occur on a weekend or on a judicial holiday. Also, weekends and holidays are not counted in calculating the number of days before the Warrant can be signed or issued. This means that the tenant will be locked out at a minimum of eight days from the day judgment of possession is entered.

8. If a judgment for possession is entered after a trial, or because a tenant did not appear in court, or because the tenant agreed with the landlord to the entry of a judgment, a tenant has the right to apply to the court for a hardship stay at any time up to ten (10) days after the Warrant for removal has been executed (door locked!) The court may grant or deny the stay and the landlord has a right to be heard at the hearing on the application. A stay of the judgment means that the tenant will not be removed for as long as the stay is in effect. The court may grant a stay for up to a maximum of 6 months. During the period of the stay, the tenant must pay all back rent, pay the future rent on time, not disturb the neighborhood, and not damage the property. After the stay is over, the tenant may be evicted by the landlord through the Constable without any further judicial action unless the Court grants an extension not to exceed 6 months from the date of judgment.

9. The Court provides a list of social service agencies that may be able to help tenants find other housing or provide grant monies.

10. If a landlord and tenant agree to an eviction, a consent judgment for possession must be prepared. When this happens, the landlord must also submit, in writing, a sworn statement that one of the causes for eviction authorized in the eviction statute has occurred. This sworn statement must be filed before the court will accept the consent judgment. The sworn statement must also state that all fees and charges sought by the landlord are allowed by federal, state and local law, as well as the lease.

Are you a New Jersey landlord?  Do you have an eviction that requires legal assistance?  Then contact Christopher J. Hanlon toll-free at (888) 800-7442 or e-mail him at chanlon@hnlawfirm.com today to protect your interests.

By Christopher J. Hanlon, Esq. an experienced attorney for Landlords.

Commercial Landlords: Four Important Questions to Ask When a Tenant Files for Bankruptcy

With the downturn in the residential and commercial real estate market, a number of commercial tenants are experiencing financial difficulties. In turn, this can lead to problems for commercial landlords, most importantly, the tenant staying current with lease payments. This may then lead to the tenant filing for bankruptcy protection. If your commercial tenant files for bankruptcy, it is wise to have a strategy in place to not only minimize the time of non-payment, but also maximize the ability to receive rents and damages allowed under the Bankruptcy Code. 

Following are four (4) questions for a commercial landlord to consider whenever a commercial tenant files for bankruptcy protection:
1.    Have You Filed a Proof of Claim(s)?  As soon as the tenant/debtor files for bankruptcy protection, commercial landlords should ensure their rights to payment(s) by filing appropriate proofs of claim.  It is advisable to review with your attorney the current account history and lease to ensure all fees are being accounted. Landlords may be able to file up to three (3) different types of claims:
    a.    Pre-petition Claim. Section 502 of the Bankruptcy Code provides that creditors are permitted to file a proof of claim for all pre-petition charges and assessments owed.  If a tenant files for bankruptcy, the landlord is permitted to file a proof of claim for all fees and charges incurred prior to the filing date;
    b.    Post-Petition Administrative Claim.  Section 503(b)(1) of the Bankruptcy Code provides a creditor a priority claim for all “actual, necessary costs and expenses of preserving the estate”.  If the tenant remains in the premises after the bankruptcy and does not reject the lease, the commercial landlord may be allowed payment  ahead of other creditors for amounts incurred during this period; and
     c.    Post-Rejection Damage Claim. Section 503(b)(7) of the Bankruptcy Code provides a commercial landlord the right to be paid for “post bankruptcy rejection” damages. If the tenant rejects the lease, certain damages incurred and the remainder of the lease may be permitted priority before payment of certain claims.
 2.    Is the Debtor/Tenant Assuming or Rejecting the Lease?  Landlords should inquire whether the debtor/tenant intends to assume or reject the lease.  Bankruptcy Code Section 365 provides that tenants are permitted to assume a commercial lease, as long as they cure all post-petition defaults. If they reject the lease, then the landlord may be able to proceed with an eviction action to remove the tenant. However, landlords should know that the Bankruptcy Code permits the debtor 120 days to decide whether to assume or reject the lease, with an additional 90 day extension.  All told, this can leave the landlord sitting around for more than 7 months without payment.  If you’re not being paid, it may be advisable to have the Bankruptcy Court allow you to proceed with an eviction action. 
 

3.    Should you File a Motion for Stay Relief to Proceed with an Eviction?   The debtor/tenant may not advise their intent to assume or reject the lease.  As noted, during this time, the debtor/tenant can use the premises without paying anything.  The landlord is permitted to file a motion for “Relief from the Automatic Stay”.  This Motion, if granted, permits the landlord to resume or commence with a state court eviction action.

4.    What to Do with Items Left by a Tenant?  If the debtor/tenant leaves equipment, inventory or equipment at the premises, can you just throw it away? Does anyone have an interest in the left over items, like the debtor/tenants’ bank?   Can you recover storage fees? When a tenant/debtor files for bankruptcy, these left over items may be part of the bankruptcy estate. Gaining proper approval from the Bankruptcy Court, before disposing of the left over “junk” is essential to limiting liability.  For instance, the left over property may be secured by a bank, financial institution or creditor. You may want to have a UCC Search conducted to ascertain whether any security interest exists.  If security interests are discovered, it is advisable to give notice to those entities, possibly through a motion with the Bankruptcy Court.

These are just a few of the questions a New Jersey landlord should ask when a debtor files for bankruptcy.  By asking these questions at the start of the bankruptcy, landlords can limit the loss or liability; as well ensure their right to payment through the Bankruptcy Code. For more information and assistance contact Christopher J. Hanlon, Esq. toll-free at (888)800-7442 or e-mail him chanlon@hnlawfirm.com.  Act today!

By: Fredrick P. Niemann a N.J. Estate Planning Attorney
        

Should you exploit the new $5 million lifetime gift exemption?

In 2010, Congress voted to give us all a $5 million dollar lifetime gift estate tax individual exemption.

In addition, between married couples, upon the death of one spouse, the executor of the estate can elect to transfer any unused portion of the $5 million individual exemption to the surviving spouse.

At the moment, these tax rates and generous exemptions apply through 2012.  In 2013, things may change.  So estate planning and tax planning professionals are alerting their clients of this window of opportunity.

The big news:  The $5 million lifetime gift tax exemption.  For married couples, the lifetime gift tax exemption is actually $10 million dollars.  In 2010, the lifetime gift tax exemption was only at $1 million dollars.

So considering all this, the big question is:  Should you give away as much as you can to your children before 2013 with the intent of reducing estate taxes down the road?

After all, lifetime gifts reduce your taxable estate.  Additionally, if you give your children appreciated securities, the long-term capital gains of those securities will be taxed when sale at their capital gains rates rather than yours.  If your children’s income puts them in the 10 percent or 15 percent tax bracket, their capital gains tax rate is zero percent through 2012.

Let’s illustrate how this works.  Dad doesn’t gift up to $5 million during his lifetime - he only ends up gifting $3 million.  Well, Mon can subsequently gift up to $7 million after he passes thanks to the portability rules, as there would still be $7 million to go toward the $10 million lifetime gift tax exemption for a married couple.  When the first spouse passes away, the executor of his or her estate must file an estate tax return even if no estate tax is owed.  That estate tax return formally notifies the IRS that you are transferring the unused or partially used gift tax exemption.

Incidentally, this estate tax return is due nine months after the death of said spouse, with a six month extension permissible.

Do families need bypass trusts anymore?  We can’t say goodbye to them, because 15 states still levy their own estate taxes with exemptions commonly at $1 million or under like in New Jersey.  Moreover, who knows if portability will be permitted five or ten years from now?

The potential for savings could be great.  When you look at this remarkably generous lifetime gift tax exemption allowance in light of certain estate planning techniques that might leverage it – such as the grantor-retained annuity trust and the family limited partnership – the potential is intriguing.

For more information, please contact Fredrick P. Niemann, Esq. at (888) 800-7442 or email him at fniemann@hnlawfirm.com

In general, a charitable remainder trust is a trust in which the creator of the trust reserves the cash flow from the property contributed to the trust, and upon the death of the creator (and the creator’s spouse).  The property that remains is distributed to the charity.

There are two basic types of charitable remainder trusts, a charitable remainder unitrust (CRUT) and a charitable annuity trust (CRAT).  The primary difference between the CRUT and the CRAT is how the cash flow is measured:

• In a CRUT, the non-charitable beneficiary is entitles to receive a fixed percentage (not less than 5 percent) of the annual fair market value of the trust assets.  Thus, in an inflationary economy, the payments to the non-charitable beneficiary will increase as the value of the assets increases.  However, in deflationary times, the amount paid to the non-charitable beneficiary will decrease as the value of the assets decreases.

• In a CRAT, the non-charitable beneficiary is entitled to receive a fixed percentage (not less than 5 percent of the initial fair market value of the trust assets) each year, and this amount does not fluctuate with the fluctuation of the value of the trusts assets.

As a general rule, charitable remainder trusts created for older individuals tend to be CRATS because older individuals want certainty as to the annual payments, and their life expectancies, usually are not long enough to benefit from the historical inflationary economy.  Conversely, CRUTS are generally selected by younger donors whose life expectancies are long enough to benefit form increasing asset values, therefore increasing distributions later in life.

For more information, please contact Fredrick P. Niemann, Esq. at (888) 800-7442 or email him at fniemann@hnlawfirm.com

By: Fredrick P. Niemann, Esq. a NJ Estate Planning Attorney

Besides being one of the few charitable-giving techniques that permit a donor to reserve an interest in the property that is given to charity, the charitable remainder trust has another unique feature that makes it attractive to donors who have low-basis property that they want to diversify without paying the capital gains tax.

A charitable remainder trust generally pays no income tax itself, so property can be contributed to a charitable remainder trust and sold by the rest of the trust without payment of capital gains tax; 100 percent of the property (unreduced by capital gains tax) can be reinvested in a more diversified asset mix to generate increased cash flow for the donor (and the donor’s spouse).

The donor can be the trustee, so the donor can control the trust investments.  The annual payments to the donor are taxable either as ordinary income or capital gain, depending on the nature of the income inside the trust.

In addition to the reservation of cash flow and the non-payment of income tax upon sales of assets, the creator of a charitable remainder trust receives an income tax deduction at the time the trust is created based upon the cash f low that is reserved, the donor’s age, and the Internal Revenue interest rate that is applicable at the time the trust is created.

Below is an illustration of how a Charitable Remainder Trust works:

 Mr. A, age 68, is an employee of the ABC Corporation.  Mr. A purchased 10,000 shares of ABC Corporation at $1 per share, when shares were first made available to employees.  Mr. A’s shares are now worth $2 million and pay no dividends.  Mr. A is thinking of retiring, and would like to diversify his investment in ABC Corporation to reduce the risk of having a substantial portion of his assets in one stock and also to increase his cash flow by $100,000 per year to supplement other retirement income.

 If Mr. A sells his ABC Corporation stock for $2 million, he will pay $497,500 in federal and state capital gains tax (assuming a 25% combined federal and state rate).  The sale would leave Mr. A with $1,502,500 to invest to generate $100, 000 per year retirement income.  Under current economic conditions, it would be difficult for Mr. A to achieve the almost 7% return that would be necessary to yield $100,000 per year.

 Instead of selling the AC stock, Mr. A contributes it to a charitable remainder unitrust that pays him 5% of the annual fair market value of the trust assets each year during his lifetime, then following his death, the same percentage to his wife, age 66, for her lifetime, and upon the death of the survivor of Mr. and Mrs. A, whatever assets remain in the trust will be paid to the Leukemia & Lymphoma Society.

In the year the charitable remainder unitrust is created, Mr. A will be entitled to a charitable income tax deduction of approximately $800,000 which can be used up to 30% of his adjusted gross income in the year of the gift and five succeeding years.  Thus, a substantial amount of Mr. A’s retirement income can be sheltered over a six-year period.  Beginning with the year the charitable remainder unitrust is created, Mr. A will begin receiving $100,000 per year, hopefully increasing over time as the assets of the trust, which are now diversified, increase in value.

If Mr. A wanted to be certain that he and his wife received $100,000 per year for the balance of their lifetimes, irrespective of the investment performance of the trust assets, Mr. A could have created a charitable remainder annuity trust that would pay his wife and himself $100,000 per year, irrespective of asset performance.  Mr. A would have been entitled to an income tax deduction of approximately $860,000 in the year the trust was created, to be used to up to 30% of his gross adjusted income in the year of the gift, and five succeeding years.