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Ohio Real Estate Law: LLC membership interest transfers take hit at Ohio Supreme Court

Author By Finney Law FirmPosted on

As we have written about previously, real estate transfers involving the sale of a limited liability company or other entity that owns the underlying real estate are under increasing scrutiny by Ohio’s county auditors and school boards. Now, Ohio’s Supreme Court has declared that these sales are “a contrivance for accomplishing the sale of commercial real estate.”

In a decision that will have broad implications on Ohio’s property tax law,  Columbus City Schools Board of Education v. Franklin County Board of Revision, Slip Opinion 2020-Ohio-353, an LLC that owned a 264-unit apartment building was sold but the contract documents indicated that the transaction was actually the sale of real estate, distinguishing this case from prior cases in which the Court had affirmed the Board of Tax Appeals’ treatment of such sales as the sale of a business rather than the sale of real estate. In those prior cases, the transfer of title to real estate did not appear to be the primary factor in the transaction.

“In stark contrast, the BTA in this case confronted a document labeled by the parties as “Sale of Palmer House on the Boulevard 4121 Palmer Park Circle East New Albany, Ohio” and “Purchase and Sale Agreement.”  That is, the contract identifies itself as a purchase agreement for the real estate at issue.  Beyond its cover page, the contract takes the classic form of a purchase agreement for commercial real estate by identifying as the subject matter of the transaction the specific real property along with categories of personal property appurtenant to the commercial operation of the real estate.  Finally, this particular contract includes an explicit provision setting forth an optional method for consummating the deal as a transfer of corporate ownership rather than a conveyance of real estate from the seller to the buyer.

We conclude that the documentation in this case made it reasonable for the BTA to find that this sale, unlike those in the earlier cases, reflected the parties’ intent to sell and purchase income-producing real estate and supported the BTA’s finding that the parties’ transfer of corporate ownership constituted a contrivance for accomplishing the sale of commercial real estate.”
Decision, at ¶¶ 38-39.

The prior cases involved an existing shareholder buying out other shareholders – indicating that such a sale was not “arm’s length” and that it was truly the business that was being purchased rather than simply the underlying real estate; and sales where the conveyances did not indicate that the real estate was truly the asset being acquired, rather than an actual going concern.

As a result finding that the transfer was a sale of real estate, the Board of Tax Appeals then treated the sale price as the “best evidence of value” of the real estate, thereby shifting the burden to the property owner to defeat the sale price value. Ultimately resulting in an increase of value from $16 million to over $34 million.

As school districts and county auditors become more aggressive in identifying membership interest transfers, and treating them as real estate sales, investors would be wise to review their contract documents with an appreciation for the fact that they may end up as evidence in a valuation dispute.

Cincinnati Council enacts sweeping residential rental regulations

Author By Finney Law FirmPosted on

In the past few months, Cincinnati City Council has passed new laws regulating residential landlord/tenant relationships, including requiring all landlords to file extensive rental registration forms with the City and a first of its kind law requiring landlords to accept alternative security deposit payments. These new laws change the dynamic and financial viability of residential rental property within the City limits.

Presented below is a summary of new laws contained in six different enactments by  City Council.

Rental Registration

New Section 874-6 of the Municipal code requires all landlords to register with the city and supply the following information for each rental unit within the city limits:

  1. Name, address, and telephone number of the owners;
  2. If owned by an entity, the name, address, and telephone number of a member or corporate officer;
  3. The name, address, and telephone number for “any and all persons in control of the property” who can be reached 24 hours a day, 7 days a week, 365 days a year;
  4. Street address and permanent parcel ID of each rental property;
  5. Monthly rent charged; and
  6. The number and size of each rental unit, including the number of bedrooms, bathrooms, and approximate square footage of each unit.

Landlords must update any changes in information on the form, any change in ownership, or any change in use, including if the property is vacant for sixty days or more.

There is a registration fee of up to $1 per unit to be charged every time a unit is registered or updated.

Failure to register is a Class D Civil offense ($750 fine [$1,500 if delinquent]). After receipt of notice of violation, each subsequent day is a separate violation punishable by a fine of $150 per day ($300 per day if delinquent).

The rental registration law goes into effect on May 13, 2020.

Read Chapter 874 here.

Late Fee Regulation

Chapter 871 of the Municipal Code has been amended to regulate late fees charged to residential tenants. Like the registration requirement, this change applies to all residential rental properties within Cincinnati.

Section 871-8 caps late fees at $50 or 5% of the monthly rent, whichever is greater.

Section 871-9 prohibits:

  1. interest on late fees;
  2. late fees on late fees; and
  3. late fees assessed against a tenant where the late rent that is owed is owed by a third party payer (CMHA or other rental assistance organizations).

The late fee regulation went into effect on January 28, 2020.

Security Deposit Regulations

The most sweeping change is the newly enacted security deposit regulation.

Sections 871-9 of the Cincinnati Municipal Code have been amended to require that all landlords provide a receipt to the tenant when the security deposit is paid (unless such payment is by the tenant’s personal check).

871-9 also now requires that landlords “who own and control more than twenty-five rental units” who require security deposits must offer to accept at least one of the following options in lieu of the required security deposit:

  1. Rental security insurance;
  2. Payment of the security deposit over at least six monthly installment payments due on the same day as the rent;
  3. Payment of a reduced security deposit no greater than 50% of the monthly rent charged for that unit.

Additionally, prior to entering into a rental agreement, the landlord must provide the tenant with a written notice of the available security deposit alternatives. The law also prohibits landlords from requiring any additional security should a tenant select an alternative security deposit arrangement.

The security deposit regulations take effect starting on April 14, 2020.

Notably, the security deposit regulations apply only to those landlords who own twenty-five or more units. So long as a distinct LLC or other entity owns less than twenty-five units total, that owner would not have to accept the alternative security deposits.

The municipal code does not provide any specific penalty for landlords who do not comply with the new security deposit provisions, but does provide that a tenant may bring a lawsuit to obtain an injunction to force a landlord to comply with the Cincinnati landlord tenant laws. The city solicitor could also sue for such an injunction.

Read the security deposit ordinance here.

Conclusion

We expect legal challenges to these new laws. If you have questions about how these new laws may affect you, contact us using this link.

If you have specific questions, contact Christopher P. Finney at 513.943.6655.

Ohio Tax Law: Ohio legislature taking up LLC transfer tax

Author By Finney Law FirmPosted on

As reported by Eye on Ohio,  State Representatives Doug Green (R. 66th House District), and Mike Skindell (D. 13th House District), have put forth Ohio House Bill 449 in late December, seeking to capture conveyance taxes when entities owning real estate, are sold. Read the bill and follow its status here.

What is a “Drop and swap?

Called a “membership interest transfer” or “drop and swap,” conveying the entity that owns real property rather than simply selling the real property directly, allows buyers to avoid reporting the transfer as a sale of real property, and the value placed on the property as part of the transaction. County auditors and school boards in particular have complained that these conveyances cost public entities tax revenues that would have been generated had the parties engaged in typical real estate transactions.

New legislation to capture drop and swap sales

The current proposal would require that whenever more than 50%  of the ownership interest of an entity owning real property (either directly or indirectly) is conveyed, that the conveyance be reported to the county auditor and the value of the real estate be determined and taxed as part of the sale.

Membership interest transfers have come under increasing scrutiny as property owners perceive that these transfers distort the tax rolls and shift tax burden onto less sophisticated owners. Many property tax levies are for a fixed dollar amount (e.g. a levy to raise $10 Million). So that, as the value of one property increases, other owners pay a slightly smaller amount toward that fixed dollar tax, while the higher value property owner pays a slightly higher amount toward that fixed dollar tax. When one property is kept at a lower value via a membership interest transfer, those other owners continue to pay a higher amount toward that fixed dollar tax.

As news outlets such as Eye on Ohio report on this issue, public opinion is swaying in favor of taxing  these transfers.

As always, would be property investors should consider not only the current tax bill, but the likely tax bill after purchasing a property, and factor that into their purchase price.

Status of legislation

H.B 449 has been referred to the House Ways and Means Committee, on which sponsor Doug Green sits. At this time no hearings have been scheduled on the bill.

As we predicted nearly two years ago to the day, whether this particular bill goes into law or not, the effort to identify, value, and tax these conveyances will continue.

Upcoming tax presentation to REIA

This bill, and membership interest transfers generally, will be a part of our presentation with Hamilton County Dusty Rhodes to the Greater Cincinnati Real Estate Investors on February 6. Learn more about that event and how to sign up for a free ticket here.

Conclusion

The attorneys of Finney Law Firm have achieved literally hundreds of millions of dollars in property tax valuation reductions over the past 15 years.  Let us help you with your tax valuation challenge.  For more information on our property tax valuation practice contact Christopher P. Finney at 513.943-6656.

Ohio Personal Injury Litigation: Dog bites man

Author By Casey A. JonesPosted on

Ohio Dog Bite Statute – When Man’s Best Friend Isn’t So Friendly

During my first year of law school, we were assigned a research and writing project on the Ohio Dog Bite Statute but, until recently, I had not yet been faced with this legal issue in my practice. In revisiting this area of the law, I found I have a new appreciation for it, both in terms of being able to help my clients and because I now have two German Shepherds of my own. I also realized there are quite a few misconceptions out there as to when a dog bite/attack may be actionable.

Statutory language

The Ohio Dog Bite Statute provides in relevant part:

The owner, keeper, or harborer of a dog is liable in damages for any injury, death, or loss to person or property that is caused by the dog, unless the injury, death, or loss was caused to the person or property of an individual who, at the time, was committing or attempting to commit criminal trespass or another criminal offense other than a minor misdemeanor on the property of the owner, keeper, or harborer, or was committing or attempting to commit a criminal offense other than a minor misdemeanor against any person, or was teasing, tormenting, or abusing the dog on the owner’s, keeper’s, or harborer’s property.

Ohio Rev. Code 955.28(B). In simpler terms, an “owner, keeper, or harborer” of a dog is strictly liable to anyone their dog injures, unless the injured person was trespassing, committing a criminal offense, or “teasing, tormenting, or abusing the dog on the Owner’s, keeper’s or harborer’s property” at the time of the injury.

Myth: “Dogs in Ohio get ‘one free bite.’”

Many believe that a dog owner (or keeper or harborer) is not liable to a person injured by their dog unless they had reason to know the dog was aggressive. This is often colloquially referred to as a “one free bite” rule. The idea is that the owner is not liable the first time it happens because he or she has no reason to know that the dog is capable of such behavior but, after that, the first bite serves as the “reason to know,” and the owner can be held responsible from that point forward.

Ohio does not have a “one free bite rule.” There is no requirement that the injured person prove negligence, or that the owner knew the dog was dangerous, or even that the owner did anything wrong whatsoever. This is often referred to as “strict liability.” In other words, the “owner, keeper, or harborer” of the dog is liable even if they aren’t at fault. See Allstate Ins. Co. v. U.S. Associates Realty, Inc., 11 Ohio App. 3d 242, 464 N.E.2d 169, 1983 Ohio App. LEXIS 11287 (Ohio Ct. App., Summit County 1983) (finding that R.C. 955.28, the dog bite statute, does not establish negligence per se; rather, the statute establishes liability without regard to fault or the dog owner’s negligence).

Myth: “I can’t be liable if it isn’t my dog.”

The Ohio Dog Bite Statute imposes liability on, not only owners, but also keepers and harborers. Individuals other than the owner of a dog have been found to be harborers or keeper under the statute in several cases throughout Ohio. See, e.g., Lewis v. Chovan, 2006-Ohio-3100 (Ohio Ct. App., Franklin County 2006) (pet groomer found to be a “keeper” under the statute even she was only temporarily exercising control over the dog); Buettner v. Beasley, 2004-Ohio-1909 (Ohio Ct. App., Cuyahoga County 2004) (while boyfriend was technically the owner, his girlfriend was considered a “keeper”); Sengel v. Maddox, 31 Ohio Op. 201 (Ohio C.P. 1945) (finding that a person who is in possession and control of the premises where the dog lives, and silently acquiesces in the dog being kept there by the owner, can be held liable as a “harborer” of the dog).

Exceptions to Liability

In addition to the explicit exceptions set forth in the statute (i.e., if the injured person is trespassing, committing a criminal act, or otherwise tormenting/abusing the dog), case law has carved out a couple of additional caveats. The first is that an injured person cannot recover if they were a harborer or keeper of the dog. For example, in the Lewis case cited above, a pet groomer was determined to be a “keeper” of the dog during the time it was in the groomer’s possession and control. In that instance, the pet groomer likely could not recover against the owner of that dog under the statute for any injury the dog caused while under the groomer’s possession and control – i.e., while he or she was a “keeper.” The same would presumably be true for a veterinarian. Similarly, as set forth in the above Buettner case, a live-in girlfriend can likely not recover against her boyfriend who is, technically, the owner of the dog. In other words, an owner is likely not strictly liable to a keeper or harborer under the statute for injuries that occur while the injured person is considered a keeper or harborer.

Landlord/Tenant Liability

Another niche of the case law interpreting the Ohio Dog Bite Statute exists relative to landlord/tenant situations, i.e., situations where an injured person seeks to hold a landlord liable for injuries sustained after an attack by a tenant’s dog. The cases throughout Ohio tend to be fairly fact specific as to this issue. Most courts have held that landlords can be liable if the attack occurs in a common area (such as a hallway or foyer). See Weisman v. Wasserman, 2018-Ohio-290, 2018 Ohio App. LEXIS 335 (Ohio Ct. App., Cuyahoga County 2018) (finding that a landlord was not entitled to summary judgment where the dog attack occurred in a hallway, which could potentially be considered a common area). The critical question is whether the tenant retained exclusive possession and control over the area in which the attack occurred. See Pangallo v. Adkins, 2014-Ohio-3082, 2014 Ohio App. LEXIS 3018 (Ohio Ct. App., Clermont County 2014) (landlord was not a harborer of the dog because the incident did not occur in a common area, but rather in an area where the tenant had sole possession and control).

It follows that landlord liability is perhaps more common in apartment complexes than, for instance, a situation where the tenant is renting an entire house (where there are likely not “common areas” and the tenant retains possession and control of the entire premises). Additionally, a landlord will generally not be liable where the landlord or lease explicitly prohibits dogs from being on the premises and does not know that about the dog, regardless of whether the attack occurs in a common area. See Lynch v. Lilak, 2008-Ohio-5808, 2008 Ohio App. LEXIS 4865 (Ohio Ct. App., Erie County 2008) (finding that the landlord could not be a “harborer” under the statute where the lease prohibited pets and the landlord did not know of the dog, or permit or acquiesce to the dog’s presence).

Practically speaking, how do these claims work?

Generally, when we evaluate cases, we focus on three key factors: liability, damages, and collectability. With the Ohio Dog Bite Statute, liability is typically a non-issue provided that one of the above-described exceptions does not apply. We also look at damages (such as medical expenses, lost wages, and anxiety when faced with dogs in the workplace). Often, the clients we represent in these cases were treated in an ER setting, were forced to miss some work, have scarring, etc. and are, thus, entitled to compensation for those damages in addition to pain and suffering. Where many cases become complicated is the collectability aspect – in other words, even if we get a judgment against the liable party, will they be able to pay it or do they have assets to which we could attach in satisfaction of that judgment? However, many homeowner’s insurance policies cover liability for injuries caused by the homeowner’s dog, making the collectability question a bit of a non-issue as well.

Conclusion

We understand that it can be difficult to navigate this fairly nuanced area of the law, which, as we’ve seen, is full of misconceptions, exceptions, and caveats. If you have been injured by a dog, we would love to meet with you and walk you through some of your options – at no charge.

For help defending against or pursuing a dog bite claim, contact Casey Jones at 513.943.5673.

 

 

Ohio Estate Planning: Advantages of living trusts 

Author By Isaac T. HeintzPosted on

An inter vivos trust is a trust created during a person’s lifetime that becomes effective while that person (“Grantor”) is living.  As an inter vivos trust operates during the lifetime of the Grantor, it is commonly referred to as a “living trust.”

The Grantor may want to create a living trust, but may also desire to retain an interest in the trust property and control over its management, such as serving as Trustee, receiving all of the income, retaining the power to revoke or amend the trust, and keeping the right to change the beneficiaries.

Living trusts are not for everyone. Anyone considering a living trust should consult with an estate planning attorney to discuss the potential benefits and disadvantages for such person’s individual situation.

The following is a summary of some advantages of living trusts:

Provide For and Protect Beneficiaries.  The Grantor’s desire to provide for and protect someone is probably the most common reason for creating an inter vivos trust.

Minor Children.  Minor children lack the legal capacity to manage property.  A trust permits the Grantor to make a gift for the benefit of a minor without giving the minor control over the property or triggering the necessity for the minor to have a court-appointed guardian to manage that property. A trust is also more flexible and allows a Grantor to have greater control over how the property is used when contrasted with other methods, such as a transfer to a guardian of the minor’s estate or to a custodian under the Uniform Transfers to Minors Act.

Individuals Lacking Management Skills.  An individual beneficiary may lack the skills necessary to properly manage the trust property. This could be the result of a mental or physical disability, or a lack of experience in making prudent investment decisions.  By putting the money under the control of the trustee with investment experience, the Grantor increases the likelihood that the beneficiary’s interests are served for a longer period of time.

Spendthrifts. Some individuals may be competent to manage property, but are likely to use it in an excessive or frivolous manner.  By using a carefully drafted trust, a Grantor can protect the trust property from the beneficiary’s own excesses, as well as the beneficiary’s creditors.

Under the laws of the State of Ohio, the Grantor may protect trust assets by including a spendthrift provision. A spendthrift clause does two things: (1) it prohibits the beneficiary from selling, disposing of, or otherwise transferring the beneficiary’s interest, and (2) it prevents the beneficiary’s creditors from reaching the beneficiary’s interest in the trust. The spendthrift provision permits the Grantor to carry out the Grantor’s intent of benefitting the designated beneficiary, but not the beneficiary’s assignees or creditors. Grantors typically include spendthrift restrictions in a trust because they protect beneficiaries from their own lack of management of the trust property, or from disposing or selling of trust property, and also protects assets from the beneficiary’s personal creditors.

Persons Susceptible to Influence.  When a person suddenly acquires a significant amount of property, that person may be under pressure from family, friends, or other individuals or organizations who wish to share in the windfall.  An inter vivos trust can make it virtually impossible for the beneficiary to transfer trust property to other people or organizations.

Retain Flexibility.  The Grantor may restrict the beneficiary’s control over the property in any manner the Grantor desires, as long as the restrictions are not illegal or in violation of public policy.  This flexibility allows the Grantor to determine how the trustee distributes trust benefits, such as by spreading the benefits over time, giving the trustee discretion to select who receives distributions and in what amounts and frequencies, requiring the beneficiary to meet certain criteria to receive or continue receiving benefits, or limiting the purposes for which trust assets may be used, such as health care or education.

Revocation and/or Amendment.  The Grantor may amend, or even revoke, a revocable inter vivos trust during the Grantor’s lifetime.

Trustee.  The Trustee is responsible for handling the assets held in the trust, including distributing the assets according to the terms of the trust document.  Thus, the Grantor has the flexibility of designating the individual or corporate trust department of the Grantor’s choosing to serve in the role as Trustee.

Avoid Probate.  Property in an inter vivos trust or received by the trust as beneficiary upon the death of the Grantor is not part of the Grantor’s probate estate. The property remaining in the trust when the Grantor dies and all property received by the trust, is administered and distributed according to the terms of the trust; it does not pass under the Grantor’s Last Will and Testament nor by intestate succession.

Reduction in Administration Expenses.  Some expenses incurred in the administration of a probate estate include attorney’s fees, fiduciary fees, appraisal fees, and court costs. The use of an inter vivos trust may be effective to reduce these expenses because less (if any) of the decedent’s property would pass through the decedent’s probate estate.

Increased Privacy.   All probate estate proceedings are public record, and can be viewed by anyone.  Documents filed in an administration of a probate estate include, but are not limited to, the inventory of all of the decedent’s probate assets, with the date of death value of each.  Further, the names of the beneficiaries of a probate estate, as well as the assets distributed to the beneficiaries, are also public record.  By the use of an inter vivos trust, the Grantor can keep private the extent of the Grantor’s assets and their disposition.

Avoidance of Ancillary Administration for Real Property Located Outside the State of Ohio.   If a decedent owned out-of-state real property, the decedent’s Last Will and Testament is probated in the county of the decedent’s residence, with some type of ancillary administration being necessary in the state or county in which the out-of-state real property is located. This ancillary administration can be expensive, inconvenient and time-consuming, and can be avoided if the property passes by way of an inter vivos trust.

 

Finney Law Firm and Dusty Rhodes to Present on Property Valuation

Author By Christopher P. FinneyPosted on

Hamilton County Auditor Dusty Rhodes and Finney Law Firm attorneys Chris Finney will present on Property Tax Reduction at the Greater Cincinnati Real Estate Investors Association (REIA) meeting on February 6, 2020, at the Holiday Inn North, 5800 Mulhauser Road, West Chester, Ohio 45069. Directions here.

The meeting begins with dinner at 5:30. Our presentation begins at 6 PM.

The meeting is open for free to all REIA members. First-time attendees can obtain a free guess past here.

Learn more about REIA here.

Auditor Rhodes has presented on this topic with Finney Law Firm numerous times to great appreciation from home owners and investors alike. We appreciate the opportunity to “pull back the curtain” and help property owners understand the process involved in bringing a successful challenge to your property’s valuation.

Remember if you plan on filing a challenge to the value of your property in Ohio, the deadline is March 31.

Constitutional Law: Attorney Curt C. Hartman featured in Washington Times on impeachment issues

Author By Christopher P. FinneyPosted on
Attorney Curt C. Hartman

OK, this does not happen every day.

Yesterday the views of attorney Curt C. Hartman, of counsel to Finney Law Firm, were featured in the pages of the Washington Post on the impeachment proceedings underway in the United States Senate.

You may read the article here.

Curt Hartman helps lead the Finney Law Firm public interest practice, which includes Constitutional Law. Three times his briefing brought us to 9-0 wins before the US Supreme Court and numerous  victories in federal and state Courts of appeals as  well as the Ohio Supreme Court.

You may reach Curt at 513.943.6650.

Ohio Probate Administration: Successfully enforcing the rights of a surviving spouse

Author By Casey A. JonesPosted on

Finney Law Firm prevails in “Mansion House case” through Ohio Supreme Court

Attorney Casey A. Taylor

Recently, our firm had a probate decision make its way all the way up to the Ohio Supreme Court as part of joint effort by Attorneys Isaac T. Heintz of our transactional team and Casey A. Taylor of our litigation team.

While the precise legal issues in that case were somewhat idiosyncratic (and certainly underutilized), the underlying situation in that case was not all that unique. That is, our firm has been approached on more than one occasion by an individual whose spouse has passed away and, to their surprise (or perhaps not), had disinherited them before their passing.

Many times, the surviving spouses are left believing they have no recourse and will be left with pennies on the dollar relative to the decedent’s estate. However, that is not always the case.

A Surviving Spouse’s Right to Purchase Assets from Decedent’s Estate

Under Ohio law, a surviving spouse has the right to purchase certain assets from an estate at the appraised value, including “the mansion house.” See R.C. 2106.16 (providing the right to purchase “the mansion house, including the decedent’s title in the parcel of land on which the mansion house is situated and lots or farm land adjacent to the mansion house and used in conjunction with it as the home of the decedent” at its appraised value, provided that it is not specifically devised/bequeathed to someone else).

The “mansion house” is often not an actual mansion, as the name would suggest but, generally speaking, can be thought of as the decedent’s primary residence. See id. (“. . . as the home of the decedent.”) (emphasis added). Additionally, if there is a farm associated with the mansion house, which is used in connection with the home (and not a commercial farming operation), the farm should also be subject to the surviving spouse’s right to purchase.

The statute, however, is not limited to the “mansion house” but also may apply to household goods and other personal property under certain circumstances. Although it is typically not the focal point of a surviving spouse’s rights, R.C. 2106.16 can provide an opportunity for a surviving spouse to promote a more expeditious resolution of an estate and, if the facts and circumstances are right, benefit monetarily.

As a threshold issue, R.C. 2106.16 only applies to assets that are, “not specifically devised or bequeathed.”  A specific devise or bequeath occurs when a Will specifically references a designated asset transferring to a particular party (e.g., I give to John Doe the real estate located on 123 General Street, Anytown, Ohio).

A residual devise/bequest, by contrast, almost never qualifies as a specific devise/bequest (e.g., I give to John Doe the rest, residue and remainder of my estate).  As long as the asset in question is not subject to a specific bequest, R.C. 2106.16 may be an option as to the asset in question.

R.C. 2106.16 – the “Mansion House Statute” – Applied in Real Life

Not only can the exercise of this right allow the surviving spouse to purchase and, at his or her election, remain in the home that served as the decedent’s residence (and, perhaps, as the surviving spouse’s residence too, though this is not required – keep reading. . . ), but it can also serve to maximize an otherwise disinherited spouse’s share under the decedent’s estate. For instance (and especially where the mansion house appraises for less than the surviving spouse believes it is worth), a practical, yet largely overlooked strategy available to surviving spouses is to purchase the mansion house (or another undervalued asset contemplated under the statute) and immediately sell it to a third-party purchaser for a higher price. R.C. 2106.16 imposes no requirement that the surviving spouse maintain ownership of the mansion house/asset for any set period of time.

Thus, if the subsequent sale generates excess proceeds, those proceeds would belong to the spouse. In this scenario, even a disinherited surviving spouse who would otherwise take very little under the decedent’s estate may be able to pocket a significant amount by capitalizing on the difference between the appraised value and market value/purchase price of a sale to a subsequent buyer, consistent with his or her rights under R.C. 2106.16.

Further, there may be instances where the purchase of one or more assets by the surviving spouse (or the threat of him/her purchasing) could help facilitate a resolution or settlement of the decedent’s estate. For example, if the asset is desired by the executory/adverse party, he or she may seek a prompt resolution if that asset is in jeopardy, or the surviving spouse could otherwise use his or her right to purchase as a bargaining chip of sorts.

These are just a couple of ways that R.C. 2106.16 could be used to the benefit of a surviving spouse in an otherwise less-than-ideal situation in a practical sense. This is an area where our firm excels – we have a well-rounded team, with experience in diverse areas of the law and real estate, who come together to develop innovative solutions for our clients.

Our Case

In our “Mansion House” case, our client was a surviving spouse asserting her right to purchase the home and farm owned by her husband, which served as his primary residence. The executor of the decedent’s estate challenged our client’s right to purchase the home/farm, arguing primarily that she (the surviving spouse) did not live at the home/farm full time at the time of her husband’s (the decedent) death. In essence, the executor wished to impose a residency requirement on the surviving spouse where the statute only contemplates the residency of the decedent. Though more secondary arguments, the executor also asserted that:

  • the property was somehow specifically devised by virtue of the residuary clause in the decedent’s will and, thus, excluded from the purview of R.C. 2106.16 (conveniently, the executor was the beneficiary of the residual and desired the home/farm), and that
  • if the decedent’s home was the “mansion house,” and if our client had a right to purchase it, that right did not extend to the farmlands adjacent to the home because they were a separate parcel.

The trial court rejected all three of the executor’s arguments and found for our client (i.e., that the home/farm at issue was a “mansion house” under that statute and that our client was entitled to purchase it at its appraised value). Specifically, the trial court found that the plain language of the statute does not impose a residency requirement on the surviving spouse – the “mansion house” is the home of the decedent.

Additionally, the residuary clause contained no specific devise of the property at issue. And lastly, the statute (R.C. 2106.16) explicitly contemplates “lots or farm land adjacent to the mansion house” and used in conjunction therewith. On appeal by the executor, the Twelfth District Court of Appeals unanimously upheld the finding in our client’s favor. You can read the full appellate decision HERE (link to 12th Dist. Decision).

In a final effort to thwart our client’s purchase of the property, the executor sought discretionary review from the Ohio Supreme Court, arguing that the question was a great issue of public importance. The High Court, however, declined to exercise its jurisdiction to hear the case, leaving the lower court decisions for our client undisturbed.

Conclusion

This was a very favorable outcome for our client and our firm, and we take pride in our ability to deliver creative solutions to our clients’ unique, and often difficult, legal questions. If you would like to speak someone regarding estate planning or any other legal questions you may have, please don’t hesitate to reach out to us.  You may reach Isaac Heintz at 513.943.6654 and Casey Taylor at 513.943.5673.

 

Ohio Employment Law: Many more workers now entitled to overtime pay.

Author By Stephen E. ImmPosted on

The Fair Labor Standards Act (“FLSA”) is the federal law requiring employers to pay time and a half to most employees who work more than 40 hours in a work week. On September 23, 2019, the Department of Labor issued some new rules that significantly changed the overtime requirements of the FLSA. These new rules took effect on January 1, 2020.

By far the most important of these changes has to do with which employees are considered “exempt“ from the overtime laws. To be considered exempt, an employee must meet two conditions: (1) they must be performing a category of work recognized as exempt, and (2) they must be receiving a regular salary that normally does not vary based on the amount of hours they spend working. Furthermore, in order for the exemption to apply, the salary the employee receives has to be above a certain threshold. That threshold is where the new rules come into play.

Under the old rule, an otherwise exempt employee who was paid a salary of as little as $23,660 a year ($455 a week) was not eligible to be paid overtime when they worked more than 40 hours. On January 1, however, that amount was increased to $35,568 a year, or $684 per week.

As a result of this change, it is estimated that approximately 1.3 million salaried workers who were previously exempt, and were not entitled to overtime pay, will now be eligible to get time and a half their regular rate of pay whenever they work more than 40 hours in a work week.

For employers who employ workers like these, this does not just mean having to pay overtime when they did not have to pay it before. It also means they now have to keep close track of the hours such employees work. There is no obligation to keep track of the hours of “exempt“ employees, but now a great number of previously exempt employees will be considered non-exempt, and their hours will have to be tracked.

If you are an employer or employee who may be impacted by these important new rules, and need guidance on your rights and responsibilities, be sure to seek competent legal counsel as promptly as possible. Mistakes in this area can be very costly.

If you have  questions about the FLSA, consider speaking to one of the labor and employment attorneys at the Finney Law Firm: Stephen E. Imm (513-943-5678) or Matt Okiishi (513-943-6659).

 

Ohio Employment Law: Can an employer keep employee tips?

Author By Matthew S. OkiishiPosted on

Tipping employees in various service professions (barbering, food service, etc.) is as American as apple pie. Unfortunately, the retention of employee tips by employers is a less common, but nonetheless pervasive, practice. Both employers and employees would do well to note that an employer’s retention of any employee tips (except as part of a valid “tip pool”) is illegal, as the 2018 amendments to the Fair Labor Standards Act (“FLSA”) make clear.

It was not always this way. For example, prior to the 2018 amendments, federal appellate courts were split on the issue of whether an employer could keep employee tips if the employer paid the employee above the minimum wage.

But the law has changed, and both employers and employees should know that employees have a right to demand and receive the tips paid by customers. The gains that employers can expect from skimming tips are simply not worth the risk of being caught in a lawsuit. In addition to requiring employers to pay the full amount of improperly withheld tips, the FLSA further entitles employees to additional liquidated damages, which is an amount equal to the improperly withheld tips, plus attorneys’ fees  and expenses. (This means a court award of double the actual damages of the wrongfully withheld tips plus the attorneys fees and expenses of the litigation.)

Because the FLSA is a federal law, it applies to nearly all employers and employees in the United States, including those in the Cincinnati tri-state area (Ohio, Kentucky, and Indiana).

If you are an employee who has been shorted on their tips or an employer who needs to update its policies to accommodate the requirements of the FLSA, consider speaking to one of the labor and employment attorneys at the Finney Law Firm: Stephen E. Imm (513-943-5678) or Matt Okiishi (513-943-6659).

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