Over the last several years, the Indiana General Assembly has given considerable attention to the regulation of Homeowner’s Associations (“HOAs”). The 2013 session was no exception. Effective July 1, 2013, House Bill 1084 created new requirements for HOA recordkeeping and access. HOA’s must now keep certain records and make them available at the request of their Owner – Members. Those records are:

- The HOA’s financial records, including all contracts, invoices, bills, receipts, and bank records, of a homeowners association must be available for inspection by each member of the homeowners association upon written request. A written request for inspection must identify with reasonable particularity the information being requested. A member’s ability to inspect records under this section shall not be unreasonably denied or conditioned upon provision of an appropriate purpose for the request. This “appropriate purpose” basis for HOA records requests is a requirement under the Indiana Non-Profit Corporation act, which was the prior standard for HOA records requests. This is no longer the case under the new Act.

- Other communications are also excluded. An HOA is not required to make available to a member for inspection: (1) unexecuted contracts; (2) records regarding contract negotiations; (3) information regarding an individual member’s association account to a person who is not a named party on the account; (4) any other information that is prohibited from release under state or federal law; or (5) any records that were created more than two (2) years before the request. For instance, this may include information pertaining to debt collection records which may be regulated by the Federal Fair Debt Collection Practices Act.

These new regulation provide a new minimum level of access to an HOA’s records by its members. However, if an HOA’s own documents provide for greater records access to its members, these new regulations would not limit those existing standards or would prevent an HOA from increasing its access to records to its members. The bill also recognized the costs that can arise from keeping and producing these records that previously may not have been required to be available. An HOA may not charge a fee for the first hour required to search for a record in response to a request for records. After the first hour, however, an HOA may charge a search fee for any time that exceeds one (1) hour of up to $35.00 per hour, pro-rated for any partial hours over the first hour, for a total fee not to exceed $200.00.

HOA Board members and their managers should implement new practices to collect and catalogue the required records. For instance, this might include collecting and keeping communications not previously saved in the HOA’s records, such as e-mails between Board Members and / or the HOA’s management concerning a potential covenant enforcement matter, written third-party complaints to the HOA about a lot, or architectural approval request forms or written communications. An HOA may not have previously kept these items. These types of written communications would now need to be kept a minimum of two years. If an HOA does not presently keep a record of those communications, it should develop a method to do so. Board members should also be mindful that email communications between Board members about a lot, regardless if there is a dispute, would need to be catalogued and saved for the required two years. Therefore, copying management into all such communications to capture the records is advisable. Or, for self-management communities, designating a board-member, ideally the Board Secretary, to keep these records would be advisable.

These new standards, however, do not mean that oral communications, such as phone calls or face to face conversations about a lot need to be transcribed and made into a record. Likewise, these new requirements do not necessarily apply to matters not involving a particular lot or the financial records designated; for instance, a written communication between board members concerning where to deposit reserve funds, common property maintenance, or a governmental issue.

JEFFREY M. BELLAMY is a Partner with the Indianapolis law firm of Thrasher Buschmann & Voelkel, P.C., where he counsels clients in the areas of real estate, land use and litigation. He regularly represents homeowner’s association boards and their managers throughout central Indiana. He earned his B.S., M.A., and J.D. degrees from Indiana University. Mr. Bellamy is a member of Indianapolis Bar Association Land Use Law Executive Committee, a 2009 graduate of the Indianapolis Bar Association’s Leadership in Law Series and a 2013 Superlawyers “Rising Star” in the area of Real Estate and Litigation. Jeff can be reached by telephone at (317) 686-4773 or e-mail at bellamy@indiana-attorneys.com.

If you hire employees in Indiana, you need to read this article. On July 1, 2013, a new law came into effect in Indiana regarding the expungment of arrest and conviction records in Indiana. This new law was aimed at allowing people who have been arrested but not convicted and those who have been convicted of certain classes of crimes to have their records expunged and sealed by the Court.
This law affects businesses that hire employees in Indiana in two different ways.

First, the law makes it very clear that employers now have to change the questions they ask on employment applications and in interviews.

Indiana Code § 35-38-9-10 (a) states that it is unlawful discrimination to refuse to employ a person because of conviction or arrest record that has been expunged or sealed under Indiana law. This means that an employer cannot refuse to hire someone due to an arrest or conviction if that arrest or conviction has been expunged or sealed.

Does that mean an employer can still ask about that conviction so long as the employer does not discriminate against them because of it? Well, no… The law goes on to state that, “[i]n any application for employment, a license, or other right or privilege, a person may be questioned about a previous criminal record only in terms that exclude expunged convictions or arrests, such as ‘Have you ever been arrested for or convicted for a crime that has not been expunged by a court?’” See Indiana Code § 35-38-9-10 (c).

Therefore not only can an employer not fire a person for the expunged conviction, they also cannot even ask about the expunged conviction when they hire a person. If an employer is deemed to have discriminated against a person due to an arrest or conviction that has been expunged, that employer commits a class C infraction and can be held in contempt of Court for that action. Further the employer can be enjoined for committing such discrimination. A Class C infraction is punishable by a fine up to $500.00.

Although the law does not state it is an infraction to have the wrong question in the application or during an interview, the statute is clear that the employer cannot discriminate and goes on to state the exact question that may be asked by employers. Therefore a Court will not have to take much of a leap to find that by having the wrong question in the application the employer is discriminating against the person seeking employment. It is strongly advised that employers change their employment application and the questions they ask during interviews to comply with the statute.

The second way employers are affected by this new Indiana law involves with what can admitted as evidence if the employer is sued by a third party for negligence or other fault. The new Indiana law states that in an action for negligent hiring the conviction that has been expunged CANNOT be used as evidence against a person or entity. Here is an example of that situation:

XYZ Property Management Company hires Joe Doe. Joe Doe had a theft conviction on his record but that conviction was expunged. Therefore, when XYZ Property Management hired Joe, Joe did not have to disclose the conviction. One day Joe goes into one of the properties managed by XYZ Property Management and steals jewelry from the occupant. After Joe is caught the owner of the jewelry sues XYZ Property Management alleging negligent hiring of Joe. In that situation the evidence of the expunged conviction CANNOT be admitted as evidence against XYZ Property Management to support the contention that XYZ Property Management was negligent in their hiring of Joe Doe.

The new Indiana law also states that if there is a judicial or administrative proceeding alleging negligence or other fault against an employer, then the order of expungment CAN be introduced by that employer to show that an employer exercised due care hiring or retaining a person who had their record expunged. Here is an example of how this could work:

XYZ Property Management Company hires Joe Doe. Joe Doe previously had a theft conviction on his record but that conviction was expunged. Therefore, when XYZ Property Management hired Joe, Joe did not have to disclose the conviction. One day Joe goes into one of the properties managed by XYZ and steals jewelry from the occupant. After Joe is caught the owner of the jewelry sues XYZ Property Management alleging that XYZ Property Management was negligent in hiring Joe. XYZ Property Management could introduce the expungment to show that they had no reason to know of the conviction.

The bottom line is that this law makes the hiring process a bit more difficult in that employers now have to make sure not to request any information about expunged convictions or arrests. It should be noted that this article is geared toward employers, but the prohibition against discrimination applies in any decision to suspend; expel; refuse to admit; refuse to grant or renew a license, permit or certificate necessary to engage in any activity, occupation or profession; and any other type of discrimination against a person because of an expunged or sealed conviction or arrest record. Therefore the prohibitions against discrimination apply in rental and school applications too.

If you would like more information about the new expungment law or would like to see if your employment application is in compliance with the law, please contact Laura Conway at 317-686-4773 or Conway@indiana-attorneys.com.

Eviction actions can be emotionally unpleasant for landlords and tenants. Even the most diligent landlords who have gone to great lengths to screen potential tenants will encounter times when an eviction is a necessary step. Evictions in Marion County, however, are unlike evictions in the other Indiana counties. As a result, Marion County evictions also can be financially unpleasant for landlords under certain circumstances, even when the evidence is clearly in the landlord’s favor.

The Marion County Small Claims Court system is divided into nine distinct townships. Generally speaking, most residential landlords bring eviction actions in one of these courts rather than in the Marion Superior Courts. The amount of damages sought by a landlord generally is less than $6,000, the statutory maximum amount recoverable, so it is quicker and cheaper to proceed in small claims court. Once an eviction action is filed in the township court where the leased property is located, the issues of possession and damages are typically bifurcated into two separate hearings.

The first hearing is limited to the issue of possession of the leased property. Generally, if a tenant is behind in his or her rent, the Court will award a landlord possession of the leased property, reflected in a court order. Often, the township constables will not permit execution on the possession order until at least one week after the Court awards possession and issues its “writ of restitution.” In those situations, a landlord will be required to contract with a moving company, storage facility, and a locksmith to remove the tenant’s personal belongings and to adequately secure the leased property. Although these costs may be reflected in a judgment after a damages hearing, they can be significant if the tenant has substantial personal property to remove and store.

After the Court awards possession, the Small Claims Court rules permit tenants to appeal the possession order before a decision has been made on the issue of damages. Some township courts will even directly inform the tenant of his or her ability to appeal the possession order. In other words, a landlord may have followed all appropriate procedures: hired an attorney to file an eviction; obtained an award of possession; hired a moving company for an eviction, only to have the tenant pay the appeal fee and cause the entire eviction matter to begin anew in the Marion Superior Courts. It is unclear if this result was the intention behind the rules governing Marion County Small Claims Court appeals.

Pursuant to Indiana’s appellate rules, a party possesses the automatic right to appeal a “final judgment.” A final judgment, according to Indiana’s appellate rules, generally will be a judgment that “disposes of all claims as to all parties.” In Marion County, however, appeals from the Marion County Small Claims courts do not go directly to the Indiana Court of Appeals, rather they are taken to the Marion Superior Courts and the case starts over (de novo). Marion County’s local rules permit any party to “appeal from the judgment of the Marion County Small Claims Court” without discussing whether a judgment must be final.

By not requiring that appeals be taken only from final judgments, the eviction process for landlords in Marion County can become rather tumultuous and costly compared to the burdens placed on a delinquent tenant. While unusual, if a case is appealed to the Marion Superior Courts, it can take months to obtain a pre-judgment order of possession and a writ of assistance to have a tenant forcibly removed. In the meantime, the tenant can remain in the leased property and continue to avoid paying rent. Despite these procedural obstacles and astronomical costs, a landlord generally must remain forthright in pursuing the eviction in order to regain possession of the leased property and begin searching for a viable stream of rental income. This perseverance is necessary even if the prospects of collecting a large monetary judgment from a nonpaying tenant are miniscule.

To avoid this scenario, it is important to consider informally agreeing with a tenant to a consent judgment on the issue of possession. Alternatively, it may be prudent to write into a lease specific waivers with regard to how a potential eviction matter may proceed in the Marion County courts. Still, those provisions may not be enforced by a given court.

Quite obviously it is essential to gather extensive information about tenants prior to agreeing to any lease. Furthermore, a landlord must be diligent in pursuing eviction upon the tenant’s initial breach of the covenant to pay rent. Unfortunately, the plans established in the Marion County Small Claims Task Force’s May 1, 2012 Report on the Marion County Smalls Claims Courts do nothing to help avoid this disproportionately burdensome effect on landlords. If anything, the plans make it more difficult and less efficient to reach informal resolution of possession issues with tenants. Hopefully, the Marion County Small Claims Task Force or other appropriate body will soon recognize the need for reform to the appeals process when there is clear evidence that a landlord is entitled to possession of his or her real estate.

For questions regarding this article or for additional information, please contact the author via email at donham@indiana-attorneys.com.

There is an old saying that an ounce of prevention is worth a pound of cure. This saying is sometimes forgotten by business owner – especially when looking at the cost of hiring an attorney.

Attorneys are a necessity in today’s business environment. No business would operate without insurance. But many businesses choose to operate without obtaining the advice of an attorney. It is only when something happens, such as a lawsuit, notice that the business has violated some regulation or the other party to a contract fails to keep up their end of the deal that the lawyer is called. By that time though, it is usually too late to prevent the problem and the lawyer comes in at a point where they are required to cure the issue. Attorneys are like insurance in that they know the various issues that can arise with a business and can help a business owner prevent a problem.

Every business is regulated by some law, whether it is a local, state or federal law. The laws and regulations govern everything from how your pay your employees to how your dispose of any hazardous materials. No business is immune from government intervention. Attorneys can help a business navigate the various laws and regulations and come up with a plan to prevent the various penalties that can come from a violation of those laws and regulations.

Contracts are also part of every business. These contracts can range from one year cell phone contracts to ten year leases for offices space to the invoices that the business sends to its customers. Though not all contracts require attorney review, each business owner should consult with their attorney to determine what kinds of contract should be reviewed by an attorney.

Though the list is endless, here are just a few areas that could pose trouble for business owners:

• Employee relations
• Collections
• Rental/Purchase of space

Employee relations

Various issues can develop with employees, including, but not limited to, discrimination claims, workers compensation claims, unlawful firing claims, and wage disputes.

Have a good employee manual and keeping good records of matters regarding your employees are two measures that will go a long way in preventing and/or helping with problems that may occur.

The employee manual serves two main purposes.

First, it serves as a guideline for new and existing employees as to the expectations for their behavior and as to the businesses policies. Employees will not have the ability to claim they did not know what the rules were when the rules are printed in an employee manual that each employee is required to review and sign. Second, the employee manual serves as evidence of the businesses policies if there is a later claim for discrimination or unlawful firing.

Good record keeping helps in preventing and defending against claims of discrimination and unlawful firing. Having a record of when an employee was disciplined and the result of the discipline conversion will go a long way in preventing a claim for discrimination or unlawful firing. Records as to the hours of your employees will help in a defense against a wage claim by both the government and by an ex-employee.

An attorney can help a business owner develop the employee manual and guide the business as to what kinds of records to keep regarding employee matters.

Collections

Finding the customers is only half the battle with a business. The second half is collecting the money that is owed by the customers. Given the nature of some businesses and today’s economy, sometimes a business does not have the ability to collect all the funds for their goods or services up front.

Unless a business collects all its funds up front, it needs to have a solid contract that allows for the collection of interest and attorneys fees in the event the customer does not pay what is owed after the goods or services are provided Also helpful is having consistent collection practices; including credit checks before providing credit to customers, taking deposits on orders over a certain amount, requiring guaranties from individuals when the customer is a business and refusing future orders until past due invoices are paid. Not every strategy will work for every business, therefore, these and other collection strategies should be discussed with an attorney.

When a business does have to collect past due amounts from its customers, having information such as the bank account and social security or EIN numbers is important.  The information will make it easier to collect on any judgment obtained.

Have a lawyer review the contracts and provide guidance as to the information is needed from customers is critical in allowing a business to stay on top of its receivables.

Rental/Purchase of Space

Every business needs space to function, whether it be the owners extra bedroom, an office suite, or a standalone manufacturing facility with multiple buildings and acreage. Whatever space the business is in, it needs to have its attorney review any lease or purchase agreement it enters into with third parties.

For leases, the attorneys’ job is to make sure the business understands the lease it is entering into and the various areas of the lease that may cause trouble for the businesses, such as business hour requirements and extra costs that may be due to the landlord.

If the business is purchasing or selling a building, one of the attorneys’ roles is to make sure the liability of the business is limited in the event there is an issue with the property at a later date. The attorney can also help the business owner determine what inspections and other items are necessary.

In almost every situation, the money spent by a business in having the attorney help it prior to there being a problem will be paid back in the peace of mind gained and the issues that will be prevented in the future.

The attorneys at Thrasher Buschmann & Voelkel, P.C. provide the services discussed in this article as well as well as defense of various claims, collection of past due amounts, and defense against governmental claims.

Each year, homeowners in subdivisions and condominiums throughout Indiana complain to their state legislators regarding real and perceived problems with their neighborhood associations.  Those elected officials respond each year by introducing a variety of legislation designed to solve the problems of their constituents.  This year was no different.  There were a number of legislative initiatives, some potentially catastrophic, that were introduced into the 2011 Session of the Indiana General Assembly. Fortunately only a few became law.  However, those bills will have an impact on the operation of homeowners associations in Indiana. This article will discuss the 2011 initiatives that became law.

House Enrolled Act Bill 1058

The Indiana Attorney General is granted certain authority in cases where non-profit corporations do not act within their guidelines or where government officials misspend public funds.  Current law exempts homeowners associations from this regulation.

House Enrolled Act 1058 allows the Indiana Attorney General to bring a legal action against an HOA board of directors or an individual director, if the Attorney General finds that :

(1) the association’s funds have been knowingly or intentionally misappropriated or diverted by a board member; or

(2) a board member has knowingly or intentionally used the board member’s position on the board to commit fraud or a criminal act against the association or the association’s members.

This legislation will not allow the Attorney General to become involved in assessment collection actions or in disputes regarding covenant enforcement or maintenance responsibilities.  However, in cases where one or more of the board members knowingly or intentionally misappropriate or divert funds or commit fraud or criminal acts, the Attorney General may step in.

Legislative committees heard testimony about instances where board members paid themselves exorbitant sums to perform work in the neighborhood; where board members appropriated significant sums of money for projects that benefited only themselves; and in one case where a board loaned significant sums of association money to a friend of the board members. These are the types of conduct where the Attorney General may become involved.

Under the Act, a Court could enjoin the improper conduct or could order a board member to make restitution; to be removed from the board and/or to reimburse the State for the reasonable costs of the attorney general’s investigation and prosecution of the violation.

This Act will not impact board members acting within the scope of the covenants and in the best interests of the neighborhood.  However, in those cases where the conduct of a board or a board member is clearly outside the scope of reasonable behavior, the Attorney General may become involved.

House Enrolled Act 1541

This act prohibits “transfer fee covenants”.  The use of Transfer Fee Covenants has not yet reached Indiana, but has become prevalent in some western states.  In those states, finance companies will enter agreements with developers where the finance company pays an up front  lump sum to the developer in exchange for a “transfer fee covenant” that will impose a transfer fee, usually in the 1% range, every time a residence in the neighborhood is sold, for the next 100 years. The finance company assumes it will make a profit over time on each sale.  The fee provides no benefit to the neighborhood or the Association.  Several states, now including Indiana, have outlawed this practice.

The Act has been written so that it does not prohibit standard charges by homeowners associations or their management companies, for processing the paperwork for transfers of homes within the subdivision.

Senate Enrolled Act 155

This legislation initially dealt with tax warrants, but was amended to impact the collection of homeowner’s association assessment liens.

Under current Indiana law, a homeowner’s association can file a lien against a property if the owner fails to pay his/her assessments.  The current law provides that the association cannot foreclose that lien until at least one year after it is recorded.  This Act shortens the time period from one year to ninety days.  The waiting period is waived if someone else files a foreclosure action against the property or if the property owner issues a written demand that the association bring suit sooner.  This legislation will help homeowners associations in collection cases. .  .

The catastrophe that did not pass.

Senate Bill 144 was introduced to address the problem of children and drivers who drown in neighborhood retention ponds.

Many neighborhoods in Indiana have retention ponds, that were mandated by government authorities to deal with drainage issues.  Unfortunately, there have been a number of instances where vehicles have been driven into these ponds and/or where children have wandered into the ponds causing injuries and death.  Senate Bill 144 would have allowed local government entities to construct whatever types of barriers they deemed appropriate to prevent vehicles from driving into the ponds and to “child proof:” the ponds.  No input from the residents in the neighborhood was required.  The bill also provided that when the construction was completed, the government authority could then assess some or all of the residents in the neighborhood, at the sole discretion of the government authority, to pay the costs of work.

While the cause is noble, the implementation of the bill could have been catastrophic. The ponds were installed by developers at the request of and with the approval of local governing authorities. The homeowners were never part of the equation. The bill however, put the entire economic burden on the homeowners.

The issue should be addressed, but the method and the cost of addressing the issue needs significant further study.  Look for future legislation.

The Indiana General Assembly has passed legislation affecting the way homeowners associations conduct their business in each of the last several sessions.  You should expect more of the same in future sessions.

The construction job is complete.  Your invoice has been submitted to the customer.  However, several weeks have passed since you submitted the invoice and you have not been paid.  On your last day at the job site, the architect (or foreman, general contractor, building manager, homeowner, etc.) told you that he was delighted with your work, asked you for business cards to submit to colleagues and friends, and promised that you would be paid “but it might take a few extra days.” When you were out with your spouse during the weekend, you were sure you saw your customer at the ballgame (or grocery, trade show, department store, movies, etc.) but he put his head down and walked the opposite direction.  That is when you realized that you have a problem – you are not going to get paid.  Of course, your fears are confirmed when your phone calls or emails to the customer go unreturned or are returned at times when you are sure not to be in the office.

Mechanic’s liens can be an effective way to lower your risk when it comes to bill collection.  However, Mechanic’s Liens are not foolproof. Indiana’s Mechanic’s Lien laws are technical.  If you make a mistake with the lien requirements, that lien could be invalid.  Also, you may have been talked out of filing your lien by a general contractor – “I’m not getting paid either, buddy.  Don’t make waves because we’re all in this together.  The next draw is due any day now.”  Depending on the project, you only have a limited time to file your mechanic’s lien.  When that time expires, so do your lien rights.  Also, ‘no-lien’ contracts are common. By agreement, your mechanic’s lien rights are waived; or more likely, the ‘no-lien’ status of the work was offered as a ‘take it or leave it’ option as part of the request-for-bid stage.   Regardless, you still have an unpaid invoice and possibly laborers and material providers that want to be paid.  A mechanic’s lien is certainly not the only mechanism to getting an invoice paid or to lowering your collection risks.  Failing to timely file a mechanic’s lien, being party to a no-lien contract, or filing a flawed lien that is found to be unenforceable is not the end – you have other options.

The place to begin with collection problems is at the very start of the relationship by making sure you are using a good written contract. A good written contract, when used appropriately, can head off problems with your customer before they begin.  Ambiguity between the parties’ understanding of the contracted work, especially when working with homeowners, is a major source of dissatisfaction with a finished job and a customer’s reluctance to pay an invoice.  With homeowners, the contract negotiation stage will be your first chance to begin the process of educating them about construction standards and practices that you may take for granted as understood when working for a general contractor or colleague in the trades.  Use this chance to begin setting fair and reasonable expectations.  Material samples and photos of previous work done help in this regard.  By defining clearly the terms agreed upon, including a detailed scope of work, estimated time of completion, change order procedures, job finish specifications, type, brand and quantities of materials to be used and payment terms, your reluctant customer will less likely be disappointed with the end product.  Make sure to give your customer a few days to review the contract before you begin work.  Courts are less likely to enforce a contract in your favor if it was signed without first giving your customer the chance to read carefully the document and possibly get third-party review.  While not a collection issue, have a qualified attorney review your contracts to make sure they comply with the Indiana Home Improvement Contract and Warranty Statutes.

During negotiation of the contract, you may lower your collection risk by requiring the customer to pay a deposit, pay draws, or pay material suppliers directly. Using one or a combination of all these options will not protect you completely if a customer defaults, but it will cushion your fall if a customer refuses to pay.  Paying a deposit at the start of the job provides funds so you do not have to pay out of your own pocket to start the project.  Should the job be several weeks in length, requiring periodic payment of draws further reduces your risk and shortens the time between job completion and your final invoice.  While a deposit and periodic draw arrangement would be ideal, some jobs can be completed before a draw would be due.  In those cases, consider proposing payment of a deposit and direct payments by the customer to material suppliers.  If you do not know your customer well, he may be reluctant to make a significant prepayment to you.  Therefore, payment to the third party material supplier may overcome the customer’s anxiety and limit your risk.  This would leave you only with labor and profit as outstanding debts.  Not an ideal situation, but certainly better than the alternative of having materials outstanding, too.

Keep this in mind when negotiating – proposing deposits, draws, or direct material payments can act as a test; you are hiring your potential customers just as much as they are hiring you.  If a customer balks at all of these payment proposals, insists you start the job as soon as possible, refuses to make any payment until the job is complete and shows little if any interest in the details of the contract, be concerned, be very concerned. This is a customer you may want to think twice about working with.

On insurance restoration jobs, an additional term you can negotiate into your contract is an assignment of insurance proceeds directly to you or joint payment drafts to you and the customer. Insurance claim settlement amounts often will be calculated based on your and your competitors’ quotes after being reviewed by an adjustor or in conjunction with an inspection by an adjustor.  To accomplish this, you will, of course, need an agreement with your customer.  You may make this type of payment arrangement a requirement of your providing a quote to do the work.  Make sure that the assignment or joint payment agreement is in writing.  An attorney can prepare a simple assignment of insurance proceeds or joint payments agreement for you to use as an attachment to your written contract.

Keep in mind, if you and your customer agree to a direct assignment of insurance proceeds, the insurance company’s payment will be less the customer’s deductible.  Make sure your customer understands that he may have to make an additional payment to cover the deductible.  Consider getting that amount in the form of a deposit directly from the customer before work starts.  If you and your customer agree to the joint payment of drafts, make sure that your customer understands that he cannot negotiate that insurance payment with his bank without your consent.  The same goes for the contractor; the customer’s signature will be needed to negotiate the insurance check with your bank.  While this is a less preferred method than simply having the insurance proceeds directly assigned to you, it creates a type of escrow situation where both parties have to be in agreement before the insurance proceeds can be released.

If you file a lien but it has a technical flaw that makes it unenforceable or if the filing deadline passes before you could file the lien, all is not lost.  You may want to consider litigation for a breach of contract action or “unjust enrichment.” The difference between a breach of contract action and unjust enrichment is very simple:  Breach of contract actions are based on written contracts.  Unjust enrichment claims can be raised when materials or labor were provided to a customer without a written contract and the parties dispute whether or not they had an understanding or agreement. Again, using a good written contract has more benefits than just those mentioned above.  You should look at every contract you sign with the perspective of “what if I had to go to Court to enforce this document.”  If you have a customer who refuses to pay you and your lien period has expired or you entered into a no-lien contract, then you will likely have to walk away from the debt or go to Court to have the contract enforced.

If you made the mistake of doing a project without a written contract and your customer refuses to acknowledge that you had an understanding to do the work, then you also may be able to seek recovery from a Court for unjust enrichment.  The legal theory of unjust enrichment is that it would unfair to allow one party to be benefited by the labor and materials of another at the expense of the party who did the work.   It would be careless to think that unjust enrichment makes using a good written contract unnecessary.  However, for those instances where a contract was not used or, for whatever reason, was not valid, unjust enrichment provides a remedy for when a customer decides not to pay.

Of all these methods reviewed, including mechanic’s liens, the best way to avoid an invoice dispute is to deliver the job on time with a high level of workmanship, keep communication open, and never miss an opportunity to educate your client about your products and services. While unfortunate, there is a very small portion of the population who are professional deadbeats.  It is best to avoid doing business with them.  However, many invoice disputes are related to misunderstandings that could have been avoided.  Reinforce reasonable expectations in your client and refer to the contract if there are questions about your responsibilities.  Make sure to always use written change orders for additional work. If you implement these methods you will reduce invoice disputes, increase your bottom line profits, and raise your reputation in the building community by having more satisfied customers.

Once again the Indiana General Assembly has shown an interest in legislation regulating homeowners associations. Since our firm maintains an active presence at the General Assembly, we are often called upon to assist on this legislation.  Several proposed bills could significantly impact neighborhoods and neighborhood associations. They include various bills that would (1) allow the Attorney General to pursue HOA boards for fraudulent conduct or misappropriation of funds; (2) allow local works boards to install mounds, barriers, fencing, and other structures to protect retention ponds from children and vehicles and then assess the cost against the home owners; and (3) change the timing and various aspects of imposing and collecting association assessments.

The following is a list of the pending bills:

House Bill 1058

Authorizes the Attorney General to bring an action against the board of directors of a homeowners association or individual members of a homeowners association, if the attorney general determines that the board or a director has committed a fraudulent or criminal act or has knowing and intentional misappropriated association funds. Originally, the Bill would have permitted the involuntary dissolution of an association if violations were severe, but after our firm provided guidance and input to the legislature, this provision was removed.

Senate Bill 104

This bill specifies that Barrett Law funding may be used to finance a mound, guardrail, barrier, or other structure necessary or useful to: (1) limit access by children to a retention pond; or (2) reduce the likelihood that a vehicle will enter a retention pond. The Bill provides that if such an improvement is constructed under the Barrett Law within a platted subdivision, the works board may assess all or part of the lots in that subdivision for the improvement.

Senate Bill 155

The original bill dealt with the foreclosure of tax liens by the Department of Revenue. The bill was amended to add a provision that specifies that a complaint to foreclose a homeowners association lien may not be filed earlier than 90 days after recording (current law is 1 year) , unless a person files a notice to foreclose the lien, or another person files an action to foreclose the property that is the subject of the lien.

House Bill 1514

This bill provides that a person who repairs, cleans up, or maintains a neighboring abandoned structure is entitled to a lien on the property, not to exceed the lesser of: (1) the fair market value of the work performed; or (2) $10,000. The bill establishes a procedure for creating, filing, and enforcing the lien and provides that the lien has priority over the lien of a lender and over later recorded liens.

House Bill 1541

This bill defines “transfer fee covenant” as a declaration or covenant that: (1) purports to affect an interest in real property in Indiana; and (2) requires the payment of a transfer fee to a specified person upon a subsequent transfer of the interest in real property. Provides that a transfer fee covenant recorded in Indiana after June 30, 2011: (1) does not run with the title of the real property interest purported to be affected; and (2) is not binding or enforceable against any subsequent owner, purchaser, or mortgagee of the real property interest. Provides that any lien purporting to secure the payment of a transfer fee under a transfer fee covenant recorded in Indiana after June 30, 2011, is void and unenforceable.

Senate Bill 466

This bill would allow tax sale certificate purchaser to enter onto abandoned property for which the purchaser owns a tax sale certificate to abate a nuisance or comply with unsafe building laws or certain ordinances. It requires a person who purchases property at a foreclosure sale to record the deed within 60 days. With respect to mortgaged real property that the mortgagor surrenders in writing to the court or to a mortgagee, provides that 30 days after the date on which the mortgagor surrenders real property the mortgagee is responsible for ensuring that the property does not violate local ordinances or nuisance, unsafe building, and vacant and abandoned structures statutes. Specifies that the mortgagee is personally liable for ensuring that the property complies with local ordinances or nuisance, unsafe building, and vacant and abandoned structures statutes, and provides that the mortgagee may be liable for additional civil penalties as determined by the appropriate local legislative body. Requires a mortgagee to whom property has been surrendered to record the mortgagee’s interest in the property not later than 60 days after receipt. The bill provides that a mortgagee has the authority to enter onto real property in order to carry out its responsibilities.

Bear in mind, these bills are currently pending before the Indiana General Assembly and may be amended, combined, or not passed.  At present, they are not the law of the State of Indiana.   If you have questions regarding the how state laws and legislation will impact your neighborhood, please contact Steve Buschmann at (317) 686-4773.

It’s official!  President Obama signed into law the Tax Relief Act of 2010 making major gift, estate and generation skipping tax changes.  Under the new law, the estate tax exemption is increased to $5 million per taxpayer and the maximum tax rate is lowered to 35%.  In addition, the unused exemption of a deceased spouse may be transferred to the surviving spouse, who together would have a combined estate tax exemption of $10 million per couple.  This article highlights the implications of these tax law changes on estate planning.

What does this Mean for You?

With proper planning, the increased exemption means that far fewer families will owe federal estate tax when their loved ones pass away.  It also means that many of the estate tax planning structures currently found in estate plans have become obsolete, and in some cases, unnecessary.

For instance, in the case of married couples, will and trust provisions that provide for the assets of the first spouse to pass to a “credit shelter trust” (this trust sometimes goes by other names) may be unnecessary for estate tax purposes.  Instead, the assets could simply be passed to the surviving spouse.  However, there are still important non-tax reasons why passing the assets to a credit shelter trust remains a wise choice.  Primarily, the credit shelter trust will continue to perform the valuable function of protecting assets from potential loss if the surviving spouse remarries or engages in professional, business or investment activities exposing him or her to risk of loss; thereby fulfilling the legacy wishes of the spouse establishing the trust.

Of course, the transfer of the unused exemption amount of the first spouse to the surviving spouse reduces the importance of dividing assets between spouses.  This is particularly helpful in situations where dividing assets between spouses is difficult because a large portion of the assets consist of retirement plans or closely held business interests subject to transfer restrictions.  There remain many cases, however, where dividing assets during life is a very good idea.

Changes Remain Temporary

The new estate tax laws accompanied the extension of the Bush-era tax cuts originally passed in 2001.  As a result, this new estate tax structure is not permanent and will expire in 2013.  In view of the history of the estate tax, the significant but failed attempts to eliminate the estate tax over the last decade, and the federal government’s need for additional revenue, it is likely that this new structure will become permanent in 2013.  Since the modern estate tax was enacted in 1916, the exemption amount has decreased only once – during the Great Depression.  In addition, the proponents of the estate tax recognize that a higher exemption makes the estate tax less of a political issue.  It is possible, however, that in view of the need for additional revenue sources, the tax rate could be increased above the current 35% level.

Conclusion

The new estate tax law creates opportunities for many clients to better plan their estates to address non-estate tax goals.  These goals often include determining when and how to pass on their assets in order to provide the beneficiaries with the greatest benefit.  This may involve implementing trust arrangements to protect the assets from loss due to divorce, risky spending or investment choices, or claims arising from business activities.  Also, the temporary nature of the law should be considered.  Estate planning should never be undertaken from a “one size fits all” approach.  While clients often have similar goals, their circumstances and beneficiaries are unique, requiring each client’s estate plan to be individually designed.

One of the most common problems with property tax payers is the simplest to solve: missing deadlines.  Below are some of the more important deadlines that are approaching.  They cannot be extended and missing a deadline cannot be appealed, so it is absolutely imperative that clients either file or appeal on their own in a timely manner or delegate that responsibility to our Firm.

1.       Marion County 2010 Assessments:  November 30, 2010 if the taxpayer has received a Form 11 Notice of Assessment; otherwise, within 45 days following the receipt of the first 2011 tax bill.  We are assuming that November 30 is the deadline for all of our existing appeals.

2.       Other Counties:  Typically, all counties surrounding Marion have already completed their appeals period, but if you are uncertain please call us or your local Assessor to be sure.

3.       2011 Assessments:  Appeal by May 10, 2011 unless an extraordinary circumstance forces the County Assessor to delay assessments.

4.       2011 Exemptions:  File Form 136 or it equivalent by May 15, 2011, whether or not you have appealed the 2011 assessment.  Commercial landlords with below-market leases to non-profit entities should consider filing an exemption to relieve the property tax from such tenants’ spaces.

5.       2012 Assessments:  This is a general reassessment of all real property in the State of Indiana.  Assessor representatives are inspecting all properties and adjusting all assessments, effective March 1, 2012.  To be ahead of the rush for what is expected to be another massive round of appeals, taxpayers should file on all properties as soon as possible, for instance, January 2, 2012.  It is not necessary to know your 2012 assessment to appeal it.

Because the State, and many Counties, are finally becoming current in their valuations, assessments, and tax billing, taxpayers are finding that in some years, for instance 2010 in Marion County, they had three tax bills to pay.  That is hopefully behind most of us and we can look forward to having only two tax bills each year.  Nevertheless, as the Counties find that the tax caps become more and more burdensome, they will need to drive tax rates up to the caps and then find other sources of revenue, such as increasing assessments, cancelling exemptions that had been granted for decades on properties that were only marginally qualified for exemption, asking for special bond issues through referenda, increasing local option income taxes, and so forth.  So, the adoption of caps on tax rates has only moved the battle ground from tax rates to other locations such as assessments and exemptions.

At present, there is no telling what the 2012 general reassessment holds for taxpayers.  Suffice to say that, at least in Marion County, there were many properties that had significant differences between market value-in-use and the assessment imposed by the Assessor prior to settling their assessment appeals.  Those who failed to appeal are thus going to be paying part of the tax that was formerly imposed on those who successfully appealed.  As mentioned above, our normal recommendation to commercial clients is to appeal every parcel every year.  That is the only way to be assured that your assessments are fair.  In Marion County, the appeal window is still open.

If you have any questions or need assistance with an appeal or exemption filing, please call or email Phil Thrasher at your convenience.

Asset Protection Planning is not hiding assets or planning to perpetrate a fraud on your creditors.  It is designed to work with full disclosure to your creditors.  It is intended to be a professional, ethical and legal means to decrease the likelihood that your assets could be placed at risk of loss. Asset Protection Planning relies on the laws of Indiana, other states, the United States and sometimes foreign jurisdictions to lawfully provide these protections.  And it is also a part of your overall integrated estate plan.  Asset Protection Planning is generally tax neutral, meaning that when properly implemented it will neither save nor cost you income taxes.

Regardless what you may have heard or read, no Asset Protection Plan is foolproof, and it is unlikely to protect all of your assets from every type of risk. Instead, each technique offers varying degrees of protection.  What a good Asset Protection Plan does is provide you with significantly more protection than you had before you created a plan.

Asset Protection Planning is often accomplished by transferring assets from a less protected form of ownership to a more protected form of ownership.  As a common example, business owners and investors typically own businesses and property through corporations or limited liability companies offering limited liability to the owner, thus protecting the owner from the liabilities of the entity.

Asset Protection Planning is not new and generally is not exotic.  It entails developing strategies and structures uniquely designed to a particular situation and type of risk exposure, often including some of the following techniques:

• Risk Shifting/Avoidance in Contractual Matters
• Insurance (general liability, products liability, premises liability, malpractice, etc.)
• Limited Liability Entities
• Protected Retirement Plans
• Charging Order Protections Offered by LLCs
• Equity Stripping
• For Couples in Indiana, Holding Real Estate as Tenancy by the Entirety
• Domestic and Foreign Limited Liability Companies
• Foreign and Domestic Asset Protection Trusts
• Exemption Planning
• Gifting
• Premarital Agreements
• Certain Types of Trusts Used in Estate Planning

Asset Protection Planning is a vaccine, not a cure.  In other words, in order for most types of Asset Protection Planning to work, the plan must be implemented before a creditor asserts a claim against you.  Once a creditor asserts a claim against you, it is generally too late to implement an Asset Protection Plan.  It is also essential to remember that a generic off-the-shelf solution rarely works, and often do more harm than good.  Instead, the plan should be custom designed to integrate into your business, investments and other circumstances.

If you are interested in learning more about how Asset Protection Planning could benefit you and your family, please do not hesitate to contact Dennis Voelkel, Esq.  at voelkel@indiana-attorneys.com.