New Jersey Lawyers Blog

Published on: January 9, 2013

New Jersey Short Sales

When you sell your house for less than you owe on your mortgage it is referred to as a “short sale”. This is one option available when you find you can no longer make your mortgage payments, and the outstanding principal balance on your mortgage is higher than the fair market value of your house. The offer must be submitted to your lender, along with a detailed statement of all the costs of the sale and any other items which must be paid when the house is sold. The short sale can only proceed if it is approved by the lender. In other words, the lender must agree to accept less than what is owed on the mortgage. In the current economic climate, short sales are occurring with greater frequency. When a homeowner cannot make the mortgage payments on his home, this option relieves the homeowner of the burden of those payments. The alternatives are often foreclosure by the lender, bankruptcy or, if the homeowner qualifies, a mortgage modification.

The buyer of a short sale property typically gets a good value, he buys the property at its fair market value, but pays less in a depressed real estate market than if the house were listed for sale by the homeowner – as the homeowner would have to seek a price that is sufficient to cover repayment of his current mortgage balance. When the market rebounds, a short sale buyer can typically sell the property for a significantly higher price than he paid. There are, however, a few things to keep in mind.

A homeowner seeking a short sale is typically in financial distress. The homeowner seeks a short sale because he cannot make his mortgage payments. The short seller will not have the resources to make repairs, and it is likely that maintenance and repair of the home have been deferred due to his financial situation. The short sale lender will be accepting less money than they are owed on the property, and the lender will be unwilling to make any repairs. The short sale buyer must therefore be prepared to purchase the home in “as is” condition. The buyer can expect to invest additional monies repairing the home after the purchase.

Published on: January 3, 2013

The New Jersey Consumer Fraud Act

by Pauline M.K. Young

New Jersey’s Consumer Fraud Act (the “CFA”) is one of the broadest, strongest, and most far-reaching consumer protection laws in the country. The CFA states that it is unlawful for any person to use any unconscionable commercial practice in the sale of any goods, services, or even real estate in some cases.

The New Jersey Legislature enacted the CFA in 1960. Amendments in 1971 expanded the Act’s reach and purpose and included provisions to allow for individuals to bring private lawsuits rather than only allowing public actions by the Attorney General. However, the State still plays a significant part in enforcing the Act, led by the New Jersey Division of Consumer Affairs, Office of Consumer Protection.

In the attempt to encourage private actions and reduce the burden to the State in enforcing the CFA, the Act included the ability for claimants to recover treble (triple) damages, reasonable attorneys fees, and litigation expenses. This was done so that even those with little means to bring an action could recover their losses no matter how small, and, in the process, the punitive nature of the damages would further discourage those who would otherwise be tempted to use deceitful or fraudulent practices against others.

Since the CFA is a remedial piece of legislation courts tend to interpret the Act’s language very broadly with the aim of providing the most consumer protection. However, the CFA does have some limits and generally will not apply to claims such as denial of benefits by insurance companies, claims regarding employee benefit plans covered by the Employee Retirement Income Act (“ERISA”), claims regarding hospital services, employment claims, or claims against the government, public utilities, or licensed professionals. “Licensed professionals” typically include accountants, insurance agents, architects, doctors or other professionals where the claimant could have alternative options for recourse such as through malpractice claims.
Continue reading

Published on: December 18, 2012

The Best Business Structure for Your New Jersey Business

by Boris Peyner

Business owners must choose a structure for their organization when starting a business in New Jersey. Choosing the right structure is the first of many decisions towards running a successful business.

Business owners have the option to form a sole proprietorship, a partnership, limited liability company (“LLC”), or a corporation. Each business structure offers different types of liabilities, expenses, and tax treatment. Choosing the right business structure generally depends on the type of business, how it will be run, and the number of owners.

Owner/Business Liability
Generally, the more risky the business activity, the better it is to operate the business through a corporation or an LLC. Corporations and LLCs provide New Jersey business owners with limited liability. This means that anyone seeking compensations for anything related to the business will have a hard time placing personal liability on the business owner.

On the other hand, owners of sole proprietorship and partnerships can normally be held personally liable for business debts. Owners of sole proprietorship will always be responsible for claims against the business. Similarly, in a partnership, every partner can be held personally liable for claims against the business. This means that if someone won money in a law suit against the partnership, that person could collect from any one of the partners. Therefore, if one of the partners filed for bankruptcy or simply did not have any money to pay, the remaining partners would be responsible to make payment.

Expenses

Sole proprietorships and partnerships are the easiest to form and maintain with minimum expense. There is little special paperwork that needs to be filled out to establish these business structures, and there are rarely any fees associated to maintain them.

Conversely, corporations and LLCs are more difficult to form and can be expensive to establish and maintain. Businesses that establish a corporation are required to file “articles of incorporation” with the secretary of state and pay fees associated with the incorporation. Similarly, LLCs must register with the secretary of state, designate an agent for service of process, and pay associated fees for registration. Businesses that operate as corporations and LLCs must also have separate business bank accounts and keep detailed records of all business finances.
Continue reading

Published on: December 11, 2012

The Federal Gift Tax Annual Exclusion is Increased for 2013

by Jennifer C. Meusel

The Internal Revenue Service increased the annual gift tax exclusions for 2013. The annual gift tax exclusion amount will increase from the 2012 amount of $13,000 to $14,000 in 2013 for gifts made to anyone other than a person’s spouse. New Jersey does not impose a gift tax, with the limited exception that gifts made within three years of a person’s date of death are subject to tax upon the death of the giver.

Individual annual gift tax exclusions can be combined with gifts of spouses to give up to $28,000 to any person each year and no gift tax will be due. There is no limit as to the number of gifts which may be made to different people. Additionally, there is no limit to the marital deduction for taxpayers who make gifts to their U.S. citizen spouses. The annual gift exclusion for gifts made to non-U.S. citizen spouses is being increased to $143,000 in 2013.

If an annual gift is made during 2013 which exceeds $14,000 to any one person, or if it exceeds $143,000 to a non-US citizen spouse, it is a taxable gift and the giver must file a U.S. Gift Tax Return with the IRS on Form 709. Each person is afforded a lifetime gift tax exemption. At present, the lifetime gift tax exemption amount is $5,120,000. However, that amount is scheduled to decrease to $1,000,000 when the county hits the “fiscal cliff” in 2013 unless Congress acts to change the law. Even if you make an annual gift to an individual over of the applicable annual exclusion amount, the giver will have to file a gift tax return, but will not owe gift tax unless they have exceeded the lifetime gift tax exemption.

Published on: November 30, 2012

New Jersey Employee Handbooks

by Boris Peyner

Businesses, regardless of size, can benefit from an employee handbook. Similarly, an employee handbook can provide benefits to people working in New Jersey.

Generally, an employee handbook (also an employee manual) is a written record of a company’s policies and procedures. A well written employee handbook can provide clear guidelines and procedures for all employees and can help avoid lawsuits and other legal actions for employers. However, handbooks can also create contracts of employment which can bind employers if they are not careful.

Business owners can save time and money by having an experienced employment attorney draft its employee handbook providing employees with answers, explaining business rules, and allow the employer to comply with state and federal laws. A handbook should be drafted both to help the employee and prevent litigation. A poorly written employment handbooks could contain provisions that violate New Jersey or federal law, opening an employer up to liability.

An experienced employment attorney should review all employee manuals. An employment manual can under some circumstances create a employment contract with an employer. This can be detrimental to a company that intends to hire employees on an “at-will” basis. New Jersey is an “employment-at-will” state. This means that an employer can generally terminate an employee at any time for virtually any reason. Having an employment handbook that creates an employment contract could change a company’s outlook on its operations, and ability to hire and fire in its business judgment.
Continue reading

Published on: November 26, 2012

Post Sandy: FEMA Extended To All Residents of New Jersey

by Boris Peyner

Recently New Jersey was impacted by a storm the likes of which has never been seen before in this area. In fact, the storm was so powerful and damaging that it was nicknamed Frankenstorm. Hurricane Sandy’s destruction was unimaginable, causing many of its victims to lose power for days and many others to lose everything. Hurricane Sandy’s victims will now have to start the recovery process. This will require rebuilding, for which they will need dedication, resilience, and financial assistance.

Many will seek financial assistance from their insurance companies. Filing insurance claims will therefore be the first step for most people who were affected. Sadly, many will find themselves uninsured or underinsured. Many other will be denied coverage because of policy exclusions. Another problem that will plague many New Jersey residents is that their damages were caused by a flood in areas that were never prone to flooding. These homeowners therefore did not carry flood insurance. All hope, however, is not lost.

New Jersey residents who do not have sufficient insurance coverage or were denied coverage should seek assistance from the Federal Emergency Management Agency (“FEMA”), assistance was recently extended to all twenty-one New Jersey counties. FEMA will cover losses which include damage to homes, personal property, and vehicles.

FEMA, however, will provide coverage to people who do now have insurance coverage or have insufficient insurance coverage to provide safe, sanitary, and functional housing. Additionally, FEMA will not provide financial assistance for homeowners who are making claims for secondary homes.
Continue reading

Published on: November 23, 2012

New Jersey’s Highlands Water Protection and Planning Act

by Pauline M.K. Young

The Highlands Water Protection and Planning Act is a relative new law, signed by New Jersey’s then-Governor McGreevey on August 10, 2004. The Highlands Act seeks to protect the ecological integrity of the highlands region in northwest New Jersey. In short, the Act, under the New Jersey Department of Environmental Protection’s supervision, regulates and restricts development in the area. Indeed, it aims to protect and preserve not only the area’s animal and plant life but also a large source of fresh water for human consumption.

The New Jersey Highlands covers a vast span of the state covering over 1,250 square miles, and is home to nearly nine hundred thousand residents primarily in the counties of Warren, Morris, Hunterdon, Passaic, and Sussex.

Of the over eight hundred thousand acres of the Highlands region, nearly four hundred thousand acres have been designated as the Highlands Preservation Area. The remaining acres are designated as the Highlands Planning Area.
Continue reading

Published on: November 19, 2012

Mortgagees, Tenants and Tax Sale Certificate Holders May Have Standing to Appeal New Jersey Property Tax Assessments

by Jennifer C. Meusel

Under New Jersey law, a taxpayer feeling aggrieved can appeal a property tax assessment. Obviously, the owner can qualify as a “taxpayer feeling aggrieved.” However, it is not well known that others can also qualify under the statute. Tenants, mortgagees, tax sale certificate holders and even non-owner spouses of a marital residence can, under certain under certain circumstances, qualify as aggrieved taxpayers and thus are permitted to file an appeal of a property tax assessment.

The word “taxpayer” has been interpreted by New Jersey courts to include not only the owner of record of a property but also tenants, mortgagees and holders of tax sale certificates under certain circumstances. The courts have often based their findings upon the belief that the “taxpayer feeling aggrieved” means anyone with a legitimate interest in the property and who pays the property taxes, and is thus adversely affected by an incorrect assessment.

If a lease requires a tenant to pay all taxes for a full tax year, the Tax Court has held that the tenant qualifies as an aggrieved taxpayer. However, the Tax Court required that because the appeal of the assessment could result in an increased assessment, the owner of the property must also be a party to the action. The Tax Court noted that the lease was silent on the issue of whether the tenant was permitted to file a tax assessment appeal.
Continue reading

Published on: November 13, 2012

New Jersey’s New LLC Law

by Pauline M.K. Young

Since the entity known as a Limited Liability Company, or “LLC” came along in New Jersey in 1993, it has quickly become one of the most common business forms. LLCs are popular largely because of their flexibility, limited liability, and tax advantages.

For example, as long as they meet the requisite qualifications, an LLC may elect to be taxed as a sole proprietor, partnership, C corporation, or S corporation, which means it may avoid the double taxation of a C corp wherein both the owners and the company are taxed. Also, although an LLC is not incorporated, in many instances, LLC owners – called “members” – are protected from personal liability for the company’s debts the way a corporation is.

New Jersey’s Limited Liability Company Act was enacted in 1993, and while it has been revised in 1996 and 2006, revisions have been minor until recently. On September 21, 2012, Governor Christie signed the Revised Uniform Limited Liability Company Act which is scheduled to go into effect for new LLCs on March 20, 2013. (For existing LLC’s it will become effective in March of 2014.)

The new law will include several revisions and additions, including the following:

Duration: Under the prior law, an LLC has a default duration period of thirty years unless the members designate otherwise on the certificate of formation. Under the new law, an LLC will have an unlimited or perpetual duration period unless otherwise indicated on the certificate, which is more like a corporation which is also considered to have perpetual existence.

Not-for-Profit: The new law allows LLCs to be formed for any lawful purpose regardless of whether they are for profit or not-for-profit or formed to own non-income-producing property.

Published on: November 9, 2012

Hurricane Sandy Insurance Claims

by Maurice W. McLaughlin

Hurricane Sandy has inflicted unprecedented damage on New Jersey. Homes have been destroyed. Businesses, homes and schools have lost power. Tens of thousands of people in New Jersey are homeless. Homes and buildings were destroyed by fire, trees, waves and other casualties. Many homes, especially in the evacuated Shore communities, have been looted. Losses in the Tri-State area expected to exceed fifty billion dollars.

That, of course is the big picture. On the ground, however, the storm had a devastating impact on individual homeowners, renters, and small businesses. The first thing each of these homeowners, renters and small businesses should do is make a claim with their insurance companies.

This first question is, will there be coverage? This depends on two things: First, the type of insurance policies you have and, second, the type of damages you incurred. For instance, many homeowners and business policies exclude coverage for damage caused by flooding. However, flood insurance should obviously cover this.

Therefore, you should get a copy of your insurance policy, including the declaration page. The declaration page is a one or two page summary of the types of coverage you have, the amounts of coverage, and the amounts paid for each type of coverage. The policy itself, to which the declaration page is usually attached, is much larger, often twenty pages or more. If you do not have a copy of your policy, or if your policy was destroyed in the storm, you should contact your insurance agent or broker, or the company with whom you have the insurance.
Continue reading