Property owners in Cuyahoga County may want to review any recent tax valuation determinations to see if they are now able to appeal the Board’s determination and to avoid waiving such rights. Property owners can review the docket at the Board using this link and may contact the Board at 216-443-7195.

In general, a property executed mortgage takes priority over a bona fide purchaser under Ohio law pursuant to ORC 5301.01. For a mortgage to be properly executed under Ohio law, the following requirements pursuant to ORC 5301.01 must be satisfied:

1. the mortgage must be signed by the mortgagor;
2. the mortgage must sign and acknowledge their signature on the mortgage before a notary public;
3. the notary public must certify the acknowledgment; and
4. the notary public must sign their name to the acknowledgment.

A mortgage that does not substantially comply with the requirements is invalid and the courts have narrowly construed the corrective elements of substantial compliance. For example, in the recent case of In Re Sauer (417 BR 523) (Bankruptcy S.D. Ohio 2009) the court address the issue of an acknowledgment clause that left the name of the joint husband and wife mortgagors blank. The court held that the  mortgage was invalid as to one of the joint mortgagors due to the faulty acknowledgment. This is a very harsh result to the creditors in this case and potentially even to the borrowers who now may lose the priority security interest granted to their largest creditor.

All is not lost. The 8th Circuit Bankruptcy Appellate Court, in the case of In Re BowlNebraska v. Omaha State Bank (Case No. 10-6016 2010 WL 2606336) recently overturned a district bankruptcy court opinion holding that a recorded deed of trust was void due to faulty acknowledgment. In this case, the deed of trust was defectively executed because the notary was related to the parties executed the mortgage which is not permitted under Nebraska law. The Appellate court held that property executed and recorded default notices of the mortgage were sufficient to default a bona fide purchaser claim by the Bankruptcy Trustee.

There are a few take home lessons for lenders here. First, make sure that mortgages are properly recorded. Second, make sure have any other recorded documents property executed and recorded as if it was a mortgage (such as a default notice, memorandum of lease, SNDA, etc.) as a back up in case is found to be defectively executed.

There are also take home lessons for borrowers. Borrowers should all review the acknowledgment clauses of mortgages and any subsequently recorded documents to confirm that the mortgages will not be avoided in bankruptcy. This include subordination, non-disturbance and attornment agreements which are often recorded and usually contain sufficient information to potentially avoid a claim by the Bankruptcy Trustee that the mortgage was defectively executed.

We will see how this plays out in Ohio when the commercial real estate defaults and bankruptcy filings pick up this year.

The IRS has published a list available here listing the entities at risk of automatically losing their tax-exempt status. It might be a good idea to check the current IRS list, which is available in excel format and can be sorted by state and city, to see if any organizations that you are connected to are at risk of losing their tax-exempt status.

What does this mean for property owners?

The audit recommended creating two additional temporary boards to help the board of revision process pending claims. This should hopefully speed up the hearing process.

The fact sheet sets forth 2 major requirements:

1. Employers are required to provide “reasonable break time for an employee to express breast milk for her nursing child for 1 year after the child’s birth each time such employee has need to express the milk” and
2. Employers are required to provide “a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk”

The fact sheet also contains guidance on time and location of breaks, compensation, and clarifies which employers are subject to the requirements.

What does this mean to businesses subject to these requirements?

In general, employers will need to have a policy in place regarding break time to express breast milk and provide an area free from intrusion and the public (other than a bathroom) for employees to express breast milk. For many businesses, this may be a managers office, conference room or similar are that can be secured (i.e. locked) to prevent intrusion.

What about other state law requirements?

The fact sheet indicates that this release does not preempt state law that provides greater protection to employees

Question 179.01

Question: Under Section 413(a) of the Dodd-Frank Act, the net worth standard for an accredited investor, as set forth in Securities Act Rules 215 and 501(a)(5), is adjusted to delete from the calculation of net worth the “value of the primary residence” of the investor. How should the “value of the primary residence” be determined for purposes of calculating an investor’s net worth?

Answer: Section 413(a) of the Dodd-Frank Act does not define the term “value,” nor does it address the treatment of mortgage and other indebtedness secured by the residence for purposes of the net worth calculation. As required by Section 413(a) of the Dodd-Frank Act, the Commission will issue amendments to its rules to conform them to the adjustment to the accredited investor net worth standard made by the Act. However, Section 413(a) provides that the adjustment is effective upon enactment of the Act. When determining net worth for purposes of Securities Act Rules 215 and 501(a)(5), the value of the person’s primary residence must be excluded. Pending implementation of the changes to the Commission’s rules required by the Act, the related amount of indebtedness secured by the primary residence up to its fair market value may also be excluded. Indebtedness secured by the residence in excess of the value of the home should be considered a liability and deducted from the investor’s net worth. [July 23, 2010] [Emphasis Added]

What does this mean if you are looking to raise capital?

Any mortgage indebtedness that exceed the value of an investors primary residence is a liability and should be deduced from the investor’s net worth calculation.

This is not a big surprise and confirmed the SEC’s initial position on the matter.

Thanks to  Broc Romanek for posting about this here.

The 3 exemptions that will have the largest immediate impact are exemptions 1, 2 and 6. In general, the new exemptions are, : general”

1. Exemption 1 deals with circumvention  of short portions of movies for criticism or commentary for educational use, documentaries and noncommercial videos.
2. Exemption 2 deals with circumvention to jailbreak iphones (or root Android phones) and to unlock phones to switch carriers.
3. Exemption 6 deals with circumvention of ebooks to enable read aloud function or to render text in a specialized (magnified) format.

The exemptions do not authorize or permit the software that is used to circumvent the access controls. Apple’s webpage dealing with jailbreaking is available here and may void the warranty.The Cult of Mac posted Apple’s response here.

We will see how this impacts this emerging market.

“(a)… The Commission shall adjust any net worth standard for an accredited investor, as set forth in the rules of the Commission under the Securities Act of 1933, so that the individual net worth of any natural person, or joint net worth with the spouse of that person, at the time of purchase, is more than $1,000,000 (as such amount is adjusted periodically by rule of the Commission), excluding the value of the primary residence of such natural person, except that during the 4-year period that begins on the date of enactment of this Act, any net worth standard shall be $1,000,000, excluding the value of the primary residence of such natural person.” [Emphasis added]

Now an accredited investor must have a net worth of $1,000,000.00 excluding his primary residence. The SEC is taking the position that this requirement is effective upon enactment. In addition, the SEC is also taking the position that the amount of any mortgage indebtedness secured by the personal needs to be reviewed in considering the investors net worth. If the indebtedness is less than the value of the property then the indebtedness does not need to reduce the investors net worth. If the indebtedness is more than the value of the personal residence, the indebtedness may need to be factored into the investors net worth.

What does this mean for start up business?

This will likely reduce the number of angel and other investors that are able to invest in start-up and small businesses. The pool of accredited investors will now be smaller.

What steps do I need to take if I am raising capital?

Companies seeking capital will need to review their suitability questionnaires in light of the new requirements.The investors will now need to give a representation regarding their net worth excluding their personal residence and may also need to to give a representation that any mortgage indebtedness does not exceed the value of their personal residence.

Thank you to Alan M. Parness (www.cadwalader.com) for writing about the SEC’s interpretation.

The image is used under the creative commons license from pbarnhart

What factors establish in loco parentis status?

Either “day-to-day care or financial support may establish an in loco parentis relationship where the employee intends to assume responsibilities of a parent with regard to a child”. There are also various tests and court opinions that further clarify in loco parentis

What type of documentation or evidence is an employee required to provide to establish in loco parentis status?

A simple statement from an employee that an in loco parentis relationship exists my be sufficient. The DOL takes the position that “a simple statement asserting that the requisite family relationship exists is all that is needed in situations such as in loco parentis where there is no legal or biological relationship.”

Are they any limitations on the number of parents a child may have under FMLA?

There are no limitations on the number of parents a child may have under the FMLA. The DOL takes the position that “neither the statutes nor the regulations restrict the number of parents a child may have under the FMLA”

Does in loco parentis status apply to same-sex couples?

Same sex couples are able to attain in loco parentis status over child. The DOL believes that “an employee who will share equally in the raising of an adopted child with a same sex partner, but does not have a legal relationship with the child, would be entitled to leave to bond with the child following placement, or to care for the child if the child had a serious health condition, because the employee stands in loco parentis to the child.”

What does this mean for employers?

Employers may want to consider reviewing their FMLA leave policy to determine if it should be extended for birth, adoption or to care for a sick child if an employee establish they provide either day to day care for such child or are financially responsible for the child. This is also an opportunity for employers to decide how they want to treat same sex couples in the workplace.