Year: 2016

The ADA’s “Grandfather Clause”

One of the most common questions from businesses sued under the American’s with Disabilities Act (ADA) in California is whether they are protected by a “grandfather clause.” Generally, such clauses in the law protect an existing building or facility from complying with new rules made after they were built. While the ADA has such a clause, it is neither as extensive or as protective as the ones they are used to.

Businesses usually meet this kind of exception to the law when they work with the local city building codes and inspectors. Making sure your facility qualifies for “grandfathering” often saves lots of money in renovations and construction. However, the ADA is a federal law and, under the Constitution, it trumps local California laws. City permits and inspectors are concerned with local law, so they will often certify or permit architectural features that are acceptable under local law, but are actually prohibited by the ADA. Entrepreneurs should keep in mind that the city permit and inspection process gives little to no insight into whether your facility is “accessible” under the federal rules of the ADA and the ADAAG guidelines.

The first misconception about the ADA is that, if your facility was either compliant or otherwise acceptable when it was built, that you need do nothing about making it accessible under ADA standards now. This is what most people think of as “grandfathering.” But the ADA’s clause does not actually allow this. The ADA allows buildings with that were built before the updated ADA regulations to be grandfathered in as long as the deficiency is not readily achievable. I other words, regardless of when or how your facility was built, you must do everything that is “readily achievable” to make your facility accessible or you will eventually face a lawsuit alleging that you discriminated against disabled people under the ADA and related state laws.

“Readily achievable” is a slippery legal term and you should get the advice of a knowledgeable lawyer to help you determine what you must do and what you can let go. However, certain things are almost always “readily achievable” – such as: putting up the proper signs, properly striping your parking lot to provide accessible parking, leveling out minor slopes, and placing dispensers at the proper height. In fact, parking lot striping and signs are the number one most common complaints in ADA lawsuits. The readily achievable standard is a factor-based test that looks into a number of areas. Some of those factors include the practicability of bringing your location to ADA compliance, your financial situation, the physical universe that your location occupies and so on. Sometimes it is just impossible to bring your location into compliance. Many judges and courts have differing opinions on what is readily achievable and its best not to risk making judgments without proper advice.  If you are concerned about your parking lot or other features on your property, you should get hire a CASp inspector immediately. They are worth the price.

Besides making all “readily achievable” changes, you must comply with the ADA when you make “alterations” to your property. “Alterations,” like “readily achievable,” is a slippery legal term and you should consult a knowledgeable lawyer before making any changes to your property. In very broad terms, alterations mean structural repairs or additions that go beyond routine maintenance and upkeep. While the ADA does not require full compliance to features that were not “altered,” there are important exceptions. For example, in many cases, you are required to provide an accessible path of travel to the altered area, even if the path of travel is not part of the alterations.

The bottom line is that businesses can’t count on a “grandfather clause” to protect them against lawsuits. There are simply too many exceptions. A CASp inspection followed by making any minor changes required is your best defense.

How to Respond to an ADA Lawsuit

If you have been targeted by an ADA lawsuit, you have 3 possible responses: you can ignore it, settle it or fight it.

 

Ignoring it is simple, expensive and exactly what the other side wants. If you do not respond, they will ask the court for an “entry of default.” In many cases, this will be within a week of missing the deadline to answer their complaint, which is less than a month after you were served with the complaint. Then, after a time, they will ask the Court to decide your case. The Court will have to make the decision with only the information provided by the plaintiff and his lawyer. In other words, you are very likely to lose the case. Then the Court will issue a judgment against you. This will have three parts: $4,000 in statutory damages to the disabled plaintiff, attorney’s fees to his lawyers, which could range from $5,000 to $20,000 depending on many factors, and that you repair the noncompliant features of your building in a certain time.

 

As you might imagine, this is the worst possible outcome. You will have to pay the most money and have to make repairs, no matter how expensive. Nonetheless, many business owners prefer to bury their heads in the sand and ignore the situation.

 

The second option is to settle it. This is the main way that the other side makes its money. Except for a few law firms, they will typically settle one of these cases for between $3,000 and $5,000. Occasionally, you can fight for slightly less payout or they will hold out for more money. Unfortunately, the most active law firms settle at more than double this amount, usually no less than $7,000, but typically $9 or even $10 thousand. As part of the settlement, they will ask you to make the repairs, often in a 6 month period.

 

The advantage to this option is the certainty. The payout and the end of the case are certain. Often, the law firm will be agreeable to a payment plan. They also don’t necessarily follow up on the demand to make repairs, although that is dangerous for the business, since it leaves them open to another lawsuit, sometimes only months after settling the first one. Several businesses have faced this problem of multiple lawsuits.

 

The third option is to fight it. Changes in California law have allowed a quick and cheap strategy to fight these cases and win. However, you will have to pay your own lawyers’ fess. Most lawyers do not understand how to fight these cases in an economical manner and will quote you a price based on a typical court case – $10 or $20 thousand or more. Because that price is so steep compared to the cost of settling, only the most motivated businesses will agree to fight the lawsuit.

 

However, our firm knows how to fight these cases and win for less than the cost of settlement. If you are served with an ADA lawsuit, think about your options and choose the best one for you. Call or meet with one of our attorneys for a free consolation to fully discuss your options and help determine the best path for you.

What is the difference between a will and a trust?

Planning for your death can be a daunting thought, but it’s a reality we all have to face and should prepare for. To ensure that your loved ones will get the support they need, its best to make an estate plan.

In the state of California, there are default rules in place to protect the deceased and his or her assets.  However, these are minimal protections based on traditional family relationships. There are many instances where a loved one would not be entitled to the deceased’s estate simply because he or she is not related by blood or the relationship has not been recognized by marriage or adoption.  Furthermore, these rules are enforced by the Probate Court, whose expenses come out of your property and which can take a significant amount of time to process your estate.

The purpose of a Will or a Trust is to remedy these shortcomings and direct your property exactly where you want it to go.  Both a will and a trust puts your wishes on paper, making it clear to the world that you have assets and you want them to go to specific places. Trusts also help save time and money for your loved ones by avoiding a tedious and lengthy probate process.

California Will

A will is a document that states your property and where you want it to go upon your death. If worded correctly and executed properly, it will trump any default rule.

 A will takes effect at the time of death, but it is not automatic. The will must go through the probate process, which is the official proving of a will. This means that at the time of death, a probate court will review the will, determine if it is valid, identify the beneficiaries, and institute a process for disbursal of the assets.

If there are no substantial problems, the probate process takes a minimum of eight to twelve months. This includes the time is actually takes for a probate claim to be heard and also the waiting period for creditors to make a claim against the estate if any. However, between crowded courts, delays in filing, claims against the estate, and a myriad of other issues that may arise, the process could take much longer.  For example, one client’s father, because of poorly drawn legal documents unrelated to the will, is still going through the probate process 3 years after his death.

 In California, not all estates need to go through the probate process. Under the California probate code, the law allows for simple estates valued less than $150,000 to avoid probate. However, given typical California home values, few estates that include the family home will qualify.  Qualifying estates must go through an application process.

In addition to the wait, the probate process is not free.  Probate costs depend on the size of the estate. Expenses range from $4,000 for the first $100,000 up to hundreds of thousands of dollars for large estates.  This cost is paid out of the estate itself.

California Trusts

 A trust, like a will, is a legal instrument that identifies your assets and designates those assets to go to certain beneficiaries before and after your death. But unlike a will, a trust takes effect instantly at the time of death thereby avoiding probate all together.

 With a trust, assets are placed in a fictitious entity (the “trust”). Technically, the trust will now hold legal title to all the assets placed in the trust.  However, the terms of the trust allow you and your loved ones to enjoy the benefit of those assets, with or without restrictions, as determined by the type of trust. Once a trust is created, a person called a “trustee” manages the trust according to the instructions placed in the trust. For example: “the income from my rental property shall benefit my daughter Alex for ten years after my death, then give her the property.” Upon death, the trustee is responsible for paying out the income of the rental property to the beneficiary while the trust remains the legal owner of the property until ten years pass, when the beneficiary will get full ownership of the property.

 The most common trust, usually called a “living trust,” is a revocable, transparent trust.  Because it is revocable, you can revoke the trust at any time and get your property back.  “Transparent” means that the trust, although it has a legal existence, is not evident in your day to day life – it is set up so that you can use your money and property just as you had before the creation of the trust.

 There are many other types of trusts, each of which provide different benefits and consequences. For example, irrevocable trusts transfer ownership and control of the asset during the lifetime thus making the giving of the asset a life-time gift instead of a gift after death and charitable trusts benefit charities and can sometimes help avoid estate taxes upon death. Speak to an attorney about the pros and cons of each trust and what would best make sense for you as each trust carries different tax and control consequences.

 Although it sounds like a trust has every benefit over a will, there are some drawbacks.  First, a trust costs more to set up than a will.  The law is very generous as to what constitutes a will – a handwritten note with your signature is sometimes enough (although it is best not to dispose of your property without legal advice).  A trust, on the other hand, is a complicated legal document which could have serious consequences for you immediately if not written correctly.  Professionals will charge more for a trust than a will.  A trust must also be filed with the State and your property must be officially put inside the trust.  If you do not keep up with your trust, when you pass, there could be significant property that is not in the trust and will have to go through the probate process.

 In a nutshell, both wills and trusts provide for your loved ones after your death. They both ensure that your assets go where you want them to go. However, with a will, probate is almost always necessary if the estate is large enough. The cost of creating a simple will is relatively low and generally, no transfers or additional paperwork is required to effectuate your last wishes. On the other hand, creating a trust can help avoid the costs and time of probate but will require more cost and effort in initial set up. Trust creation requires placing your assets into the trust meaning you will have to transfer legal title of real property and other such property into the trust and you have to keep up the trust after it is created. Additionally, both wills and trusts should be reviewed regularly and modified as your life needs and property change.

The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship.  Please contact an attorney for your specific situation as all cases vary are require specialized attention.

Rental real estate and your taxes

One of the most common questions that people ask me is how renting out property affects their taxes.  The rules are actually quite complex, and you should definitely seek the advice of a professional, but here is a simple overview.

            Generally speaking, renting out real estate is considered “passive income.”  This is the worst type of income to have (for tax purposes).  Passive income counts as regular income and is taxed at the higher rate, but the losses you can take are limited and provide no relief from taxes.  Unlike an “active” business, where losses can be deducted from your income, rental business simply sets those losses aside to be used later, and that later day never comes for all too many taxpayers.

            The most important thing to remember about a rental is that, for tax purposes, they often lose money.  This is because you have to take a depreciation deduction on top of your other costs for the building or property.  On the one hand, that will mean your rental income is rarely taxed.  On the other hand, it means that your losses will not save you any tax dollars.

            There is some good news.  People making less than $100,000 per year in other income can deduct up to $25,000 of passive losses.  Over that amount, the amount deductible phases out until it is $0 at $150,000 of income (for married couples).  What this means for you is that you should understand that your decision to buy a rental property should not be influenced by the idea that it will generate tax savings.

            However, there is an important opportunity.  “Real estate professionals” do not have the passive activity loss limitations on real estate.  To qualify as such a professional for tax purposes, you have to spend at least 750 hours per year actively working on your rental business.  But that is not the only requirement.  If you believe you spend enough time on your rentals, you should ask your tax professional about the other requirements.  It could mean big savings.

Paid sick leave in California require starting July, 1 2015

Starting July 1st, 2015, any California employee that works 30 days or more within a year is entitled to paid sick leave. The new California law called the Healthy Workplace Healthy Family Act of 2014 (AB 1522) applies to all California employees whether full-time, part-time, or temporary. For every 30 hours worked an employee gains one hour of paid sick leave.  Accrual begins on the first day of employment or July 1, 2015, whichever is later.

Not all employees receive this added benefit however. Employees covered by qualifying collective bargaining agreements, In-Home Supportive Services providers, and certain employees of air carriers are not covered by this law.

That means for an employee working 40 hours a week for 48 weeks out of the year (assuming four weeks off a year), an employee will accrue 64 hours of paid sick leave a year or eight days. Employees should not get too carried away with planning eight day vacations just yet.  There can be limitations on how many of those hours can be redeemed at one time. An employer can limit the amount of paid sick leave an employee can use to 24 hours or three days. The benefit to employees does not stop there. An employee may carry over her unused sick leave up to 48 hours or six days to the next year.

What does this mean for employers?

This new law will be enforced, and failing to comply may result in penalties and fines (up to $10,000). An employee can also have claim against his or her employer for failure to comply with the new standards. Ignorance of the law is no excuse. Employers must provide notice to their employees of the new law in the work place as of now or at the time of hire. They must also reflect sick leave accrual on paychecks and allow for sick leave upon reasonable request.

There are alternative methods to providing for sick leave by the accrual method explained in the example above. Employers may choose to provide sick leave in advance at the beginning of the year (which can cap the sick leave to three days), or employers may choose the Paid Time Off (PTO) method. The bottom line is employers are required to provide at least 24 hours or 3 days of paid sick leave a year depending on what sick leave method an employer chooses. Please refer to your attorney about the different options available and which if the best for your business.

For more information visit the California Department of Industrial Relations website at http://www.dir.ca.gov/dlse/ab1522.html