Business Transactions

September 20, 2013

Islamic Compliant Real Estate Mortgages and Loans in New York State

Observant Muslims in New York State who seek financing for the purchase of residential or commercial real estate may have issues with traditional mortgage loans. The reason for this is that, under traditional interpretations of Koranic law, the payment or receiving of interest is considered forbidden (“haram”). While a thorough theological explanation is beyond the scope of this article, the main principal involved is that, under strict Islamic law, the exchange of capital alone for debt is not balanced by any significant advantage to the borrower, because it is not associated with the type of risk that a business venture would entail. Therefore, a loan of funds which generates interest for the lender, to be paid by the borrower, is considered profiteering and contrary to the laws of Islam.

Therefore, a traditional mortgage loan, in which funds are lent for the purchase of a property, either residential or commercial, and the funds are paid back over time to the lender with interest, would be considered non-compliant with Islamic law. This prohibition would apply both to the borrower as well as to the lender.

This raises a dilemma for an individual who wishes to purchase real property. The first solution which comes to mind is simply to pay the full purchase price for the property, and not obtain any type of loan. However, most people do not have the funds to pay for a property “up front,” and therefore require a loan of some type in order to complete the transaction. Most home purchases in New York State require a 10% downpayment of the purchase price. For example, if the purchase price is $500,000.00, the purchaser would pay $50,000.00 prior to closing, and the remainder at closing. At closing, most purchasers would then use funds loaned to them by a bank or other institutional lender to complete the transaction. The lender would record the mortgage on the property to secure the loaned funds. The purchaser would repay these funds over time, paying annual interest on the amount borrowed.

August 23, 2013

Albert Pujols and Defamation Law

By Weiss & Weiss

Recent blog posts have discussed the legal ramifications of the use of performance enhancing drugs (“PED’s”) by baseball players, especially as it relates to Yankees slugger Alex Rodriguez. Several recent developments regarding these issues have raised a new legal point, a discussion of which may be helpful to our blog readers.

More specifically, former player Jack Clark, who has been retired from baseball since 1992, stated during his radio show that he believes that current Angel player Albert Pujols has used PED’s throughout his career. Reaction to this statement was immediate, with Pujols denying he had ever used PED’s, and stating that he would sue Clark for libel. In addition, the radio station employing Clark as a talk show host promptly fired Clark and distanced themselves from his comments.

The legal issues that we will discuss here are whether Pujols should sue for libel, and the likelihood of success of such a lawsuit. Legal claims for libel (written statements) and slander (spoken statements) are commonly called defamation actions. Broadly, they are claims that someone either spoke or wrote an untrue statement that harmed one’s reputation in the community. In order to prove such a claim, one would first have to prove that the statement was made, that such statement was untrue, and that one’s reputation was harmed as a result of the untrue statement.

August 9, 2013

A-Rod and Arbitration

By Weiss & Weiss

New York Yankees slugger Alex Rodriguez (hereinafter “A-Rod”) was recently suspended for 211 games by Major League Baseball for his involvement with performance-enhancing drugs. However, as of this writing, A-Rod is currently playing third base for the Yankees. Why is this? The reason is that the collective bargaining agreement between the Major League Baseball Players Association (MLBPA) and Major League Baseball (MLB) allows any player suspended for this reason to appeal his penalty to a neutral, third-party arbitrator, and to continue to play until the arbitration appeal is resolved.

The existence of a neutral arbitrator in these situations is quite common in most labor – management agreements. In fact, the first executive director of the MLBPA, Marvin Miller, had a background working for the United Steelworker’s Union prior to taking the MLBPA position. Because of his prior experience negotiating with U.S. Steel, he recognized the importance of a neutral, third party arbitrator to resolve disputes. In the 1968 Basic Agreement between MLB and the MLBPA, the parties agreed to the appointment of such an arbitrator.

In 1976, Peter Seitz, as arbitrator, resolved a dispute involving whether a player could “play out his option” and become a free agent after his existing contract expired and was renewed for one year by his team. Seitz ruled that the team’s renewal option was for one year only, and, after that renewal or “option” year, a player would become a free agent, free to negotiate with any team. The team owners were quite chagrined at this outcome, and immediately fired Seitz, but the ruling stood, giving players the leverage to negotiate a new labor agreement allowing them to become free agents after a certain period of major league service time.

July 26, 2013

Proving Damages in Intellectual Property Litigation

By Weiss & Weiss

Our firm recently litigated a case in which another company admitted to infringing on the trade name of our client. A trademark is a name, symbol or other design used to identify goods or services used in commerce. An example would be “Coca-Cola” for soft drinks. To legally protect a trade name, the first requirement is generally registration with the United States Patent and Trademark Office. Registering a trademark will enable a trademark owner to legally prevent other businesses from using said name for similar goods and services. There are many requirements for registration, and our firm is experienced in registering trade names and designs on behalf of our clients, many of whom own small businesses in Westchester County and the surrounding geographic area.

Once a name has been formally registered with the United States Patent and Trademark Office (“USPTO”), it is generally the job of the trademark owner (and their attorneys) to insure that another company is not infringing on that mark. Unfortunately, the USPTO is not a enforcement agency for trademark owners. Once it allows a mark to be registered, the trademark owner is generally responsible for commencing litigation against any other companies who may be infringing on the registered mark. For example, if our firm registers a trademark for “Debbie’s Deli” for restaurant services, and another deli opens in the immediate vicinity called “Debby’s Deli,” our firm would bring a trademark infringement action in the appropriate forum (usually United States District Court in White Plains), seeking an injunction against the infringing company, as well as money damages.

The general legal standard for infringement is whether an average customer would be likely to be confused into thinking the infringing name is the original protected company. If a Court finds infringement, there are several remedies that it can award. Most common would be an injunction (a Court order) against the infringing party forbidding it from continuing to use the infringing name. If the party violates the injunction, it can be held in contempt of Court.

June 21, 2013

Real Estate Transactions and Specific Performance

By Weiss & Weiss

A recent article in the Journal News discusses the sale of the Yonkers Polish Community Center to the Church of Jesus Christ of Latter Day Saints. As the author has enjoyed many events at this Center, and will certainly miss attending events if the center is sold, this article discusses the possible legal remedies when one of the parties to a real estate contract will not complete the transaction.

In the situation discussed in the article, the buyer has given the seller a downpayment in the amount of $120,000.00. Although we are not familiar with the specific facts of this transaction, a downpayment is generally held in escrow by the seller’s attorney until the sale closes or the transaction is cancelled because the purchaser could not obtain a loan commitment, or for another contractual reason.

There may be certain situations in which a seller wishes to transfer title to a property, but encounters legal difficulties in doing so. For example, a Religious Corporation, such as a Church or Synagogue, may seek to sell certain property. This subject was addressed in a previous blog post. Such a transaction must be approved by the New York State Attorney General. In addition, our firm has encountered situations where certain congregants challenge the decision to purchase or sell certain Church or Synagogue property in New York Supreme Court.

April 12, 2013

Professional Licensing and the Law in New York State

By Weiss & Weiss

Our firm often interacts with other professionals, such as doctors, architects, and accountants, in the course of our practice. This can happen in several ways. The first is when such services are needed by our clients in the course of litigation. For example, an architect may be needed to evaluate whether a property can be divided in separate parcels in a partition action. Courts will consider this separation to be the preferred remedy, so the expertise of an architect is often needed to provide their professional judgment on whether the property can be subdivided.

Another situation which may occur is when a client states that they received professional services which were not satisfactory. One client informed our firm that the person they hired to prepare and file their professional income taxes had done such a poor job that their business was subject to IRS investigations and liens from the government.

When either of these situations occur, our first step is to check the New York State Licensing Division website. This website allows us to determine whether a person holds a professional license in New York State. Examples of such licensed professions are doctors, nurses, architects, certified public accountants, and other financial and health related occupations. If a person practicing such a professional is not listed as licensed, this would raise several “red flags” in our evaluation of the situation. We have had several situations in which a tax preparer was neither a licensed certified public accountant nor a licensed accountant of any kind. At that point, we informed our client and told him not to use such a person in the future.

March 22, 2013

Corporations and Partnerships: Their Legal Effects

By Weiss & Weiss

Our firm is often asked by clients who are purchasing real estate or starting a business what type of legal entity, if any, they should form to protect their interests. In order to insulate an individual from personal liability, a corporate or partnership should be formed. In addition, within these categories, there are subcategories, such as limited liability companies (“LLC”) and limited liability partnerships (“LLP”). This post will discuss the basic qualities of such entities, as well as the legal effect that they have on their individual shareholders and partners.

According to New York State, a limited liability company (LLC) is an unincorporated business organization of one or more persons who have limited liability for the contractual obligations and other liabilities of the business. It combines corporation-style limited liability with partnership-style flexibility. The owners of an LLC are called “members” rather than shareholders or partners. A member may be an individual, a corporation, a partnership, another limited liability company, or any other legal entity. A managing member is to be designated when this type of entity is formed.

Forming an LLC will generally be more expensive than forming a New York corporation. This is because an LLC, upon formation, has a legal obligation to publish a statement of its formation in a publication ordered by the New York Department of State. The cost of such advertisement usually makes the cost of forming an LLC greater than the cost of forming a standard business corporation. An LLC has no restrictions on what it may own, so it can hold legal title to real estate or any other type of property. The members of an LLC are not personally liable for the debts and obligations of the LLC.

February 8, 2013

Alex Rodriguez, the Yankees, and Employment Contract Law

By Weiss & Weiss

Recently, there have been several news stories regarding Yankees’ superstar Alex Rodriguez and his contract. For those unfamiliar with the situation, Rodriguez, who has admitted using performance-enhancing drugs during his tenure with his former team, has been linked to a Florida company that allegedly supplied additional performance-enhancing substances in recent years. Rodriguez has denied these allegations.

The situation has raised many issues regarding Rodriguez’s contract with the Yankees. After the 2007 regular season, Rodriguez used a clause in his contract to opt out of his existing contract. After becoming a free agent, he re-signed with the Yankees for ten years for a total of 275 million dollars, which runs through the 2017 season.

During the last few seasons, Rodriguez has seen his productivity and durability decline, which is part of the normal aging process for a professional athlete. However, frustrated fans are asking whether the recent accusations regarding performance-enhancing drugs may be used as grounds to void the contract and release Rodriguez without the Yankees having any further financial obligations. There are several legal issues which must be addressed to answer this question fairly.

January 10, 2013

Legal Issues Relating to the Sale of Businesses and Professional Practices

By Weiss & Weiss

Our firm is often asked by clients to handle the purchase or sale of an ongoing business. This business may also be a professional practice, such as a pharmacy, or medical or dental office. There are many legal aspects of such a transaction, which will be discussed in this blog post.

Such transactions often involve the sale of real estate which is owned by the business being sold. For example, if a pharmacy is being sold, the building in which the pharmacy is located may be owned by the business in question. In such a situation, the sale of the real estate would be part of the transaction in which the actual business is also being sold. For tax purposes, the amount paid by the buyer should be allocated separately to both the real estate (if applicable) and business in question. A further allocation may be made with respect to fixtures and equipment that are part of the transferred items. Therefore, if the total purchase price is $600,000.00, $300,000 may be considered the price for the real estate, and $300,000.00 for the purchase of the actual business. We recommend that all parties consult their accounting professionals to determine the most favorable allocation for tax purposes.

The first legal issue relates to the legal structure of the business being purchased. If the business is an entity such as a corporation, professional corporation (P.C.) or limited liability company (LLC), the entity and its assets can be sold to another party. The first step in this process involves confirming that the corporation is in “good standing” in the State of New York. This involves checking to ensure that the entity has made all necessary filings and is current in paying its franchise taxes. A certificate of good standing should be obtained from the New York State Department of State. In addition, all corporate documentation, including the stock certificates, stock book, and corporate seal should be delivered at the time of the completion of the purchase.