Saturday, January 19, 2019

Title Insurance Regulation 208 is Back - Soliciting Title Business is Seriously Restricted Yet Again

On January 15, 2019, the Appellate Division, First Department, reversed the Supreme Court in New York State Land Title Associations, Inc. v. The New York State Department of Financial Services (page 69).

To remind the reader, the New York County Supreme Court had previously annulled the Insurance Regulation which regulated title closer fees, ancillary charges, premiums and most importantly, soliciting business.

Now, the annulment is reversed (as if it never happened), except with respect to section 228.5(a)(1)-(3) [ancillary search fees] and (d)(1)-(2) [closer fees].

So, no more sports tickets, golf outings, holiday parties, open houses, and wining and dining to solicit title insurance business.

Now, to the entertaining part. What about all of the ancillary fees that were being charged by title insurance companies, above the regulatory caps, in between the annulment date and the reversal date? If a decision is reversed was it ever annulled? If it was never annulled were the caps on ancillary fees always applicable and were consumers overcharged. These are tough questions that Department of Financial Services should answer soon. Stay tuned and perhaps we will be hearing from the Court of Appeals to put finality to the legality of Insurance Regulation 208.

Rental Real Estate Safe Harbor - Tax Law

On January 18, 2019, the IRS issued the safe harbor for rental real estate to be treated as a trade or business for purposes of IRC 199A's Qualified Business Income 20% deduction.

Real etate professionals, who operate "a rental real estate enterprise... [which is] an interest in real property held for the production of rents and may consist of an interest in multiple properties," should study the safe harbor closely as it can make a huge difference in your pocketbook. Interestingly, while multiple properties may qualify as the same enterprise, "[c]ommercial and residential real estate may not be part of the same enterprise."

According to the IRS, the safe harbor requires:

(A) Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise;
(B) For taxable years beginning prior to January 1, 2023, 250 or more hours of rental services are performed (as described in this revenue procedure) per year with respect to the rental enterprise. For taxable years beginning after December 31, 2022, in any three of the five consecutive taxable
years that end with the taxable year (or in each year for an enterprise held for less than five years), 250 or more hours of rental services are performed (as described in this revenue procedure) per year with respect to the rental real estate enterprise; and
(C) The taxpayer maintains contemporaneous records, including time reports, logs, or similar documents, regarding the following: (i) hours of all services performed; (ii) description of all services performed; (iii) dates on which such services were performed; and (iv) who performed the services. Such records are to be made available for inspection at the request of the IRS. The contemporaneous records requirement will not apply to taxable years beginning prior to January 1, 2019

To claim the safe harbor, "include a statement attached to the return on which it claims the section 199A deduction or passes through section 199A information that the requirements in Section 3.03 of this revenue procedure have been satisfied."

Saturday, January 12, 2019

Risk and Penalties To Employers Who Fail To Provide Sexual Harassment Prevention Training in NY

Some employers want to know if they can chose to take the penalty and forego the NY required sexual harassment prevention training, policy and complaint form. Here is a cost benefit analysis explanation that you should read before making such a terrible decision.

The fines can be huge, although that isn't even the start of an explanation of the problems that an employer will face if they choose to forgo compliance with Labor Law 201-g (i.e., training their employees, providing a sexual harassment prevention policy, and offering a complaint form). Please understand that the penalties are applied per a provision of the law violated and not by an employer who violates, in general, as a single penalty. Therefore, each employee can represent at least 3 violations. The fines start at $100 per employee for the first violation and goes up from there (fines go up per number of violations such as not training, not providing a sexual harassment prevention policy and not supplying a complaint form with fines being compounded per employee).  So for a mid size company, fines can be in the tens to hundreds of thousands of dollars. We recommend taking a look at Labor Law 213 to understand further. When reading, you will learn that the real risk is that violating the Labor Law is chargeable with a misdemeanor and possible imprisonment. 

Beyond these surface Labor Law penalties, failure to train / have a policy / provide a complaint form will be catastrophic to an employer in defending a sex discrimination lawsuit because 2 important defenses will be lost, including:
  1. The Kolstad v. American Dental Association Affirmative Defense, which avoids punitive damages.
  1. The Burlington Industries Inc. v. Ellerth & Faragher v. City of Boca Raton Affirmative Defense, which avoids an employer being liable for a hostile work environment created by a supervisor if harassment doesn't result in a tangible employment action (e.g., denial of raise / promotion).
Beyond the loss of these defenses, it will be nearly impossible for any attorney, no matter how skilled, to defend a lawsuit where an employer willfully failed to comply with a law designed to prevent the very experience complained of by the victim in the first instance. Imagine the opening statements at a trial:

Ladies and Gentlemen of the jury, the defendants actively chose to forgo training their staff on sexual harassment prevention, as every other employer in this State is required to do, because they clearly want to maintain a chauvinistic workplace where women are treated as objects not equals. Today, we ask you to teach them a lesson. We ask you to teach all employers a lesson. Women matter. Women have rights. The workplace must be safe. The Labor Law insists that it is. We ask you to teach the defendants a lesson that violating the law is not a choice. New York State introduced Labor Law 201-g to prevent the very harassment that occurred to the Plaintiff. No, the defendants did not have a sexual harassment prevention policy to tell everyone what behavior was unacceptable in the workplace although they were required to have such a policy. No, the defendants did not have a sexual harassment prevention training to clarify what behavior was unacceptable in the workplace although they were required to have such a training. No, the defendants did not have a sexual harassment prevention complaint form to empower victims to protect themselves from unacceptable harassment occuring in the workplace although they were required to have such a complaint form. These defendants actively chose to violate the laws of this State and now they must answer. Some people only understand rules when they are forced to right a check. We ask you to teach them the rules. These defendants need to learn the rules about sexual harassment in the workplace. Sexual harassment will not be tolerated...   
To add insult to injury, it is anticipated that an employer with an EPLI policy in place to avoid this pain will learn quickly how easily coverage under such a policy can be disclaimed (i.e., no insurance defense or damages paid) for violating Labor Law 201-g. So, the employer will be stuck with paying exorbitant legal fees (i.e., these cases take a long time and are very fact intensive) and damages, without the very insurance policy, which they've been paying premiums on for years, in place. 
We are sure that you understand that this isn't the type of law that you can just do a cost / benefit analysis and decide to take the penalty. The risk is simply off the charts. In our opinion, if an employer defends a cognizable lawsuit without having complied with Labor Law 201-g, they may, very predictably, be going out of business. 

The trial will be painful for the employer to say the least. 

Wednesday, January 02, 2019

NYREJ: Year in Review 2018: Andrew Lieb, Lieb at Law, P.C.

Tuesday, January 01, 2019

Discrimination: Therapy Dogs in 2019

Game-changing developments are expected to occur in 2019 with respect to therapy dogs (i.e., service dogs and emotional support dogs) and real estate professionals must monitor these developments as they occur to stay on top of their game and avoid facing a lawsuit.

As some background, on April 18, 2018, Governor Cuomo signed S7319 into law. This statute charged "the commissioner of agriculture and markets shall convene a working group to examine the need for statewide standards for therapy dogs." Then, in October 2018, the working group published "A Report from the New York State Therapy Dog Working Group".

The Report is clear to note that "[therapy dogs are not defined in other laws under the Americans With Disabilities Act, Federal Housing Authority, NYS Human Rights Law, or New York City Human Rights Law" and that the current definition found at Article 7 of the Agriculture and Markets Law should be expanded to include "private homes" to its current definition of "any dog that is trained to aid the emotional and physical health of patients in hospitals, nursing homes, retirement homes and other settings and is actually used for such purpose, or any dog during the period such dog is being trained or bred for such purpose, and does not qualify under federal or state law or regulations as a service dog." As such, the definition would be relevant to suit under the New York State Human Rights Law (i.e., discrimination in housing) - Real Estate Brokers, Property Managers and Landlords take notice.

The Report calls for "standards regarding training, evaluation, certification, and identification of therapy dogs... especially in relation to service dogs and emotional support dogs." It is expected that further statutes will follow to enact the recommendations of the Report. It's important for real estate professionals to monitor these statutes as they go from bill to law rather than to learn about their rules from receiving a Summons and Complaint. Remember, the best real estate professionals are on the cutting-edge on changes to the law. Leveraging those changes makes you money.