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Showing posts with label #realestateinvestingwithandrewlieb. Show all posts
Showing posts with label #realestateinvestingwithandrewlieb. Show all posts

Friday, April 24, 2020

New SBA Guidance on Paycheck Protection Program and Good Faith Certifications

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New SBA Guidance on Paycheck Protection Program and Good Faith Certifications
On April 23, 2020, the U.S. Small Business Administration issued new guidance on the Paycheck Protection Program under the CARES Act, specifically concerning the SBA’s position on good faith certifications and limiting PPP funding to public companies.

All applicants and recipients of PPP funds should pay close attention to Question 31 of the SBA Guidance: 
31. Question: Do businesses owned by large companies with adequate sources of liquidity to support the business’s ongoing operations qualify for a PPP loan?

Answer: In addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere..., borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business. For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification. Lenders may rely on a borrower’s certification regarding the necessity of the loan request. Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith (emphasis added).

While the SBA Guidance specifically mentions public companies and their good faith certifications, it is important to note that the good faith certification is required for ALL borrowers. This means that all borrowers should be prepared to demonstrate their basis for their good faith certification. Thus, to mitigate exposure, borrowers are urged to contact their counsel to prepare a paper trail of their loan application process, which should include at the very least any proof that the application is indeed necessary and the basis for all amounts stated on the application (e.g. payroll, projected losses, operating expenses).

For a further discussion on disclosure, listen to the podcast HERE.


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Friday, April 17, 2020

Cuomo Extends Deadlines for Condominium Filing Requirements

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Cuomo Extends Deadlines for Condominium Filing Requirements
Governor Cuomo has signed Executive Order 202.18 which extends deadlines for condominium offering plans, offering breathing room to developers. The deadlines for the following requirements have been tolled:

  • Requirement of filing an offering statement or prospective within 15 months of date of issue of the letter from the attorney general stating that the offering statement or prospectus has been accepted for filing is tolled until May 16, 2020 (see Section 352-eeee(2)(a) of the General Business Law);
  • Filing fees required at the time of submission and filing of each offering statement or prospectus also suspended until May 16, 2020 but payment must still be made to the department of law by August 14, 2020 (see Section 352-e(7)(a) of the General Business Law);
  • Requirement of Sponsor’s preparation of a budget for the first year of condominium operation is tolled until May 16, 2020. However, the Sponsor must update the first year of operation, as necessary, within 30 days from expiration of Executive Order. The Sponsor shall not be required to offer rescission, to the extent the first year’s budget for operation does not increase by 25% or more during the pendency of the state of disaster emergency (see 13 NYCRR §§ 18.3(g)(1), 20.3(h)(1), 23.3(h)(1)); and
  • Rule requiring a sponsor to offer rescission if the first closing of a unit does not occur within first year of operation is tolled until May 16, 2020, but the sponsor must update the first year of operation, as necessary, by June 15, 2020 (see 13 NYCRR § 20.3(o)(12)).

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Monday, April 13, 2020

Employer Alert - Executive Order on Essential Businesses

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Employer Alert - Executive Order on Essential Businesses
On April 12, employers were ordered to provide their staff with face coverings.

The Executive Order 202.16 provides:
For all essential businesses or entities, any employees who are present in the workplace shall be provided and shall wear face coverings when in direct contact with customers or members of the public. Businesses must provide, at their expense, such face coverings for their employees. This provision may be enforced by local governments or local law enforcement as if it were an order pursuant to section 12 or 12-b of the Public Health Law.  This requirement shall be effective Wednesday, April 15 at 8 p.m.
Employers must get their face coverings now!!!

Interestingly, the order does not require a specific type of face covering so it's conceivable that even a homemade option would satisfy the requirement. However, try to get N95 masks if you can - safety first. 



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Friday, April 10, 2020

Spousal Refusal in Medicaid Planning

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Spousal Refusal in Medicaid Planning
Do you need Medicaid and can’t wait for a 5-year lookback to qualify?

Then, consider Spousal Refusal, which with the Reverse Rule of Halves, represent 2 options to avoid the 5-year lookback requirements.

Spousal Refusal means that assets are transferred from the Medicaid applicant to such applicant’s spouse (the community spouse or the spouse not receiving Medicaid). Luckily, these transfers of assets to a spouse are exempt from the five-year look back period and thus, don’t trigger a penalty period.

Under Medicaid law, the community spouse can sign a Spousal Refusal which states that the community spouse refuses to make their income and resources available to the Medicaid applicant. This can be done especially when the community spouse may have assets over Medicaid’s allowable recourse limit or in excess of the income allowance.

In New York, Social Services Law §366(3)(a) provides that if the community spouse refuses or fails to provide the applicant with the necessary care and assistance, the medical assistance furnished to the applicant creates an implied contract with the community spouse. The cost of the medical assistance then may be recovered from the community spouse. However, this takes a lawsuit, which is often settled for far less than what was transferred, if the lawsuit is pursued in the first instance. Also, if repayment is pursued, the repayment rate is only based on the Medicaid reimbursement rate, which is significantly less than the private pay rate so there is very little to lose for a spouse to claim Spousal Refusal when they cannot plan in advance of the 5-year lookback.

Regardless, those needing Medicaid often have unique circumstances and everyone should get tailored legal advice on any strategy they seek to pursue before effectuating such strategy.


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The Reverse Rule of Halves in Medicaid Planning

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The Reverse Rule of Halves in Medicaid Planning
Medicaid provides a penalty period for the transfer of assets for less than its fair market value within 5-years of an individual’s application for Medicaid. The penalty is calculated by taking the amount of the transfer and dividing it by the average cost of one month of nursing home care in the region where the applicant resides.

A strategy used to maximize an applicant’s excess assets is the Reverse Rule of Halves. Essentially, this strategy allows the applicant to retain at least half of his excess assets and to become eligible for Medicaid sooner. When using this strategy, the Medicaid applicant gives 100% of their excess assets to a family member or multiple members. As this transfer may be a violation of Medicaid’s look back rule, a penalty period of Medicaid ineligibility will result. The family member, however, can return half of the gifted assets in installments back to the Medicaid applicant through a promissory note, so that the penalty period is also cut in half. The applicant, then, can use the returned assets to pay for care during the penalty period.

To utilize this strategy, the assets must be accessible either through a competent individual’s signature, joint ownership, or a Durable Power of Attorney. The return of assets will need to be done through a Deficit Reduction Act (DRA) compliant promissory note. To determine the value of assets that can be preserved with this strategy, the following factors are considered: 
  1. Total value of the applicant’s assets that constitutes excess resources for Medicaid purposes;
  2. Total monthly fixed income of the applicant;
  3. Actual private monthly cost of the nursing home that the applicant will be entering or is in; and
  4. Average monthly nursing home cost figure used by the Medicaid district in which the applicant resides to calculate transfer penalty periods.

While there is a specific procedure calculating the maximum amount, the amount gifted is usually approximately equal to the maximum value of assets that can be protected. To determine whether this applies to a specific applicant’s circumstances and to determine whether using the Reverse Rule of Halves is the best strategy for their specific needs, applicants are encouraged to retain counsel as early as possible.


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