Posts from: March 2016

Is Your Condominium Association’s Leasing Restriction Enforceable?

Leasing restrictions are a common issue in condominium associations. Associations have adopted different forms of leasing restrictions, often with the goal of maintaining a certain owner-occupancy rate. Common restrictions include restrictions on the length of leases and a limit on the number of units that may be leased at any one time. A higher owner-occupancy rate is desirable is desirable for a condominium association so that units meet FHA and conventional lender requirements for refinancing and sales.

Condominiums associations are controlled by the association’s governing documents: the condominium association declaration and bylaws which are recorded with the county recorder of deeds; and rules and regulations passed by the association’s board of managers. Leasing restrictions have often been adopted by the board as a rule and regulation rather than by an amendment to the declaration, which requires a vote of the unit owners.

On February 3, 2016, the Illinois Appellate Court for the First District in Stobe v. 842-848 W. Bradley Place Condominium Association, ruled that a condominium association board may not adopt a leasing restriction as a rule or regulation, if the declaration recognizes a unit owner’s right to lease his unit. In Stobe, the association’s declaration and bylaws did not expressly state that unit owners had a right to lease their units, but did include certain restrictions on leasing, including that no unit could be leased for hotel or transient purposes for less than six months, and limitations on the lease or sublease of parking spaces.

The Appellate Court held that the board lacked the authority to pass a rule restricting leasing because the association’s declaration expressed certain limitations on leasing and, therefore, any restriction of an owner’s right to lease their unit conflicted with the declaration’s intent and must instead be done through an amendment to the declaration. In its decision, the Court rejected the association’s reliance on Apple II Condominium Association v. Worth Bank and Trust Co., in which the Court held that an association may prohibit the leasing of units either by a board rule or amendment to the declaration. Since the Apple II case involved whether an amendment restricting leasing was valid, and not a rule adopted by the board, the Court in Stobe found that the Apple II holding with respect to leasing restrictions through a board rule was merely dicta and not controlling law.

As a result of the Stobe decision, if a condominium association’s declaration indicates an intention that owners have the right to lease their units, any leasing restriction must be done through an amendment to the association’s declaration, rather than the adoption of a board rule.

If you have any questions regarding leasing restrictions in your condominium association governing documents, or how this case may impact your association, please contact:

Kristen E. O’Neill at:

koneill@lgattorneys.com or 312-368-0100.

The New Illinois Pregnancy Accommodation Act: What Employers Need to Know

The Illinois Pregnancy Accommodation Act (“IPAA”), which became a law on January 1, 2015, amended the Illinois Human Rights Act and heightened the duty of all Illinois employers to reasonably accommodate job applicants and employees affected by pregnancy, childbirth, or medical or common conditions related to pregnancy or childbirth including probationary and part-time employees.

It is now a civil rights violation for Illinois employers to: (i) not make reasonable accommodations for any medical or common condition of an applicant or employee related to pregnancy or childbirth; (ii) deny employment opportunities or deny medical benefits to or take adverse action against an otherwise qualified job applicant or employee if the denial adverse action is based on the need of the employer to make reasonable accommodations to the known medical or common conditions related to the pregnancy or childbirth of the applicant or employee; (iii) require a job applicant or employee to accept an accommodation when she did not request and chooses not to accept one; (iv) require a job applicant or employee to take leave under any leave law or policy of the employer if another reasonable accommodation can be provided; or (v) refuse to reinstate employee affected by pregnancy, childbirth, or medical or common conditions related to pregnancy or childbirth to her original job or to an equivalent position with equivalent pay and benefits upon her signifying her attempt to return or when her need for reasonable accommodation ceases.

The IPAA sets forth an extensive list of possible accommodations for pregnant employees including (without limitation): more frequent or longer bathroom breaks; breaks for increased water intake and periodic rest; private non bathroom space for expressing breastmilk and breast feeding; feeding; assistance with manual labor; light duty; temporary transfer to a less strenuous or hazardous position; provision of an accessible worksite; acquisition or modification of equipment; job restructuring; part-time or modified work schedules; appropriate adjustment or modifications of examinations, training materials, or policies; reassignment to a vacant position; time off to recover from conditions related to childbirth; and leave necessitated by pregnancy, childbirth, or medical or common conditions resulting from pregnancy or childbirth.  Prior to the IPAA, employees affected by pregnancy would not otherwise be entitled to many of the statutes list of possible accommodations.

The IPAA permits an employer to deny a request for pregnancy accommodations only where granting it would present an undue hardship.  To succeed with the undue hardship defense under the IPAA, an employer must demonstrate that the nature and cost of the accommodation, the overall financial resources and size of the employer, the type of operations the employer is engaged in, and the impact the accommodation would have upon overall operations are such that the accommodations substantially impacts the ordinary operations of the business.  Significantly, the IPAA provides for a rebuttable presumption that an accommodation will not impose an undue hardship if the employer provides or must provide a similar accommodation to non-pregnant employees otherwise entitled to an accommodation.

Similar to the Americans with Disability Act, the IPAA mandates that the employee and employer engage in an “interactive process”, which requires, at a minimum, that the employer and employee “engage in a timely, good faith, meaningful exchange to determine the effective reasonable accommodation.”

We help businesses navigate the complications and confusing interactive process to ensure compliance with the IPAA when dealing with employees affected by pregnancy, childbirth or medical or common conditions related to pregnancy or childbirth.

If you have any questions in this area, please contact:

Mitchell S. Chaban at:

mchaban@lgattorneys.com or 312-368-0100.

Essential Legal Matters: What Foodservice Operators Must Know

As any foodservice operator knows, the food business is changing daily.  Margins are thin, competition is fierce and fickle consumer demand and constantly changing dietary fads create increased daily pressure on operators. There numerous legal issues you should consider to give you a leg up. 

Type of Business Entity 

While many food service companies may operate as sole proprietorships, it is always better to operate under the umbrella of a legal entity that will protect you as the owner from personal liability.  This is particularly so in the food service industry where you are feeding people (or distributing to those who do) and interacting with a multitude of guests and employees.  Typically, a corporation or limited liability company (LLC) is the way to go.  And if you open in more than one location or operate separate food service businesses, you would be well advised to set up a separate corporation of LLC for each operation; this way only one entity’s assets will be at risk in the event of a lawsuit.

Intellectual Property Rights

Nearly every food service business creates intellectual property, and these assets can be very valuable in the highly competitive foodservice industry, particularly when your business becomes successful.

One of the most commonly used methods of protecting your food service business intellectual property rights is obtaining trademark protection for any distinctive marks, emblems or symbols or form of words.  The protected mark must be something that distinguishes your business from others and be distinctive, i.e., not something generic like “great food.”  In order to obtain the right to use a trademark, an application must be filed with the United States Patent & Trademark Office.  Most businesses retain an attorney to file the application.

Another form of intellectual property common in the foodservice sector are copyrights.  The purpose of a copyright is to protect creative work and to grant authors the exclusive privilege to produce, create or display the work.  It may be possible to copyright a book containing recipes and sometimes even certain recipes themselves or the method or technique of preparation of food products.

Local Regulations

In addition to organizing a business entity and protecting intellectual property, food service operators need to obtain all appropriate permits and licenses.  The permitting and licensing process varies widely from state to state and even city to city and county to county.  Often local government offices can be a great resource for determining what type of licensing and permitting you will need for your business.  In addition, you will likely need additional licensing if you serve or distribute alcohol.  Your business may also be subject to food and safety health inspections.

Conclusion

With the foregoing in mind and, facing the legal side of the foodservice industry does not have to be a daunting task.

If you have any questions in this area, please contact:

Jonathan M. Weis at:

jweis@lgattorneys.com or 312-368-0100.

The Wait is Over: New Standards Adopted on Reporting of Leases on Financial Statements

 

On February 26, 2016, the Financial Accounting Standards Board (“FASB”) adopted a set of long-awaited standards regarding the method of reporting of leases on financial statements.  The new FASB standard addresses a long-standing criticism of the current standard which permits most operating leases to go unreported on a tenant’s balance sheet.  Under the new standard, a tenant will be required to report leases with lease terms in excess of twelve (12) months as both assets and liabilities.  The purpose of FASB’s adoption of this standard is to provide disclosure of financial transactions that have a significant impact on the financial condition of a company.  The accounting treatment for operating leases will more closely approximate the accounting treatment for capital lease transactions, i.e., those leases which are considered a financing device.

Under the new standard, the tenant under an operating lease will report the lease as a liability which will be equal to the present value of all future lease payments.  It will also report the lease as an asset based upon a right of use (“ROU”).  A value of a ROU asset is determined by adding initial direct costs of entering into the lease and any prepaid lease payments to the lease liability amount and then subtracting any lease incentives (e.g., rent abatement) received by the tenant.  The ROU asset is then depreciated over the term of the lease.  The new standard further refines the rules regarding the recognition of fixed payments associated with payment of the landlord’s ownership expenses (i.e., real estate taxes and insurance).  These payments will now be considered a part of the lease expense and will accordingly increase both the reported liability and the value of the ROU asset.

The full impact of the new standard will be determined over time.  While the standard will result in more complete disclosure of future lease obligations, the application of the standard to a company’s balance sheet will reflect both an increase in assets and liabilities and will make year-to-year comparisons more difficult.  Furthermore, the impact on pre-standard loan covenants and other contractual rights and obligations determined on the basis of a company’s balance sheet will need to be carefully evaluated in light of the changes in the accounting standard.

The new standards provide for a lengthy phase in period.  Public entities will need to start reporting leases under the new standards for fiscal years beginning after December 15, 2018 and privately held entities will need to begin applying the new standard for fiscal years beginning after December 15, 2019.

For further information regarding the new accounting standards, real estate leasing matters and related issues, please contact:

Morris R. Saunders at:

msaunders@lgattorneys.com or 312-368-0100

or

Jeffrey M. Galkin at:

jgalkin@lgattorneys.com or 312-368-0100.

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