Tag: ownership

Industrial Growth Zones Created

The City of Chicago and Cook County recently announced the creation of an “Industrial Growth Zone” initiative in order to encourage industrial development in seven designated Chicagoland neighborhoods.  These neighborhoods are principally located in existing industrial areas on the south and west sides of the City.  The program is intended to incentivize industrial development in these neighborhoods by removing barriers to further development and by providing services to support property owners and industrial developers in their development efforts.  Specifically, the services to be provided are aimed at two primary impediments to development: evaluation and remediation of environmental conditions and maneuvering complex governmental regulations.

Much of the land located within the Industrial Growth Zone program has been previously developed and used for industrial purposes.  Accordingly, to redevelop these properties, a developer will first need to conduct a Phase I environmental site assessment and, depending on the identification of recognized environmental conditions, to perform some level of environmental remediation.  This can constitute a significant barrier to development as the cost to conduct the required testing and the possible costs associated with remediating hazardous environmental conditions may be substantial both in terms of costs and delays in commencing construction.  The Industrial Growth Zone initiative will provide qualified developers up to $130,000 of financial assistance for environmental evaluation and remediation efforts.  Specifically, developers may be eligible for $5,000 to update an existing Phase I environmental report and up to $25,000 to conduct a Phase II report.  Additional funds in the amount of $100,000 may be available to remediate environmental conditions.

Additionally, the initiative will establish a “concierge” program.  The concierge will serve as a single point of contact for providing assistance to developers in conducting site evaluation and working their way through voluminous and complex layers of governmental regulations and requirements.  The concierge will assist in making available a broad range of site data and documentation required in connection with the development of properties.  This data includes, among other things, zoning maps, aerial photos, surveys, ownership and real estate tax history, analysis of utility availability, flood plain classification, and providing information regarding the presence of wetlands and endangered species.  Having access to this information at the early stages of the development process will save a developer time and effort in conducting its due diligence, evaluating the suitability of a property for development, and commencing the process of obtaining required governmental approvals.

For further information regarding Industrial Growth Zones, real estate development and related issues, please contact:

Jeffrey M. Galkin at:

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

Successor Liability-Beware

Often, buyers are advised to buy the assets of a business that is for sale, not the ownership interests.  That is based on the general principle that if you buy the assets of a business, then you are not liable for the business’s obligations unless you expressly agree to satisfy obligations.

However, an exception to this general rule is founded upon “successor” liability.  That is, if the buyer’s newly formed business can be found to be a successor of the seller’s business, then the buyer’s business may be found to be liable for the obligations of the seller’s business.  Such liability can be for the seller’s taxes, employment obligations and even union liabilities.

A recent case in California found that the buyer who set up a new business was a successor employer and therefore liable for the withdrawal liability of a prior business under the Multiemployer Pension Plan Amendments Act.  In this situation, the “buyer” only purchased certain assets of the “seller” at a public liquidation sale but was found to be liable for some of the “seller’s” liabilities.

The prior business, Studer’s Floor Covering, Inc. (“Studer’s”) was in the construction industry.  It ceased doing business on December 31, 2009.  At that time, it was party to a collective bargaining agreement, pursuant to which it made contributions to a multiemployer defined benefit pension plan (the “Fund”).

The owner of Studer’s announced to its sale staff that Studer’s would go out of business in a couple of months.  A member of Studer’s sales staff formed a new company (“Michaels”) two months prior to Studer’s going out of business. Michaels obtained a lease for the same storefront Studer’s operated its business, effective January 1, 2010.  Michael put up a sign “Michaels/Studer’s” on the storefront, obtained the same telephone numbers and purchased 30% of Studer’s tools, equipment and inventory at a public liquidation sale.  He did not obtain the customer list since the owner had personal knowledge of most customers.  Michaels employed eight installers (of whom five had been Studer’s employees) and used mainly independent contractors.

The Appellate Court held that the court should consider “continuity of the workforce” as a major factor.  Continuity could be found to exist if a majority of the new employer’s employees were employees of the old employer.  The court held that the changes in ownership here did not affect successor liability.  An important factor was substantial continuity as measured by customer retention.  The Court also was swayed by the new business using the same telephone numbers, the same location and the sign that incorporated the name of the prior business.

Where putative successors do rely on insider knowledge, similar public presentation (signs, location) to corner their predecessor’s market store, and have a continuity of the work force, courts may find the successor doctrine to apply.  New businesses that are concerned about the liabilities of the prior businesses should carefully consider these factors.

Levin Ginsburg has represented and provided counsel for many buyers and sellers of businesses.  If you have any questions regarding successor liability or any other aspect of your business, please contact:

Morris R. Saunders at:

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

Addressing Real Estate Tax Issues Involved in Recently Constructed Property

With increasing real estate development activity, many owners and lenders of recently developed properties are experiencing problems ensuring the correct payment of real estate tax bills during the first year or two after the completion of construction.  In many cases, owners are discovering a couple of years after they have purchased newly constructed property that adequate arrangements were not made to address the complexities of allocating responsibility for pre-construction and initial post-construction tax bills.  This can become quite problematic when undivided tax bills cover parcels owned by multiple owners.

The problem is the result of an incongruity in the time line for the creation of tax parcels for a new project and Illinois practice of paying tax bills in arrears (i.e., tax bills paid in 2015 are for the 2014 tax year).  In the case of newly developed property, this could mean that the tax bills payable in the calendar year after construction is completed could still relate to the property as it existed before construction.

To further complicate matters, if the redeveloped property results in a new ownership structure which does not match the pre-development ownership structure, the old tax bills will not correspond with the new ownership structure.  For example, if a parcel of land which constitutes a single tax parcel (that generates a single tax bill) is redeveloped with two buildings that are sold to separate owners, then the new owners will face a single, undivided tax bill covering both buildings.  Until the County Assessor creates separate tax parcels covering each of the newly constructed buildings, the owners would need to cooperate to cause the combined tax bill to be paid each year.  This situation would lead to all manner of problems because it would not be immediately clear what portion of the tax bill would be attributable to each of the properties.  Furthermore, if one of the owners refused to pay his proportionate share, the other owner might be faced with paying the entire bill to avoiding having the undivided tax bill become delinquent.

Unfortunately, the time line for creating new tax parcels does not correspond with the with the payment dates for real estate tax bills.  For example, an application for a tax division (i.e., the procedure for creating new tax parcels) in Cook County, Illinois is filed a year in advance, meaning a division filed in 2015 will result in new tax parcels in 2016 which will not be payable until 2017.  If the division (other than condominium properties) isn’t filed before the October 31st filing deadline, a division filed in November or December 2015 will result in new tax parcels in 2017 and initial tax bills payable in 2018.

In light of the foregoing, a prudent purchaser of newly developed real estate will need to make certain that adequate provisions have been made to assure the owner that (i) a new division will take place, (ii) that sufficient funds have been collected or will be available from the seller post-closing to pay the seller’s share of the undivided tax bill for the year of closing and any prior years, and (iii) sufficient steps have been taken or are available to protect the purchaser with respect to the payment of undivided tax bills in the periods occurring prior to the issuance of separate, divided tax bills.  Without taking adequate steps to protect themselves, many property owners may be faced with significant real estate tax problems years after the initial construction of their properties.  Thankfully, with some planning, these issues can be avoided.

For further information regarding the real estate tax issues involved in recently constructed property, the procedures which may be employed to address these issues and real estate development and related issues in general, please contact:

Jeffrey M. Galkin at:

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

Why the Business Owner Should Plan for Business Continuity

Many business owners do not believe that they will die while they own the business.  They feel that they have all the time in the world to plan for the succession of their business.  Often the owner will have the attitude of “If I die…”, not “When I die…”. Business owners have a tendency to believe that there will always be more time to make decisions relating to succession planning.  Often owners face various personal obstacles to plan for the future of the business without them, such as:

Unwillingness to plan.  The owner may be unwilling to plan, believing that he or she is in charge and no one can tell him or her “what to do”.

Inability to Plan. The owner may believe that he or she does not know how to plan for the succession of the business.

Mistaken Belief That a “Good” Will or Trust Is Enough. The owner may believe that his or her estate plan is sufficient.

Unrealistic Expectations of the Future.  The owner may believe that the business is so successful and there is so much wealth involved, that the business can take care of itself.

Conflict Between Business Succession and Financial Security.  The owner may believe that the owner’s financial security is dependent upon the business and that if the owner relinquishes control, then there will be no financial security.

Fear of Making the Wrong Choice.  The owner may have a fear that he or she is making the wrong choices for leadership or for ownership of the business.

Fear of an Adversarial Process. The owner may feel that he or she does not want to fight with the next generation and that everyone will end up angry with each other.

It is very important for the owner to overcome the typical fears associated with the business succession planning process.  A proper plan is more than an estate plan and is intended to give the owner a high degree of control over the process, provide the business with the greatest chance to succeed without the owner’s day to day involvement and to provide the owner with the greatest opportunity to enjoy financial security.  If you do not properly plan for the continuity of your business, then the relationships the business has with its employees, vendors, customers and others may be jeopardized.  Also, if you have family members in the business or key, trusted employees, then you should plan for the continuity of the business and communicate with them what your plans are. It does not have to be an adversarial process. If you fail to properly plan for the business and decide to leave it to chance, then you are leaving your (and possibly your family’s) financial security to chance.

We have helped many business owners plan for the transition of the ownership and management of their businesses to the next generation and have helped them successfully implement that plan. As a result, the owners have managed to maintain a degree of control over the process to the extent that they desired and they have also helped ensure their financial security.

We would be pleased to answer any questions you might have and to help you through this process. If you have any questions about planning for the continuity of your business, please contact:

Morris R. Saunders at:

msaunders@lgattorneys.com or 312-368-0100

Is Your Family Business or Closely Held Business Ready for Ownership Succession?

Every family owned and closely held business must eventually address the issue of ownership succession.  It should be a priority action item for all owners. Many owners see their business as their retirement plan. If they do not properly prepare the business and the next generation of leaders, then there may not be enough in the “retirement plan” for the owner to actually retire. Sometimes the owners are faced with clear cut choices as to who will take over their business and therefore feel that it is not necessary to focus on the process.  However, if the owner merely transfers ownership and/or management of the business to the next generation without getting the business and the future leaders ready for the transition, the business may fail regardless of the good intentions of all involved. With respect to the younger generation,

  • Is the successor qualified to run the business? Does he or she have the right “tools”, the right training and/or experience?
  • Is there more than one successor? If so, what will be the roles and responsibilities of each? Will ownership be equal? Will control be equal?

With respect to your business,

  • Are the company’s governance records (e.g., by-laws, minutes, stock records) complete and current?
  • Does your company have an employee handbook that is current?
  • Are there valid employment agreements for key employees with enforceable restrictive provisions?
  • Do the loan documents permit the transfer of ownership?
  • Are the agreements with vendors and suppliers in place?
  • Are there agreements with key employees that give them an incentive to stay employed with the business, such as deferred compensation plans?
  • Is the business in compliance with leases of real estate and equipment? Do those leases permit a transfer of ownership or do they require the Lessor‘s consent?
  • Is intellectual property protected? If some of the intellectual property is owned by the senior generation, is it properly documented? How will the business continue to use the intellectual property?

You might also wish to consider how the business will succeed with or without you. What will be your role in the transition? Will you retain an office, be on the board of directors? Determining who will be the next owner(s) and manager(s) may be easy or difficult but you must consider numerous factors, some of which are outlined above to give the new owner(s) and manager(s) and the business the best chance to continue to prosper.  We have helped many clients pass the ownership and management of their business to the next generation and have watched as the business has continued to thrive.

If you would like our assistance through this process, please contact:

Morris R. Saunders at:

msaunders@lgattorneys.com or 312-368-0100

Recent Illinois Supreme Court Case Clarifies That Prescriptive Easements Do Not Require Exclusive Possession

An easement is a right or privilege to enter and use land which is in possession of another. For example, if there are two parcels of land, owned by two separate property owners and one of the properties does not have access to the road, the property owner of the accessible land may grant the owner of the non-accessible land an easement to use a particular portion of the accessible property to reach the road. Another example is when a utility company desires particular access on, or over, or under a piece of property, the property owner will grant the utility company an easement. There are various types of easements, including express easements (which may be “granted” or “reserved” in a deed or other legal instrument), implied easements (which courts typically determine when there is a claim brought, and which involves an analysis of the intentions of the parties and takes into account the practices and customs for the use of the property) and easements by necessity (situations where a court determines if the easement is absolutely necessary, e.g., where a property is completely without access to a public way).

There is another kind of easement, an easement by prescription – which is the subject of the Illinois Supreme Court’s September 18, 2014 decision in Nationwide Fin., LP v. Pobuda, 2014 IL 116717, reh’g denied (Nov. 24, 2014). The plaintiff, Nationwide Financial, LP (“Nationwide”) became the owner of a parcel of land which was adjacent to a lot owned by the defendants, the Pobudas (the “Pobudas”). The Pobudas alleged that they consistently traveled over the northwest corner strip of Nationwide’s newly acquired property during the 22 year period prior to Nationwide’s ownership of the property. The prior owner had observed them using the strip and never raised an issue. Nationwide filed suit against the Pobudas, seeking a declaratory judgment that the Pobudas’ use of the strip amounted to trespass and the Pobudas’ counterclaimed, alleging that they enjoyed a prescriptive easement to travel over the strip.

According to the Court,  for the Podudas’ to establish an easement by prescription, “the use of the way in question must have been—for a 20-year period—adverse, uninterrupted, exclusive, continuous, and under a claim of right. Nationwide argued to the Court that the Podudas were required to prove that they “exclusively used” the easement property and “altogether dispossessed” the titleholder for the 20-year period. The concept of adverse possession is often confused with the concept of prescriptive easement. Adverse possession is when a party acquires ownership of land after meeting certain requirements, including  possession of the land of another, denoting physical control over the property. Therefore, when it comes to adverse possession, two people cannot possess the same thing. An easement is only one party’s limited right to use the servient land – there is not an element of ownership or control. The Court in Nationwide held that that for a prescriptive easement to exist, there is a lesser interest at stake, and therefore, two parties can simultaneously use the same strip of property over the 20-year period, and the property owner does not have to be totally deprived of possession in order for a prescriptive easement to arise or exist.

The outcome of Nationwide has various implications on real estate law and the practical issues which may arise in the purchase or sale of property, not only for residential properties but for commercial and industrial properties as well. Perhaps the most important of which is that a purchaser of property should investigate whether or not there could be a prescriptive easement (and for that matter, an implied easement) which may affect the land it wishes to purchase. While express easements may be recorded and be revealed in a title commitment, an implied easement or a prescriptive easement may exist due to practice, custom, or fulfillment of a prescriptive easement’s requirements, which may only be ascertained by visiting the property and/or speaking with the current property owners and/or neighboring property owners directly.

If you have any questions or concerns relating to easements in connection with real estate, or if you are interested in purchasing or selling property for residential, commercial or industrial purposes and would like to discuss legal issues relating to that purchase or sale, please contact:

Eli Korer at: ekorer@lgattorneys.com or 312-368-0100

or

Jeffrey M. Galkin at: jgalkin@lgattorneys.com or 312-368-0100

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