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Thursday, December 31, 2009

Build-Outs and Tenant Allowances

A common aspect of commercial leasing is the building out of the premises for the tenant. The costs of the build-out (and the hiring of the contractor(s) to perform the build-out) may be the responsibility of the landlord alone, of the tenant alone, or may be a joint enterprise between landlord and tenant. Whatever the arrangement, build-outs are a very common area of dispute between landlords and tenants. It is extremely important that the landlord clearly state the terms of the build-out in the written commercial lease. The following are the some items relating to the build-out that must always be addressed in detail in the lease when applicable:

What improvements will be made to the premises?

When must the landlord work and tenant work be completed?

Does the completion trigger the lease and/or rent commencement date?

Who is responsible for the costs of the build-out?

Who is responsible for hiring architects and contractors to perform the build-out?

What is the landlord’s mechanism for approving the contractors and the work specifications?

Is the landlord going to pay some or all of the build-out costs?

If so, will the landlord pay the general contractor directly or pay the tenant?

Is the tenant required to pay back the costs to the landlord or will the costs be amortized within the rent?

If the tenant is responsible for the costs of the build-out, will the landlord pay the tenant an improvement allowance?

If so, when/how will the allowance be disbursed? Will it be disbursed to the tenant or to the contractor(s)? What must the contractor/tenant provide to the landlord in order to receive disbursements of the allowance?

Is the tenant required to pay back the allowance? If so, when and how?


In addition to clearly setting forth the terms of the build-out in the lease, landlords need to take additional steps to protect their property and their investment in the build-out. The following are some tips that can help landlords avoid unfavorable results:

The lease default provisions should require the tenant to repay the improvement allowance and the landlord’s expenditures toward the build-out if there is a default of the lease.

If the landlord is paying for the costs of the build-out, without upfront payment from the tenant, the landlord should make sure that the improved premises will be suitable for other tenants. In the event the current tenant fails to pay rent and the landlord is forced to evict the tenant, the landlord needs to be able to market the space to other prospective tenants without tear-down expenses and another build-out.

The landlord should require the tenant and its owners to personally guarantee the repayment of the build-out expenses.
The landlord should only disburse funds for work that is actually completed. The landlord needs to monitor the project, only pay the contractor(s) directly, and require lien waivers from all contractors before disbursing funds.

Tuesday, December 29, 2009

Collecting the Professional Debt: Discretion with Aggression

Harry has been a client of your firm for several years. Eventually, you have come to regard him as a trusted client who promptly pays for services rendered. This morning he called you with an urgent message. It seems that he is involved in a large matter and your fees will go well beyond any amount previously billed to him by your firm. If you are successful, you know there will be funds available to cover your fees and costs, but you are not certain it will succeed.

While all businesses have credit extension concerns, professionals have factors to consider that require special considerations. The services of a lawyer, doctor, CPA, architect and other professional are unique and, once engaged, cannot generally be suddenly terminated. The savvy professional improves the chances of avoiding collection problems by conducting prudent credit checks like other businesses, even for existing clients who request more extensive credit.

Prevention

Additionally, the professional should candidly discuss the prospects of success in the enterprise, e.g. the risks of the medical procedure or the likelihood of reversal of the IRS ruling. Explain in detail the estimated fees and what factors can effect these charges. Do not forget to reveal expenses such as photocopies, travel, filing fees, investigations, subcontractors, etc. Tell the client how to keep the total bill down. Very importantly, tell the client when bills are expected to be paid. Not only will these types of explanations allow the client to budget, but it will avoid surprising the client with an unexpectedly large bill.

Do not assume that your client can afford your services. Ask for an upfront retainer even with a good credit history. Bills can be monthly, at project stages or other predetermined dates. For example, architects normally obtain a 5% retainer, 15% upon production of the schematic design, 20% upon detailed sketches drawn to scale, and so on with varying percentages due at specific phases of construction. Put the payment agreement in writing to avoid differing recollections.

Unless the matter is handled on a total contingency fee, the final bill should not be the majority of the account due. The final bill is the most difficult to collect, especially if the work is unsuccessful or the bill is unexpected.

Dunning the Client

When, despite your efforts, your receivables become delinquent, the part of the business that most professionals find disagreeable has to be undertaken. Most lawyers would rather argue before a jury than with a slow paying client. Furthermore, if you too vigorously emphasize prompt payment of bills, your client may feel you are more concerned about your fees than his case. Still a balance must be struck between a too-strident policy, at the cost of a lost client, and one that is too permissive, at the cost of profitability.

When it becomes necessary to go after a delinquent client, the question arises as to how the contact should be made and who in the firm should make it. A carefully edited letter, which is sent soon after payment is due, can be a good reminder. Relationships will not be damaged if regular, reasonable reminders are provided. In some cases a letter will not be sufficient and a telephone call must be made. A call from the professional handling the matter is not advisable because it can tarnish the working relationship and can be very awkward for the professional and the client. The bookkeeper or a secretary, whose duties are removed from the client, should place the call. As a final effort, an associate or partner should speak to the client about the implications of a failure to pay.

Firing the Client and the Fear of Counterclaim

Firing the nonpaying client creates a set of particular concerns to the professional.

1. Do you have the right to discontinue services? For example, can an orthodontist leave complex and potentially dangerous devices in a patient's mouth?
2. Must the client's records, books and your work product be given over?
3. Are you going to be sued for malpractice despite competent efforts to that stage of the work? Should you worry about the next psychologist ruining all the progress and you getting the blame?

Answers to many of these questions can be obtained from professional associations and by reference to ethical codes; get a written opinion for your files.

If you perform your work to the best of your abilities and meet the standards of your profession, sue your former client if they owe you a significant fee. Threats of a counterclaim based upon negligence are usually just a ploy to avoid payment. Of course, you will need some nerve and confidence in your performance, as well as good documentation. Finally, hire a good collection lawyer who can be your professional.

A Final Thought

Remember a line from the classic 1967 movie Cool Hand Luke: "What we've got here is a failure to communicate." If you keep the lines of communication open with your clients, you will establish mutual trust and will probably be rewarded by prompt- paying clients.

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The above is not meant to replace legal counsel. If you'd like to speak to an attorney please contact Gross and Romanick directly by calling 703-273-1400 or by filling out their online Information Request form.

Monday, December 28, 2009

Employees: Duty of Loyalty

Your top salesperson has just given you a two-week notice of resignation. When you discuss this problem with another employee, you learn for the first time that your top salesperson has already set up a competing company based upon copies of your files and solicitation of business from your clients. To compound the problem, several of your key personnel quit within days of your top salesperson; you learn that they are joining this new competitor. What can you do? Well, a recent case in the United States District Court for the Western District of Virginia may provide some help.

In National Legal Research Group v. Latham, the court, in an unusual ruling, enjoined a former employee from soliciting or communicating with clients of the firm for two years after resignation. Furthermore, the former employee was charged with actual damages caused to the former employer, as well as punitive damages, even though the offending employee had no written contract. This case could be a significant aid to employers seeking to enforce the so-called "Duty of Loyalty" that binds all employees.

Non-Competition Clauses

Of course, sales people should sign employment agreements containing restrictive covenants, which prevent them from copying confidential materials or competing upon termination of employment. However, such covenants are rarely executed because of the fear that excellent employee candidates may refuse employment on this basis.

To be enforceable, Virginia law generally requires that non-competition clauses be reasonably necessary for the protection of the employer, and not impose undue hardship on the employee. If the clause prevents the employee from competing in a limited geographical area or for a limited period of time, a court will generally uphold the agreement. If the clause has no such limits, courts will often find the restriction to be impermissibly overbroad and unenforceable. Since non-competition clauses are, in general, a restraint on free trade, a court will carefully examine the agreement and construe the clause, where possible, in favor of the employee.

Duty of Loyalty

Despite the failure to include a restrictive covenant in an employment agreement, the law implies an agreement on the part of the employee to faithfully serve an employer. In addition, an employee is a fiduciary with respect to information learned during the course of employment.

Virginia Trade Secrets Act

The Virginia Trade Secrets Act, Virginia Code §59.1-336 may prevent former employees from using information for which the company took reasonable steps to keep secret. This Virginia Code Section was the basis for the court's ruling in the National Legal Research Group v. Latham case.

Protect Yourself

Restrictive covenants in employment agreements are the best method for protecting your trade secrets and preventing competition from former employees. Nevertheless, you may have a case under the Virginia Trade Secrets Act if you take reasonable steps to protect your important trade secret information. Establish written procedures: inform your employees of what materials are considered protected and under what limited circumstances these materials may be utilized.

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The above article is not meant to replace legal counsel. If you'd like to speak to an attorney, please contact Gross & Romanick directly by calling 703-273-1400 or by filling out our online Information Request form.

Wednesday, December 23, 2009

Traffic Offenses in Fairfax, VA

Recently, Gross & Romanick helped a client’s elderly father with a criminal traffic matter. Afterward, our client wrote to say: “You came through when my family badly needed help, and I very much appreciate your efforts. There is a good reason the folks at the Fairfax Courthouse recommend you so highly!”

If you’d like to speak to one of the attorneys at Gross & Romanick about a criminal traffic matter in the Virginia, DC or Mayland areas, contact us by calling 703-273-1400 or filling out our online Information Request form. We’d be more than happy to discuss your case with you.

Wednesday, December 16, 2009

Can I have a personal injury claim if I don't have automobile insurance?

Yes. A personal injury claim is filed against the person who caused the accident and that person's insurance company must pay. The fact that you were not covered by your own insurance policy at the time of the accident does not prevent you from making a claim.

If you'd like to speak to an attorney about your personal injury claim, contact the lawyers at Gross & Romanick at 703-273-1400 or by filling out their online Information Request form.

Thursday, December 10, 2009

What Creditors Cannot Seize

A fellow being chased by creditors would be smart to give his fiancee' an expensive engagement ring. She'll be thrilled, and he'll be making a safe investment, since Virginia law specifically exempts wedding and engagement rings from attachment by creditors. Lawmakers have decided that, for public policy reasons, people should keep such property in the family. Better not divorce!

A religious couple might consider investing in a Guttenberg Bible, since the law also exempts the family Bible.

Animal lovers can rest easy, too. Creditors can't take the family pet, whether it's a dog, cat, squirrel or snake. As long as the debtor does not raise the animal for sale purposes, the creditor cannot take it.

Someone facing bankruptcy might not be in the frame of mind to dwell on mortality, but it's an opportune time to purchase a burial plot. The law also exempts this property as a matter of policy. Who said you can't take it with you!!

Investigate Credit Worthiness
  • Call other creditors of applicant
  • Call industry contacts
  • Check with landlords and credit references
  • Obtain a Credit Bureau Report
  • Review Dun & Bradstreet Reports
  • Study court records for information about: Judgments, pending litigation, title to real estate, liens on realty, and UCC financing statements
  • Hire an investigator or attorney Have your CPA review financial records
The above is not meant to replace legal counsel. If you'd like to speak to one of the lawyers at Gross & Romanick, please contact the firm directly by calling 703-273-1400 or filling out their online Information Request form.

Thursday, December 3, 2009

Our Website Has A New Look

Check out our new website. We hope the new interface will make finding what you need that much easier. And remember, if you want to speak to an attorney directly, simply call us at 703-273-1400.

Monday, November 30, 2009

Lease Survives Bankruptcy Rejection

An individual who owned a business filed a personal Chapter 7 Bankruptcy. The business remained at the premises and continued to pay the rent, but the bankruptcy trustee failed to accept the Lease. Under bankruptcy rules such failure is an automatic rejection of the Lease. The Landlord filed a Motion to Lift Stay to eject the business from the space based upon the rejection of the Lease.

The Court ruled that the rejection of the Lease on behalf of the bankruptcy estate was not a termination of the Lease. So long as the debtor did not default on the Lease, the Landlord could not evict the business. Federal Realty Investment Trust v. Park, U.S. Bankruptcy Court for the Eastern District of Virginia (2002)


The above article is not meant to replace legal counsel. If you'd like to speak to one of the attorneys at Gross & Romanick, please call 703-273-1400 or email law@gross.com.

Tuesday, November 17, 2009

Commercial Landlord & Collections

Gross and Romanick recently helped a client with a commercial property. Despite all the client’s efforts, the tenant refused to pay his rent and finally cut off all communication. Gross & Romanick sent a letter, filed the eviction action, and then called the tenant. Since the firm’s threats were backed by legal action, the tenant agreed to pay without us having to go to court.

The client wrote to us, saying, “Thanks, and GOOD JOB, ED, getting xxxxxxxxxxx to pay!”

If you are a landlord and need help with your collections, contact Gross & Romanick at 703-273-1400 or visit our website at www.gross.com.

Wednesday, November 11, 2009

Business Conspiracy and Employee's Fiduciary Duties

FACTS: Feddeman & Co offered a group of its employees the opportunity to buy out the main stockholder, creating an employee owned corporation. During the negotiations, the buy-out began to seem unattainable to the employees, so these employees and directors of Feddeman met with a competitor (Langan Associates). The employees discussed the possibility of employment with Langan Associates, and used the threat of resignation as a leverage.

Feddeman then sued Langan and Feddeman's former employees for conspiring to ruin Feddeman's business, usurpation of Feddeman's business opportunities and breach of fiduciary duties.

In order to legally leave Feddeman the employees followed the advice of an attorney, who was also Langan's lawyer.

JURY RULING: An Alexandria Circuit Court jury awarded 3.3 million dollars to Feddeman.

COURT RULING: The judge set aside the 3.3 million dollar verdict in part because the "employee Defendants scrupulously adhered to the advise of counsel as to how to prepare to leave". The case has been appealed to the Supreme Court of Virginia.

SUPREME COURT RULING: The Virginia Supreme Court found that there was not basis to set aside the verdict because defendant employees and defendant directors did more than merely prepare to resign and advise others of a plan to leave. Credible evidence supported the jury determination that the conduct fell below the required standard of good faith and loyalty, and was sufficient to constituted a breach of fiduciary duty. The Court reinstated the 3.3 million dollar verdict.

ACTION ADVISE: When making an important business decision, hire a lawyer that does not have a conflict-of-interest. Conspiring against an employer with a competitor may be considered a breach of good faith and loyalty, as well as a breach of fiduciary duty.

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The above is not meant to replace legal counsel. If you'd like to speak to one of our attorneys here at Gross & Romanick, please call 703-273-1400 or fill out our online Information Request Form.

Monday, November 2, 2009

Terminating A Residential Lease

Recently, Gross & Romanick assisted a client with terminating his residential lease and helped him obtain monetary damages due to mold in the rental apartment.

After receiving the check the client wrote to the firm to say: “Thank you so much for your help. I am very happy with the way this all turned out and the way you handled my case. I will use you in the future if I need a lawyer”.

For more information about how the attorneys at Gross & Romanick can help you with traffic offenses and criminal law, personal injury & wrongful death, or business law & commercial landlord cases, call 703-273-1400 or fill out their online Information Request form now.

Thursday, October 29, 2009

Pre-Judgment Attachment: Get It Before It Vanishes

Unfortunately, filing a lawsuit to collect a debt is often an encouragement to the debtor to move and conceal assets. This sometimes makes creditors hesitant to take early legal action. But, Virginia law has a solution: the pre-judgment attachment. Virginia law allows a creditor to bring the debtor's property into court custody at the outset of a lawsuit, thereby assuring that the property will be available to satisfy any judgment the court eventually grants.

Virtually any significant asset of a debtor can be subjected to attachment. Although real estate and business equipment are the most popular targets, a creditor can also attach bank accounts or even other monies owed to the debtor by a third party. One useful application of pre-judgment attachment occurs in construction cases, when a sub-contractor attaches payments to an out-of-state general contractor. An interesting case is the attachment of an elephant from a traveling circus; unfortunately, the creditor neglected to compute the cost of feeding the animal before taking this ill-advised action.

To secure a pre-judgment attachment the plaintiff files a sworn petition setting forth the cause of action and the grounds for the attachment. The justifications for attachment must fall within one or more of the categories allowed by Virginia Code Section 8.01-534. If the petition is approved by a judge, the creditor must post a bond of twice the amount of the claim. Upon posting of the bond a warrant will be issued ordering the sheriff to seize the property and bring it into the custody of the court. Generally, the debtor will request a hearing within twenty-one (21) days of the seizure at which time the court will determine whether the property will be released or remain in custody until the lawsuit is completed. Many attachments are dismissed at that hearing because of failure to comply with the technical requirements of Virginia attachment procedure.

Pre-judgment attachments do involve certain risks to the creditor. The bond is posted in order to compensate debtors for the improper seizure of their assets. Therefore, creditors should not use attachments for questionable claims. Nevertheless, the judicious utilization of this legal tool can be the difference between an empty judgment and a collected judgment.

Grounds for Attachment:

In summary form, it is sufficient grounds for attachment that the defendant:

* Is a nonresident corporation or individual, which has assets or debts owed to it in Virginia

* Is removing or about to remove out of the Commonwealth with intent to change domicile

* Intends to remove, or is removing, or has removed the specific property sued for or his assets or the proceeds of the sale of his property out of the Commonwealth so that the debtor will not have therein assets sufficient to satisfy the judgment

* Is converting, is about to convert or has converted his property into money, securities or debt with the intent to hinder, delay or defraud creditors

* Has assigned or disposed of or is about to assign or dispose of his assets with intent to hinder, delay or defraud creditors

* Has absconded or is about to abscond from the Commonwealth or has concealed himself to the injury of his creditors, or is a fugitive from justice.

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The above is not meant to replace legal counsel. To speak to one of the attorneys at Gross & Romanick, call 703-273-1400 or fill out one of our information request forms.

Wednesday, October 28, 2009

Reasonable Attorney's Fee?

Unless there is an agreement providing for attorney's fees, a Virginia court will not award attorney's fees for breach of contract or failure to pay on an open account. While most companies are aware of this problem and put attorney fee provisions in their supply contracts or promissory notes, there is still a problem. If these agreements provide for "reasonable attorney's fees", then the court may want proof of the amount the litigation actually cost (sometimes by expert witnesses) and often awards less than the contingency fee, the actual cost, and the cost it will take to collect the judgment. If the agreement states a fixed percentage such as "25%" or "1/3", the court may decide that it did not take that much effort to obtain the judgment and award less than the amount that the client will be forced to pay the attorney out of collection. Furthermore, if the debtor defaults on a confession of judgment note, the clerk of court who enters the confessed judgment will not determine the amount to be awarded under a "reasonable attorney" fee clause.

The above is not meant to replace legal counsel. If you'd like to speak to one of the attorneys at Gross & Romanick, please contact them by calling 703-273-1400 or by filling out their online information request form.



Monday, October 26, 2009

Important Eviction Deadlines

During a commercial eviction procedure there are important deadlines that landlord must meet in order to successfully evict a tenant. Some of them are as follows:

Notice of Default
There are no 5 day statutory notice requirements as in residential evictions. However, all notices required by the lease must be satisfied before filing the Unlawful Detainer.

Service of Unlawful Detainer
Must be made 5 days prior to first return date.

Removal
Tenant may seek to remove the case to the Circuit Court but must do so within 10 days after the first return date. If this occurs, be sure to demand that the tenant post a bond for future rent.

Appeal
If either tenant or landlord wants to appeal the General District Court trial verdict, a notice of appeal must be filed within 10 days; or, 30 days from a Circuit Court judgment.

Writ of Possession
If the court awards possession to the landlord, the Writ of Possession can be filed after 10 days. But, many clerks of court will not issue a Writ of Possession after 60 days.

Sheriff's Return
The sheriff must evict the tenant or return the writ of possession to the court without eviction within 30 days. Don't delay or Landlord may have to start the eviction all over again.

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The above is not meant to replace legal counsel. If you'd like to speak to one of the attorneys at Gross & Romanick, call 703-273-1400 or fill out their online Information Request form.

Wednesday, October 21, 2009

The Mechanic's Lien

Northern Virginia's construction industry was hit hard by the recent recession. One indicator of that is the spiraling number of mechanic's liens filed by unpaid general contractors, subcontractors and suppliers. The figures rose at a staggering rate during 1989 and 1990. By the end of 1990, more than $105 million worth of liens had been filed in Northern Virginia counties, including Loudoun, Fairfax, Arlington, Manassas and Alexandria. During the first half of 1991, 2,798 liens were filed, worth $53,144,530.10. In times like these, contractors have good reason to take advantage of this extraordinary remedy.

The mechanic's lien was specially created by lawmakers to protect the workers and suppliers whose sweat and effort should not go unrewarded, even if the General Contractor or Owner of the property goes bankrupt. A mechanic's lien gives contractors and sub-contractors a star preference over virtually all other creditors and liens, sometimes even challenging the Internal Revenue Service. The catch is: you must follow the rules. Even small errors could frustrate your chance to collect on a debt. Since mechanic's liens arise only under specific statutes, the courts strictly follow those laws.

What Is It & How Do I Get It?

Anyone whose work or materials are used to increase the value of real property has the right to secure a lien on that property. The lien is only a potential right until it is properly "perfected" in the manner specified by law. You perfect a lien by recording a Memorandum of Mechanic's Lien with the records division of the county or city where the property is located. This notice lets the world know of your lien interest. The Virginia Code sets out in detail what must be included in the Memorandum. Virginia Code, sections 43-5 (general contractors), 43-8 (sub-contractors) and 43-10 (laborers and materialmen).

The Memorandum and a lawsuit to enforce the lien (Bill to Enforce Mechanic's Lien) must be filed within specified time periods (see the filing deadlines). The Bill to Enforce asks the court to sell the property in order to pay the lien.

Enforcing Liens Against Subsequent Purchasers

The sale of the building or property does not destroy either a filed mechanic's lien or the legal right to file a lien. Thus, many new homebuyers are shocked to find that they may be responsible for a mechanic's lien filed after settlement. Title insurance is the method of protection recommended for residential purchasers. Fortunately, banks always require the owners of commercial property to have title insurance.

Virginia is only one of seven states giving mechanic's lien claimants the power to sell the property to satisfy the debt even against good faith purchasers. In fact, a 1988 Fairfax County Circuit Court case, (Talbot v. Swango, 18 Va. Cir. 5), held that purchasers after a foreclosure are at risk for liability on outstanding liens, even if the lien is not perfected until after the foreclosure sale! Since Virginia law provides a relatively generous amount of time to file a lien after work is completed (compared to Maryland and the District), subsequent purchasers may have no notice of the lien and no idea they can be liable for the debt.

Statutory protection for contractors and subs is under continual challenge in the Virginia General Assembly. The legislature is considering measures that would shorten the time for filing liens and would provide less protection for contractors.

Get It Right the First Time

The Memorandum of Lien and the Bill to Enforce must be complete and accurate. Although there are a few trivial mistakes involving form that the courts will overlook, the courts strictly enforce the statutory requirements. One recurring problem is the failure to name the correct Owner or naming only a few of many owners. Avoid this mistake! Have a title search performed. Once the time for filing the mechanic's lien has expired, a judge will not allow an amendment to correct mistakes contained in the Memorandum.

Many deserving lien claimants have lost their only possibility of being paid because they failed to include all necessary parties or to correctly state all requirements in the Memorandum and the Bill to Enforce. The Virginia Supreme Court in Mendenhall v. Douglas L. Cooper, Inc., 239 Va. 71 (1990), dismissed an action to enforce a mechanic's lien, because the named trustee under a recorded Deed of Trust was not included as a party to the suit when it was filed. Because of the technical nature of these procedures, it is advisable to rely on an experienced attorney to enforce your rights.

The Case of the Absconding General

Suppliers of labor and materials should take steps to protect themselves from the risk of a nonpaying General Contractor before they begin work or deliver supplies. It is essential to make careful decisions regarding extension of credit (see article on Credit Applications). But, despite all reasonable measures, there will be those few General Contractors who pocket the money intended for subs and blow it on fun and frolic. Or more commonly, the General files for bankruptcy protection. In many states, including Virginia, once the Owner pays the bill to the General Contractor, he is released, regardless of whether the subs and suppliers get paid.

Virginia, however, has a seldom utilized statute (Virginia Code §43-11) which lets you impose personal liability on the Owner or General Contractor, despite the absence of a written contract. By following specific notice requirements, the sub-contractor or materialman can obtain this additional security without having to resort to the mechanic's lien process.

It is worth noting that Virginia law also imposes criminal sanctions on General Contractors or sub-contractors who intentionally and fraudulently keep money intended for those who performed labor or furnished materials. Virginia Code §43-13.

Conclusion

While the title companies may ultimately have to pay for a perfected mechanic's lien, they will test every technical aspect of the lien, from the filing date to inclusion of all necessary parties. Nevertheless, the mechanic lien process remains one of the best methods for assuring payment. During these tough times, it is often the only way to be paid.

Mechanic's Liens Filing Deadlines

Are Owners Liable When a Mechanic's Lien is Filed Against a Tenant?

What happens if your tenant hires a contractor to do work on the leased property, and then fails to pay for it. Many property owners would assume they have to pay once they receive notice that a mechanic's lien has been filed. Not necessarily so. With some exceptions, the mechanic's lien may only be good against the tenant's leasehold interest, and may not attach to the underlying property. Owners should check on this rule before agreeing to pay.


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The above article is not meant to replace legal counsel. If you'd like to speak to an attorney, please contact Gross & Romanick by calling 703-273-1400, emailing law@gross.com, or filling out the firm's online Information Request Form.

Monday, October 19, 2009

Fictitious Name Filing: Where to File?

Many corporations mistakenly only file their tradename (also called fictitious name) certificates with the Virginia State Corporation Commission. In fact Va. Code §59.1-69 states that a proper certificate must be filed in "the same office of the clerk of the court in which deeds are recorded in the county or city wherein the business is to be conducted." File them with the SCC and the County.

The above is not meant to replace legal counsel. To speak to an attorney, please contact Gross & Romanick directly by calling 703-273-1400 or fill out their online Information Request form.

Thursday, October 15, 2009

Limited Liability Companies

After a hard-fought legal battle over a limited liability company, the attorneys at Gross & Romanick were able to conclude a very favorable settlement which included the sale of a 25% ownership interest to its client for a very reasonable price. In addition, the intellectual property was conveyed to the LLC without an additional fee. The pleased client said, “Ed and Chris: Thank you for your help in getting this finalized."

To speak to the attorneys at Gross & Romanick, contact the firm by calling 703-273-1400 or by filling out their online Information Request Form.

Wednesday, October 14, 2009

Pre-Judgment Attachment: Get It Before It Vanishes

Unfortunately for the creditor, filing a lawsuit to collect a debt is often an encouragement to the debtor to move and conceal assets. Creditors often delay filing legal action for fear of triggering such diversion of assets. However, Virginia law may have a solution: the pre-judgment attachment. Virginia law allows a creditor to bring the debtor's property into court custody at the outset of a lawsuit, thereby assuring that the property will be available to satisfy any judgment the court eventually grants.

Virtually any significant asset of a debtor can be subjected to attachment. Although real estate and business equipment are the most popular targets, a creditor can also attach bank accounts or even other monies owed to the debtor by a third party. One useful application of pre-judgment attachment occurs in construction cases, when a sub-contractor attaches payments to an out-of-state general contractor. An interesting case was the attachment of an elephant from a traveling circus; unfortunately, the creditor neglected to compute the cost of feeding the animal before taking this ill-advised action.

To secure a pre-judgment attachment the plaintiff files a sworn petition setting forth the cause of action and the grounds for the attachment. The justifications for attachment must fall within one or more of the categories allowed by Virginia Code Section 8.01-534. In summary form, it is sufficient grounds for pre-judgment attachment that the defendant/debtor is:

· a nonresident corporation or individual, which has assets or debts owed to it in Virginia
· removing or about to remove out of the Commonwealth with intent to change domicile or business location
· intending to remove, or is removing, or has removed the specific property sued for or his assets or the proceeds of the sale of his property out of the Commonwealth so that the debtor will not have therein assets sufficient to satisfy the judgment
· converting, is about to convert or has converted his property into money, securities or debt with the intent to hinder, delay or defraud creditors; (5) assigned or disposed of or is about to assign or dispose of his assets with intent to hinder, delay or defraud creditors
· absconded or is about to abscond from the Commonwealth or has concealed himself to the injury of his creditors, or is a fugitive from justice.

If the petition is approved by a judge, the creditor must post a bond of twice the amount of the claim. Upon posting of the bond a warrant will be issued ordering the sheriff to seize the property and bring it into the custody of the court. Generally, the debtor will request a hearing within twenty-one (21) days of the seizure at which time the court will determine whether the property will be released or remain in custody until the lawsuit is completed. Many attachments are dismissed at that hearing because of failure to comply with the technical requirements of Virginia attachment procedure, but equally as many cases are resolved because of the seizure.Pre-judgment attachments do involve certain economic risks to the creditor. The bond is posted in order to compensate debtors for the improper seizure of their assets. Therefore, creditors should not use attachments for questionable claims. Nevertheless, the judicious utilization of this legal tool can be the difference between an empty judgment and a satisfied judgment.

The Effect of a Default Judgement on Future Litigation (TransDulles Center v. Dr. Yash Sharma (1996))

Facts
Landlord obtained a default judgment in the General District Court in an unlawful detainer action. Tenant was personally served but did not appear at court. Default judgment was entered and landlord's witness presented evidence establishing a 3-month arrearage in rent, attorney's fees and costs. Even though the tenant was evicted pursuant to the unlawful detainer action, Tenant did pay the judgment amount.

Over a year later the Landlord again sued the Tenant for continuing rents accrued after the default judgment. The Tenant in this new case sought to assert defenses in order to deny liability.

Court Ruling
The issue of whether rent was owed had already been litigated, even though it was done by a default judgment. The Tenant cannot now deny liability.

Lease Drafting Tips
Permit the Landlord to seek continuing rents even after judgment or termination of the lease.

Action Advice
(1) File unlawful detainers in the General District Court, not the Circuit Court (2) Obtain personal service on the Tenant (3) Always present proof at court by a witness, not just by affidavit (4) Object to any contest of liability when seeking additional rental amounts at a later lawsuit.

The above is not meant to replace legal counsel. If you'd like to speak to an attorney, please contact Gross & Romanick directly by calling 703-273-1400 or by filling out the online Information Request Form.

Wednesday, October 7, 2009

The Lease Indemnity Clause

THE PURPOSE: Typically a Lease will state that Tenant will indemnify and hold the Landlord harmless from any claims of damages, suits, fines, liabilities, losses, costs and expenses or injury by the Tenant, Tenant's employees and third parties. Often the indemnity clause states that it even applies to Landlord's own negligence.

CASE LAW: In Appalachian Power Co. v. Sanders an indemnity provision was upheld which required the Tenant to indemnify the Landlord, even though the injured party fell on the premises into a hole from an old water meter. However, in the case of Hiett v. Lake Barcroft Community Ass'n an indemnity agreement signed by a triathalon participant, absolving negligence of the event's sponsor, was set aside on the basis of public policy.

INSURANCE: The Lease should require the Tenant to include in its insurance policies, provisions that: (1) protect the Landlord from subrogation or other claims that are covered by fire, casualty or other types of coverage; and, (2) prevent the invalidation of insurance coverage if the Tenant has waived its right to recover from the Landlord.

ADVICE: The Lease should include hold harmless, indemnification, and defense provisions relating to mechanic's liens, property damage, business losses, personal injuries, theft, safety, and environmental laws. Landlord's agents, employees, invitees and independent contractors should be covered by these provisions. The Lease should protect the Landlord from its own negligence, from construction injuries, and from damages caused by mechanical systems.

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The above is not meant to replace legal counsel. If you'd like to speak to an attorney, please contact Gross & Romanick directly by calling 703-273-1400 or by filling out the online Information Request Form.

Thursday, October 1, 2009

Buildout Allowance

FACTS: The tenant leased a property from a commercial Landlord. Part of the lease agreement was a building allowance of $699,000 to be paid by the Landlord for improvements. The tenant hired a contractor to do the improvements to the property. The Contractor accidentally demolished an unoccupied improvement on the property. Upon noticing their mistake the same day, the Contractor offered to remedy by either rebuilding the improvements or allowing for a credit for the value of the improvements. Instead of accepting one of the offered remedies the Landlord decided to withhold $301,000 of the tenant's allowance. When the tenant and the contractor sued for the allowance, the landlord counter-claimed for lost rent and replacement of the improvement even though the Landlord did not have a tenant for the demolished space and did not replace the demolished improvement.

COURT RULING: The Court determined that the Landlord's counter-claims were without merit; and that the Landlord and its counsel should have known of the meritless nature of the claim. Judgment was entered against the Landlord for $351,057.65 for the withheld allowance plus interest. The Court also sanctioned the Landlord the sum of $251,018.16 for attorney's fees and costs for the baseless counter-claim and defenses, which prolonged the litigation (Va. Code § 8.01-271.1).

ACTION ADVISE: A building allowance is an enforceable right of the tenant. If the landlord withholds payment for the allowance, it will need good cause to do so. Furthermore, if a landlord does not have a tenant for the demolished or damaged space, it should not withhold a building allowance on the basis of lost rent. If the landlord has no intention of rebuilding the damaged improvements, the landlord is not acting in good faith by charging the contractor for the repair cost. Finally, asserting baseless claims in a court proceeding can result in sanctions. Try to resolve these disputes out of court!

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The above is not meant to replace legal counsel. If you'd like to speak to one of the lawyers at Gross & Romanick about a similar case, fill out their online request form or call 703-273-1400.

Wednesday, September 30, 2009

Suing the Guarantor of the Lease

In Virginia, the maximum jurisdictional limit of $15,000 in the General District Court does not apply in commercial evictions if possession and money are pursued in the same Unlawful Detainer action. However, two general district judges in Fairfax have ruled differently with regard to whether the jurisdictional limit applies if the lease guarantor is sued in the Unlawful Detainer action. One judge favorably allowed an extension of the jurisdictional limit on damages against a guarantor. Yet, another judge ruled against exceeding the $15,000 jurisdictional limit on essentially the same set of facts.

Despite this conflict in rulings, it is still worthwhile including the guarantor in your Unlawful Detainer action, since you might get the right judge. If you do, you will save a lot of money and time. If you do not, you will have to seek damages against the guarantor in the Circuit Court.

The above is not meant to replace legal counsel. If you'd like to speak to an attorney, contact Gross & Romanick directly by calling 703-273-1400 or by filling out their online information request form.

Thursday, September 24, 2009

Do I need a lawyer for a drug related charge?

Yes, you do! All drug charges, whether pending in state or federal court, are criminal in nature. These matters have serious financial and economic implications beyond the fines and costs assessed by the Court. For a large number of men and women, this drug charge is their first experience with the United States legal system. This is a system with complex rules and procedures. An attorney knows how to navigate the law, the rules and the court procedures. An experienced lawyer knows the law, as well as the procedures of the court.
Many drug defenses involve complex and technical issues, sometimes involving constitutional rights. A capable attorney can assess and recognize whether the prosecution can prove its case. A lawyer can advise you regarding viable defenses; help you present defenses that work; and, when appropriate, negotiate a satisfactory plea bargain. An attorney protects your rights and prevents you from being taken advantage of by an overloaded and impersonal legal system. A lawyer is your ally in a complex and often hostile system.

To speak to one of the experienced lawyers at Gross & Romanick call 703-273-1400 or fill out their online Information Request form.

Wednesday, September 23, 2009

The Personal Guaranty

For business owners, a common aspect of doing business is a request by a lender, the landlord or vendors for the owners to personally guarantee the debts and obligations of the company. From the creditor’s perspective, it provides additional assurance that the debt will be paid. From the business owner’s perspective, it may be necessary to close a deal or to obtain financing. However, not all business owners understand the legal significance of the personal guaranty. In many cases, owners are so eager to obtain financing, and so confident that their businesses will succeed, that they ignore the potential repercussions of the guaranty. Owners need to understand that the failure of a business, backed by a personal guaranty, can have a devastating effect on the business owner’s personal assets.

Most personal guaranty agreements are wordy documents with complex legal terminology. In most cases, the “guarantor” is agreeing to be responsible for the entire debt if the business defaults. In some cases, the guarantor may only be responsible if the creditor exhausts all collection remedies against the business first (in such case, the guarantor is called a “guarantor of collectability”). Generally, the creditor can pursue both the business and the guarantor in the same legal action, and obtain a judgment against both as jointly and severally liable, which means the creditor can pursue either party for all or part of the money owed.

If a creditor obtains a judgment against an individual owner based upon the guaranty, the creditor can enforce the judgment against the personal assets of the business owner. Methods for collection include garnishment of bank accounts and income, as well as a forced sale of real and personal property. Depending on the size of the debt, the business owner may have no choice but to seek bankruptcy protection to stop the collection process.

What should a business owner do when asked to sign a personal guaranty?

First, a business owner should fully and carefully read the guaranty and consult with an attorney about the implications and consequences. Second, a business owner should assess the risk of the personal guaranty with consideration to the following factors: (a) the debt involved; (b) the financial strength of the business and likelihood of continued success; (c) the potential impact on the business owner’s personal assets in the event of default by the company; and (d) the titling of the business owner’s principle assets such as the residence and brokerage accounts. Next, a business owner should attempt to avoid, or negotiate more favorable terms for the guaranty, such as a limitation of the guaranty to a maximum dollar amount, or alternative arrangement (i.e. secure the debt against the assets of the business or a letter of credit).

A business owner should never sign the guaranty without considering the consequences on the assumption that it is just a part of doing business.

In another article we will discuss how to protect your personal assets.

Should You Cash That Check?

You receive a check for less than the amount owed from a company. The company has stated that they owe you less than you contend is owed. Should you cash the check?

Virginia Law: In the 2002 case of Gelles & Sons General Contracting, Inc. v. Jeffrey Stack Inc., the Virginia Supreme Court for the first time interpreted Virginia Code §8.3A-311 which is a 1992 statute enacted to address the issue of cashing such checks. According to the Supreme Court opinion, the test is whether "a reasonable person" would consider the check to be a tender in full satisfaction of the claim.

Facts of Case: A general contractor ("general") and its subcontractor ("sub") dispute the amount owed by the general to the sub. The general wrote two letters to the sub setting out its position and included a check with the second letter which stated that it represented "final payment". The sub cashed the check but sued for the balance it claimed was due. The trial court found (and the Virginia Supreme Court agreed) that the letter and check was a "drop-dead letter" offer of final payment. By cashing the check, the sub could not sue for any additional sums.

Advice: If there is a question about whether a check is tendered as final payment, look at the correspondence and notations on the check to determine the intent of the maker. Cashing checks may be risky if there is some evidence for an accord and satisfaction.

The above article is not meant to replace legal counsel. If you'd like to speak to one of the attorneys at Gross & Romanick, call (703) 273-1400 or fill out their online Information Request form.

Monday, September 21, 2009

Expungement of Criminal Records

In Virginia, under certain circumstances a person charged with a criminal offense may remove the police and court records relating to the charge. An expungement of an arrest record requires filing of a petition with the Court.

An expungement can only be granted if either: (a) the individual was acquitted of the offense (i.e. found not guilty), (b) the prosecutor requested the court to dismiss the charge, or (c) the charge must have been “otherwise dismissed”. Even if the case was dismissed by the court, an expungement will not be granted if the individual pled guilty to the offense or the Court found there to be sufficient evidence for a finding of guilt.

An expungement will not be granted in cases of a “deferred disposition” in which the court dismissed a charge after an individual completes certain actions within a timeframe set by the Court (i.e. complete community service, attend ASAP class, etc.) if the deferred disposition requires a plea of guilty or the Court finds sufficient evidence for a finding of guilt. A plea of “no contest” may also prevent an expungement.

While the Commonwealth Attorney can agree or object to an expungement, it is granted at the discretion of the Court based upon “good cause” shown. In addition to meeting the criteria for expungement, the Court must also find that the continued existence and possible dissemination of information relating to the charge causes or may cause circumstances which constitute a manifest injustice to the individual. Generally the Court requires that an individual have no prior criminal record similar to the charge that is being expunged.

If an expungement is granted, the record of the arrest will be removed entirely from the records of the Court, the local/county police, and the federal Department of Criminal Justice Services

***The above article is not meant to replace legal counsel. If you'd like to speak to one of the lawyers at Gross & Romanick, please contact us by filling out our online form, emailing law@gross.com, or calling (703) 273-1400.

Tuesday, September 15, 2009

Happy Clients

Here's a note that a client recently sent to Jeff Romanick of Gross & Romanick.

"Just wanted to personally thank you again for making the best out of my situation today. I couldn’t have asked for a better outcome, especially considering the charges against me. I am forever indebted to you! I wish you nothing but the best in your future legal conquests and cases."

To speak to Jeff Romanick (or any of the attorneys at Gross & Romanick) about your own situation, please contact the firm by calling 703-273-1400 or by filling out their online Information Request Form.

Tuesday, September 8, 2009

Pre-Judgment Attachment: Get It Before It Vanishes

Unfortunately, filing a lawsuit to collect a debt is often an encouragement to the debtor to move and conceal assets. This sometimes makes creditors hesitant to take early legal action. But, Virginia law has a solution: the pre-judgment attachment. Virginia law allows a creditor to bring the debtor's property into court custody at the outset of a lawsuit, thereby assuring that the property will be available to satisfy any judgment the court eventually grants.

Virtually any significant asset of a debtor can be subjected to attachment. Although real estate and business equipment are the most popular targets, a creditor can also attach bank accounts or even other monies owed to the debtor by a third party. One useful application of pre-judgment attachment occurs in construction cases, when a sub-contractor attaches payments to an out-of-state general contractor. An interesting case is the attachment of an elephant from a traveling circus; unfortunately, the creditor neglected to compute the cost of feeding the animal before taking this ill-advised action.

To secure a pre-judgment attachment the plaintiff files a sworn petition setting forth the cause of action and the grounds for the attachment. The justifications for attachment must fall within one or more of the categories allowed by Virginia Code Section 8.01-534. If the petition is approved by a judge, the creditor must post a bond of twice the amount of the claim. Upon posting of the bond a warrant will be issued ordering the sheriff to seize the property and bring it into the custody of the court. Generally, the debtor will request a hearing within twenty-one (21) days of the seizure at which time the court will determine whether the property will be released or remain in custody until the lawsuit is completed. Many attachments are dismissed at that hearing because of failure to comply with the technical requirements of Virginia attachment procedure.

Pre-judgment attachments do involve certain risks to the creditor. The bond is posted in order to compensate debtors for the improper seizure of their assets. Therefore, creditors should not use attachments for questionable claims. Nevertheless, the judicious utilization of this legal tool can be the difference between an empty judgment and a collected judgment.

Grounds for Attachment:

In summary form, it is sufficient grounds for attachment that the defendant:
Is a nonresident corporation or individual, which has assets or debts owed to it in Virginia
Is removing or about to remove out of the Commonwealth with intent to change domicile
Intends to remove, or is removing, or has removed the specific property sued for or his assets or the proceeds of the sale of his property out of the Commonwealth so that the debtor will not have therein assets sufficient to satisfy the judgment
Is converting, is about to convert or has converted his property into money, securities or debt with the intent to hinder, delay or defraud creditors
Has assigned or disposed of or is about to assign or dispose of his assets with intent to hinder, delay or defraud creditors
Has absconded or is about to abscond from the Commonwealth or has concealed himself to the injury of his creditors, or is a fugitive from justice.

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The above article is not meant to replace legal counsel. To speak to an attorney, contact Gross & Romanick directly by calling (703) 273-1400 or by filling out their online Information Request form.

Friday, September 4, 2009

Accelerated Rent: Dead or Alive

Can businesses negotiate uncertain damages?

In tenBraak v. Waffle Shops, the Fourth Circuit Court of Appeals upheld the proposition that commercial leases could provide for the recovery of future rents even though such recovery was not available under the common law. It seemed the attitude of the court was to permit businesses to negotiate their respective default rights. After all, the actual losses to the landlord when the default takes place are very difficult to determine, and the landlord should not have to spend a lot of money litigating damages when the parties have agreed to a formula. When the Virginia Supreme Court addressed several cases involving acceleration provisions in commercial leases, they upheld by implication the principle that these clauses were enforceable. Unfortunately, no case on appeal has clearly and unequivocally found that these clauses can be enforced, even if the amount required to be paid would exceed the actual damages suffered by the Landlord.

Are acceleration damages a penalty?

In the Fairfax County Circuit Court case of Teachers Retirement Sys. v. American Title Guar., Judge Thomas S. Kenny struck down an acceleration clause as unenforceable because "it calls for damages in excess of Plaintiff's actual damages." Judge Kenny under the facts of the case deemed the acceleration sums sought to be a "potential windfall" and an "unenforceable penalty." Judge Kenny indicated that the landlord's actual damages was the difference between the amount that should have been paid by the tenant and the amount of rent actually collected if the premises is relet, plus cost associated with reletting. However, the lease was so poorly drafted that Judge Kenny declined to rewrite the lease in order to provide some amount for future losses caused by the default. Thus, the landlord received no award for future damages.

Practical Advice

Mandatory acceleration provisions or damages grossly in excess of actual losses will be problematic. The remedies portion of the Lease needs to be carefully crafted to permit the landlord several options in the event of default. If the losses will be uncertain and difficult to ascertain, then the entire lease should support the proposition that an advance stipulation of damages is needed. The Lease could contain a provision which requires an independent appraiser to set the amount of damages, whose decision would be difficult to dispute.

When attempting to obtain a judgment after default, the landlord should calculate realistic actual and projected losses. If such a calculation is not possible, it may be better to utilize Virginia Code §8.01-128 which permits a landlord to evict a tenant without losing the right to recover for any later deficiency in rent after making an effort to minimize the damages by renting to another tenant; under this statute a landlord can come back to court for later judgments as the damages accrue.

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The above is not meant to replace legal counsel. If you'd like to speak to an attorney, contact Gross & Romanick directly by calling 703-273-1400 or by filling out their online information request form.

Thursday, August 27, 2009

Chapter 11 Bankruptcy

A long time purchaser of your inventory has just filed bankruptcy under Chapter 11 of the Bankruptcy Code while still owing you a large sum of money. A creditor's initial reaction is often despair. They believe that it is the end of the world and that they will be lucky to recover a few cents on the dollar. Do not despair! There is some hope for recovery of your money.

Plan of Reorganization

In a Chapter 11 bankruptcy, the debtor's goal is to reorganize and reemerge as a functioning entity. This goal is accomplished by developing a business plan, which must be approved by the bankruptcy court.

A Chapter 11 bankruptcy may be beneficial to both debtors and creditors. Debtors benefit because they continue to operate their businesses while creditors cannot seize their assets. Creditors benefit because there is the possibility for recovering the debt owed and because long standing business relations can be continued. The theory behind allowing debtors to remain in possession of operations is that current management is familiar with the business dealings and is best equipped to restore it to viability.

The Automatic Stay

Debtors also benefit from the "Automatic Stay in Bankruptcy". The Automatic Stay is immediately effective, and operates to prohibit actions against property of the debtor's estate. It provides the debtor with breathing space to allow it to formulate how best to pay off its creditors and reorganize its affairs.

Debtors are also provided with additional benefits under Chapter 11 of the bankruptcy code. Under certain circumstances, debtors may sell property free and clear of liens. In addition, when appropriate, the debtor in possession may assume, reject or assign executory contracts or unexpired leases, even if the terms of the contract do not permit it. Nevertheless, creditors may be surprised to discover that the Automatic Stay not only assists the debtor, but can also serve to protect a creditor. By staying all actions against property of the debtor's estate, the assets of the debtor can be preserved and a single creditor cannot deplete all of the debtor's assets to the detriment of other creditors. The Stay allows for orderly distribution of assets to creditors and/or time for the debtor to formulate a plan to treat all of its creditors fairly.

Creditors may also obtain relief from the Automatic Stay upon a showing of cause warranting such relief, such as the proof of a lack of adequate protection for creditors or failure to pay post-filing obligations on contracts and leases. Property with no equity and that is not necessary for an effective reorganization may be subject to relief from the Stay.

Benefit to Creditors

Creditors can also benefit from a Chapter 11 reorganization if the debtor is able to reemerge as a functioning entity. A Chapter 11 reorganization plan may lead to payment of the debt. While the payment may not be immediate or in full, it is often more than what would have been received in a Chapter 7 liquidation.

Finally, creditors will have an element of control over the debtor. Upon the filing of a Chapter 11, the debtor provides the court with schedules listing all of its assets and liabilities. These schedules inform the creditor as to where all of the debtor's assets are located and what priority will apply to the creditor. The creditor can therefore monitor the debtor's reorganization and assert some control over the debtor's actions. In short, a creditor will discover that the filing of a Chapter 11 bankruptcy is not necessarily the end of the world and that the creditor as well as the debtor can actually benefit.



The above is not meant to replace legal counsel. If you'd like to speak to one of Gross & Romanick's attorneys, please contact the firm directly by calling (703) 273-1400 or by filling out our online information request form.

Wednesday, August 19, 2009

What Happens To A Security Deposit During Bankruptcy?

What happens to a tenant's security deposit after the tenant files bankruptcy? If rent is owned, can the landlord apply the deposit to unpaid rent?

An informal poll of area Bankruptcy Lawyers reveals a belief that a security deposit can be used as a set- off against both pre-petition damages and lease termination damages under Section 553 of the Bankruptcy Code. The set off is subject to mitigation by the landlord, including releting the premises. The safest process is to have a court grant relief from stay before applying the security deposit; but this procedure may cause a debtor to file an objection. Right or wrong, most Landlords simply keep the deposit.

Some attorneys also argued that Landlord can assert a "secured claim" up to the amount of the security deposit.

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The above is not meant to replace legal counsel. If you'd like to speak to one of Gross & Romanick's attorneys, please contact the firm directly by calling (703) 273-1400 or by filling out our online information request form.

Wednesday, August 12, 2009

ADULTS SUPERVISING GUEST CHILDREN CAN BE LIABLE FOR NEGLIGENCE AND WRONGFUL DEATH

Last month, the Supreme Court of Virginia held, for the first time ever, that when a parent relinquishes the supervision and care of a child to an adult who agrees to supervise and care for the child, the supervising adult has a duty in tort to exercise reasonable care in the supervision of that child. Kellerman v. McDonough, et al.

In Kellerman, the father of a 14 year old girl from North Carolina (Jaimee) dropped his daughter off in Virginia to visit her friend (Becka). Before leaving, the father instructed Becka’s mother that Jaimee was not to ride in cars with inexperienced drivers. He specifically said: “No boys with cars”.

Later that day, Becka’s mother was supposed to pick up the children, but instead agreed that a 17 year old teenager (Nate) could drive the children home. The girls left the shopping mall in Nate’s car. He began to drive extremely recklessly. He lost control of his car and it slammed into a tree, killing Jaimee. Jaimee’s father brought a wrongful death lawsuit on Jaimee’s behalf against Becka’s mother, claiming that she was responsible for Jaimee’s death. The lower court dismissed the case for failing to state a cause of action. The Virginia Supreme Court reversed the lower court’s ruling.

The Virginia Supreme Court held, for the first time ever, that there is a common law duty in Virginia for adults to use reasonable care in supervising child guests. Accordingly, adults that fail to exercise reasonable care in supervising guest children can be liable in tort for injuries to the guest children, even if those injuries are directly caused by the actions of third parties (such as Nate).

The impact of this ruling can be quite substantial. According to the dissent, the ruling implicitly makes the host parent “the virtual insurer of the guest child’s safety”. While this remains to be seen, adults that supervise child guests are now more likely to be named as defendants in lawsuits stemming from injuries to child guests (even if directly caused by third parties).

The above article is not meant to replace legal counsel. If you'd like to speak to an attorney, please contact Gross & Romanick by calling 703-273-1400 or emailing law@gross.com

Monday, August 10, 2009

We're Twittering: FairfaxLawyer And LawBusiness

Are you up on twitter yet? We are.

You may already be following Jeff Romanick--his username is @fairfaxlawyer.

But how about Ed Gross? He's twittering under @LawBusiness. You can follow him here.

Monday, July 27, 2009

New Mechanic's Lien Statute: Cure or Just Another Hurdle

Several major title insurers refused to continue writing title insurance in Virginia, citing loses from undisclosed mechanic's lien claims. Since the Virginia Code permits notification of a claim even after settlement, many residential properties would be conveyed prior to notification, which caused problems for the new owners and their title insurers.

With the participation of the title companies the Virginia legislature has amended the mechanic's lien statute, which substantially alters the notification procedures relative to one and two-family residential dwellings. A construction project may have a "mechanic's lien agent" for receipt of notices from potential mechanic's lien claimants. The agent will be identified in the building permit, which must be "conspicuously and continuously posted" on the property. If no agent is designated, the normal rules apply.

A claimant must notify the agent in writing within thirty days of the time he first furnishes any work or materials. An agent may be designated after construction begins, in which case the claimant must provide notice within thirty days after such permit is issued. Notice must be sent by registered or certified mail or by physical delivery. The required contents of the notice are set out in Virginia Code Section 43-4.01(B).

Only title insurance companies, banking institutions, and attorneys may perform the duties of a mechanic's lien agent. Builders who fail to disclose at settlement all claims for mechanic's liens will face criminal sanctions.

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The above article is not meant to replace legal counsel. To speak to a lawyer about mechanic's liens please contact Gross & Romanick directly by filling out our online information request form or by calling (703) 273-1400.

Monday, July 20, 2009

Letters Of Credit

Letters of credit have been in use for over two thousand years, in one form or another. From the time of ancient Greece and Rome up through the present, letters of credit have been mainly used to finance shipping contracts. However, letters of credit have uses that go far beyond just transportation.

In a letter of credit arrangement, the issuing party, usually a bank or insurance company, contracts with one party to pay funds to a third party upon the fulfillment of certain conditions specified in the agreement. Most commonly, they are employed to finance a sale of goods where the buyer and seller have limited contact and experience with each other, such as an international transaction. Because letters of credit are employed so extensively in international trade, they are governed by an international treaty ("Uniform Customs and Practices Governing Documentary Credits"). But utility of letters of credit is not confined to international shipping; they can be quite useful right here in Virginia.

A tenant can obtain a letter of credit which will become payable to the landlord upon a certification from the landlord that the tenant has defaulted on his rent. This arrangement has several advantages over a conventional security deposit. The landlord can demand a much larger security deposit in the form of a standby letter of credit than he could in cash, and the tenant does not have to use his valuable cash reserves to satisfy the security deposit, assuming the tenant has a reliable credit history. In addition, the tenant will not be at risk of losing his security deposit if a foreclosure occurs.

For more information, contact Gross & Romanick directly by calling 703-273-1400 or by filling out our online information request form.

Tuesday, July 14, 2009

Credit Applications: The Smart Way to Extend Credit

Merchants, landlords and anyone who extends credit via note, contract or lease should follow the lead taken by banks when making credit decisions. Make sure your applicant fills out a credit application. The credit application is a fact sheet about the debtor; often, it also includes credit terms. Part of the credit application should be a request for specific documents, such as tax returns, deeds and automobile titles. There are important reasons why you should obtain detailed information before you extend credit.

First, if there is a default, background information and a listing of assets will be invaluable during the collection process. It is imperative to have facts about the person's employment, bank accounts, assets, address and social security number. This information may be difficult to obtain if the account goes into default.

Second, considered decisions regarding extension of credit can only be made based upon complete data. (See box below for tips on how to investigate credit-worthiness.)

Third, if the debtor was untruthful or misleading on the credit application, it may be possible to sue for fraud or oppose the debtor's discharge in bankruptcy.

Finally, the terms and conditions regarding the extension of credit should be included in the application. In the absence of a written and signed agreement, the court will not award pre-judgment interest or attorney's fees.

Make certain the applicant actually signs the credit application. An otherwise completed application is virtually useless against the debtor without this signature. Also, if you want a personal guarantee, prepare separate signature lines for the guarantors. The guarantee should be made clear by the terms of the credit application and the form of the signature.

Investigate Credit Worthiness
  • Call other creditors of applicant
  • Call industry contacts
  • Check with landlords and credit references
  • Obtain a Credit Bureau Report
  • Review Dun & Bradstreet Reports
  • Study court records for information about: Judgments, pending litigation, title to real estate, liens on realty, and UCC financing statements
  • Hire an investigator or attorney Have your CPA review financial records

The above is not meant to replace legal counsel. To speak to an attorney about extending credit to applicants, contact Gross & Romanick directly by calling 703-273-1400.

Monday, July 6, 2009

Assault & Battery

A recent client wrote to Gross & Romanick to offer thanks for the firm's expert handling of an assault and battery case.

Jeff Romanick handled the Assault & Battery Trial. The client was found Not Guilty. Ash Charles Dean handled the expungement: all arrest records were expunged.

The pleased client wrote: “Jeff – I hope this email finds you well. I am thrilled to have the expungement granted and the matter closed. Thank you for your and Ash’s assistance.”

For more information on Gross & Romanick's Criminal Law Practice, please contact the firm directly by calling 703-273-1400 or by filling out their online Information Request Form.

Thursday, June 25, 2009

New U.S. Supreme Court Case Impacts DWI & Drug Defense

On June 25, 2009, the United Supreme Court decided a case that should have a major impact on drug, DWI and other cases in which lab results are used at trial. In Melendez-Diaz v. Massachusetts the US Supreme Court held that if the defense objects to a certificate of analysis, the prosecution must call the lab technician if it seeks to introduce evidence of the laboratory test results. In most DWI and Drug cases in Virginia, the lab operator rarely testifies at trial and in the past, the Virginia Courts have routinely allowed the lab certificates into evidence without a witness.

In the Melendez-Diaz case, the Supreme Court found that the Defendant’s Sixth Amendment right to confront the witnesses against him was violated by admitting into evidence over the objection of the Defendant a notarized laboratory drug test certificate, without the in-court testimony of the analyst conducting the test. The Court stated that such notarized certificates are “testimonial” in nature, and thus, are covered by the Confrontation Clause of the Sixth Amendment to the United States Constitution.

The holding of this new case is expected to have an immediate and important effect on DWI and drug-related cases in the Commonwealth of Virginia. We now anticipate that the Commonwealth will be required to call the lab technician in order to admit laboratory certificates into evidence at trial in order to demonstrate how the laboratory test was conducted. Since that testimony is a departure from the current practice in Virginia, it gives defense lawyers an opportunity to win some cases for their clients.

The use of new, innovative arguments at trial is why anyone charged with a crime should retain an experienced defense law firm, such as Gross & Romanick.

What Should You Put In Writing: Understanding Statue of Frauds

Based on its name you might think that the Statute of Frauds has something to do with criminal or civil fraud, but it doesn't. The name "Statute of Frauds" actually refers to a law passed by the British Parliament in 1677, and the name has been retained through the centuries. It specifies which kinds of contracts must be in writing in order to be enforceable. Its purpose is to prevent the setting up of supposed agreements and then supporting them by perjury.

The most common applications of the Statute of Frauds are as follows:
  • Holding a person responsible for the promise to pay the debt of another
  • Contracts for the sale of real estate
  • Leases for real estate over 1 year
  • Agreements which cannot be performed within 1 year
  • Sale of personal property over $5,000
  • Sale of goods over $500, unless the buyer accepts the goods
  • Agency agreements

While the Statute requires a written agreement, almost any writing sufficient to indicate some kind of agreement between the parties will suffice. However, the "writing" must be signed by the party who is being charged. Thus, the venerable Statute of Frauds is still an important and influential part of modern law.

For more information or to have Gross & Romanick aid you in written contracts and agreements, please contact the firm directly by calling (703) 273-1400.

Friday, June 19, 2009

Uninsured/Underinsured Automobile Insurance Coverage

If you are injured in a motor vehicle accident in which another driver is at fault, it may come as a surprise to you to learn that the other driver does not have sufficient insurance to compensate you for your injuries. Under Virginia law you are entitled to payment for medical expenses, lost wages, pain & suffering as well as damages for change of lifestyle. However, Virginia only requires drivers to have a $25,000 bodily injury policy and in some circumstances, even allows drivers to be uninsured. If you are seriously injured, your total losses could easily exceed the financial cap of the other driver’s insurance policy. How do you protect yourself from drivers who have inadequate insurance?

The answer is to purchase uninsured/underinsured coverage from your own insurance provider. All insurance companies offer uninsured/underinsured coverage. This coverage provides compensation to individuals injured as a result of another driver’s negligence when the driver at fault does not have adequate coverage to compensate you for all of your injuries.

Beware! Uninsured/underinsured coverage can be tricky. Virginia law only requires payment from this coverage after all third party insurance that is available is exhausted. For example, if you sustain $50,000 in injuries and the responsible driver has $50,000 of insurance available and you purchased $50,000 of uninsured/underinsured coverage, you will receive nothing from your own policy. On the other hand, if you sustain $100,000 in injuries and the responsible driver only has $50,000 of insurance available and you have $100,000 of uninsured/underinsured coverage, you may be able to recover up to $50,000 from your own insurance policy. We recommend that you purchase $1 million or the most uninsured/underinsured coverage that you can afford.

Virginia Case Allows Stacking of uninsured/ underinsured coverage

In the 2009 case of Virginia Farm Bureau Mutual Insurance Company v. Williams, the Virginia Supreme Court held that an individual injured in a car accident may “stack” the insurance coverage available under her own automobile insurance policies. In this case, a passenger was injured when the automobile she was in collided with another vehicle. The combined insurance policy limits of the two automobiles involved in the accident was insufficient to cover her losses. The Virginia Supreme Court permitted the injured person to combine (or “stack”) the uninsured/underinsured policy limits from the three automobiles owned by her father and covered by the insurance he had purchased for those vehicles. Because the Court permitted stacking, the total benefits available to her were increased and available to compensate her for the injuries she suffered in the accident.

The case is significant because in the past Virginia courts disallowed stacking. However, it is important to note that the decision was based on contract interpretation and not public policy. Therefore, there may only be a short window of opportunity to stack uninsured/underinsured polices. The Insurance Company lawyers are certain to review the Williams case and re-write future policies to avoid the outcome of the Williams case. Nevertheless, the case demonstrates why it is so important to have adequate uninsured/underinsured coverage and a knowledgeable attorney on your side.

Hire A Personal Injury Lawyer With Experience

If you are injured in an automobile accident, it is critical that you hire an experienced law firm, such as Gross & Romanick. The Virginia insurance scheme is complex and extraordinarily difficult for an individual to navigate. Beware of lawyers who take automobile injury cases on an occasional basis but do not know how to seek the maximum insurance coverage that is available to the injured person.

Thursday, June 18, 2009

Happy Clients

A recent client of Gross & Romanick was initially charged with reckless driving (going 91 in a 55 mph zone) and illegal window tints. With Gross & Romanick’s help, the final disposition was speeding (74 mph in a 55 mph zone) with a$250 fine. The window tint charge dismissed.

The client wrote to Gross & Romanick shortly thereafter:

Dear Mr. Romanick:

Thank you so much for representing me for my reckless driving/window tint charge. I appreciate your continued honesty from the beginning, and your continued professionalism and patience through the continuance, and the particular judges and prosecutors we had. I am pleased we got the lucky break we did, and realize that I would not have been able to take advantage of this without you defending me. I will hold on to your business card and be sure to give a good reference for you in the future. I would say I will see you soon, but hopefully I won’t!

Tuesday, June 16, 2009

The Importance of Having a Written Contract

A common problem that we encounter at Gross & Romanick is the client who wishes to enforce an agreement that was not put into a writing signed by all parties. Even an exchange of e-mails or written proposals without a signature does not necessarily create a binding contract. While some oral agreements are enforceable, it can be extremely difficult to prove the existence of an oral contract and its terms. To be enforceable, an oral contract requires: (a) a meeting of the minds, (b) definite terms, and (c) a pattern of adherence to those terms. More often than not, the existence of an oral contract boils down to a “he said-she said” debate, which can make enforceability very uncertain.

In addition, under the Statute of Frauds in Virginia, some oral contracts are never enforceable. These include, but are not limited to:


    Agreements to pay the debts of others;
    Agreements for the sale of real estate;
    Agreements to lease real estate for more than 1 year;
    Agreements that cannot be performed within 1 year; and
    Agreements to lend or extend money in an aggregate amount above $25,000.

It is always better to put an agreement into writing, signed by the parties. Doing so eliminates the “existence of a contract” issue, the Statute of Frauds issue, and the argument over what the terms of the agreement were. Also, having a written agreement increases the likelihood that the parties to the agreement will actually acknowledge and abide by the deal. In Virginia, you also have a longer time period to enforce a written contract following a breach (5 years for written contract versus 3 years for oral contracts).

Too many people fail to create a written agreement. This is especially true when the agreement involves friends and family, because it seems to imply lack of trust. In fact, a written agreement is good for all parties because it explains the actual terms of the contract, which understanding may differ among the parties if there is no writing. The only party that benefits from an oral agreement is the party breaching the contract. In our legal experience, it is alarming how often a party to an oral agreement will simply lie about the agreement when the other party seeks to enforce it. Do not take this risk!

Virginia Lawyers Who Tweet

Our very own Jeff Romanick, @FairfaxLawyer, is mentioned in a recent Virginia Lawyers Weekly article on the Virginia Legal community on twitter.

Take a look: its a fascinating analysis of Twitter for those not in the know and a run-down of Virginia Lawyers on twitter.

Traffic Stops and Your Rights

Many people are confused about their rights when they are stopped while driving on the road by a police officer. In fact, a large percentage of individuals stopped for routine traffic violations incorrectly believe that they are required to perform whatever tasks or tests are requested by the police. If you are stopped for any sort of traffic violation, with a few exceptions, you have the right to politely decline almost any request made by the police officer.

The 5th Amendment of the United States Constitution protects against “compulsory self-incrimination” (meaning that no person can be required to give evidence against them self). This protection extends to both statements and various field sobriety tests, such as walk the line, touch your nose, etc. In the context of routine traffic stops, this means that you have the right to refuse an officer’s request for you to exit the vehicle. You also have the right to refuse to perform field sobriety tests. You have the right to refuse consent to a search of your vehicle. You may choose to exit your vehicle and perform these tests, but that is your choice. In many circumstances, the police officer cannot legally order you out of your car to perform sobriety tests if you are stopped for a routine traffic violation.

Under most circumstances, a motorist should not make any statement or have a discussion with the police officer. Do not try to convince the officer of how little you had to drink (“only 2 drinks officer!”). Citizens are under the mistaken belief that the policeman must read you Miranda Rights before asking basic questions about your drinking and driving behavior. Whatever you say and do will probably be used against you in court.

In many cases, even if you remain polite and courteous with the police officer, the officer will aggressively attempt to convince you to perform field sobriety tests, including a field blow test. Again the 5th Amendment affords you the right to refuse to perform tests. However, after you are legally arrested and transported back to the police station, there are statutory consequences for failing to take a breath test. Refusal to take a breath or blood test after being legally arrested is a violation of Virginia’s implied consent law and may subject you to the loss of your privilege to drive, as well as other consequences.

If you do refuse to cooperate with a police officer, you may be threatened with arrest and you may anger the police officer. Therefore, you should understand the consequences of being uncooperative. If the police officer does arrest you and charges you with a criminal offense (such as DWI or Possession of Marijuana), you should seek out a knowledgeable and competent criminal defense attorney. Regardless of whether you complied with the officer’s requests or exercised your rights and refused, you should have a lawyer to ensure that your rights are properly protected in court.

Tuesday, June 9, 2009

Commercial Landlord Practice Area

Commercial landlords need legal assistance from experienced lawyers who understand this area of the law as well as their business concerns. Leasing to tenants at a shopping center, office building, warehouse or other commercial facility involves issues from lease interpretation to collection of unpaid rent. Property managers and leasing brokers depend upon our advice for management decisions, contract language and eviction.

Gross & Romanick represents many of the largest commercial landlords in the Washington DC area, as well as a national REIT. We pride ourselves on taking a practical, business approach to resolving tenant problems. Whether the property manager is new at the job or hardened by the battle, our attorneys can help them with the difficult task of retaining good tenants, enforcing the rules, and collecting rents.

We handle:

- the lease & other agreements

- evictions

- self-help

- bankruptcy

- litigation

For more information about our commercial landlord arm, or to speak to an attorney, contact Gross & Romanick by calling (703) 273-1400.

Tuesday, June 2, 2009

At-Will Employment: The Employee Handbook

WHAT CONSTITUTES AN EMPLOYEE HANDBOOK: An employee handbook can consist of a two page memo informing your employees of specific rules regarding a certain aspect of their employment or it can be a three volume epic covering every aspect of employee behavior, benefits and duties.

DOES A HANDBOOK CREATE A CONTRACT? Not under Virginia law unless there is a written or oral agreement referencing the handbook. However, there are certain conditions in which a handbook or manual can be relied on to establish an employee's rights against an employer. These conditions are: 1) when the wording appears to take the relationship out of an at-will context by fixing the duration of the term of employment, and 2) if its terms constitute a binding promise. An employer may be unhappy to find that a jury or a judge will make the final decision as to whether the wording of the handbook changed the relationship from at-will employment to something more binding.

ACTION ADVICE: Always have your employee handbooks or handbook modifications written by an attorney. Make sure that the handbook states that the terms of employment are "at will". Avoid vague language that may promise benefits that the company does not wish to provide. When discussing disciplinary procedures, give the employer broad discretion to impose probation, demotion and termination. Have employees sign for receipt of the handbook. Finally, follow the handbook when making decisions about employee benefits and discipline.

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The above article is not meant to replace legal counsel. To speak to one of the lawyers at Gross & Romanick, please contact the firm directly by calling 703-273-1400.

Thursday, May 28, 2009

Legal News Sources

Not sure how to keep up to date on legal matters pertinent to you or your company? Gross & Romanick has a number of publications available to help you keep abreast of the ever changing legal arena in Virginia: sign up for our Legal Fax, a compilation of short articles; request a seminar on a legal topic hosted at your company; subscribe to our Legal Newsletter, which covers Virginia Business Law; or subscribe to our Medical Legal Newsletter, which covers issues pertinent to processing personal injury cases or medical office collections. Find out how to sign up for any one of these publications—or to request a seminar—by filling out Gross & Romanick’s online information request form. And, of course you can always call us at 703-273-1400.