There was a time when many real estate transactions were handled with the preparation of a single legal instrument - the deed. There was no contract, no title insurance, no settlement statement. Just the deed. Those days are gone, although I must tell you that I still, on occasion, will have a potential client call and, after telling me he is buying improved property, asks if I can prepare the deed for a couple hundred dollars (that's yet another story!). I will attempt to explain in this blog why proceeding as in the "old days" is a very dangerous endeavor.

Title Insurance.     If there is a real estate transaction that should close without title insurance, I haven't seen it. This is a no-brainer. This policy guarantees that your title is clear and is indeed in the name of the person selling to you. I continue to be shocked by transactions in which my client is the buyer and which, after I check the deed records, involves property not in the name of my client's seller. If you have a title policy, you are protected as the title company would:

• pay your damages, or
• take steps at its (not your) expense to correct the problem.

Of course if you are obtaining financing from a bank for the purchase, the bank will absolutely require the purchase of a title insurance policy.

Earnest Money Contract.     Important document that too often is prepared without benefit of an attorney. Why do you need help in preparing this document? Here are just a few reasons:

• need to properly identify the seller and the buyer
• need to properly identify the property
• sale contingent on buyer obtaining financing?
• sale contingent on buyer selling existing home?
• earnest money - how much? who holds?
• who pays for title policy?
• how much time to make title objections?
• survey? - who pays?
• residential service contracts?
• closing date - how much time? - extensions?
• closing expenses - who pays for what?
• termination option purchased by buyer? - how much time?
• what remedies available on breach?

No it's not brain surgery. But it's the contract that will be signed for arguably the largest purchase any person will ever make. Isn't this the one time that we need to call on the experience of someone who has been through the process before? Instead, most people will hear from their friends and family members that "you don't need an attorney - I didn't use one and I never had a problem." Chances are you can go through the process and complete it without any problems. But if something goes wrong, either before the closing, or two years down the road, you will be well-served by having hired a lawyer to shepherd you through the process.

And now the disclaimer.     What, you thought there wouldn't be one? Nothing in this post should be considered legal advice. Let's face it, chances are good that you don't know me and I probably don't know you. My aim is simple - to provide the reader with some useful, but general, information about the topic. You should not rely on any information in this post without some assurance that the material is still current at the time it is read and that it applies to your particular circumstances. If you want a legal opinion that has teeth, consult your personal lawyer about your particular circumstances. If you don't have a lawyer and like what you see here, perhaps you should contact my law office to determine if I might be a good fit for you. To do so, simply click on my name above and you will be directed to my website, or you can reach me by telephone at (713) 626-2221. Messages left during non-business hours will be returned no later than the next business day. When responding, please refer to this Blog No. 55.

We have reached the end of yet another year. Many of us will make all types of New  Year's resolutions, most of which will gravitate towards making us better people (lose weight and work out more, read more, spend more time with family, etc.). But what about those of us with small businesses, be they corporations, limited liability companies, or partnerships. Because they are "small," the owners devote full attention to the product or service provided, the satisfaction of the customer, and getting new business, while devoting little or no attention to the company's "infrastructure." By "infrastructure" I mean such things as annual meetings, shareholder agreements, insurance needs (e.g., key insurance and disability), and other business necessities. Those of us who show up every day to work in our business, too often forget to work on the business. While you may have been minding the store, you may have neglected the following areas:

1. I have written before in my posts about "corporate formalities," such things as conducting annual shareholders and members meetings and documenting in your company record books not only that such meetings occurred, but the action that was taken at the meeting.
2. Is your company record book up-to-date? If something happened to you, that book is the "road map" for someone coming in to run the business in your absence and the documents there should be up-to-date. Are all major transactions of your company authorized and noted in those records? Would someone be able to determine the identity of those persons last elected/appointed as directors, managers, and officers? Are your stock or membership records accurately reflected? Some of the small to medium sized businesses I represent have authorized me, on an annual basis, to review the transactions for the past year. I will then note anything of significance in the minutes I prepare of the annual meetings of the shareholders and directors.
3. Is your shareholder agreement or operatiing agreement showing its age? Is there a need to revise either of those documents because of changes to your business? Those documents, just like your Wills after the arrival of children, need to be reviewed on an annual basis. Almost all shareholder agreements have a formula or some previously set price for valuation of shares. Whatever the valuation method, it ought to be reviewed annually and modified, as necessary. Even if no change is made, a simple document can be prepared that shows that the owners reviewed the price and determined to leave it alone.
4. Many shareholder agreements are tied to insurance policies on the lives of the owners. Have you reviewed the company's insurance policies? Do the existing policies provide sufficient funding for the buy-out in the event of the death of a shareholder? What about disability insurance for the key individuals? Can the business survive if a key person is rendered unable to show up for a significant period of time?

You probably have thought of these issues at some time during the year and made a promise to yourself to devote some time to each. Now is the time to ensure that your company's documents are in good shape.

And now the disclaimer. What, you thought there wouldn't be one? Nothing in this post should be considered legal advice. Let's face it, chances are really good that you don't know me and I probably don't know you. My aim is simple - to provide the reader with some useful, but general, information about the topic. Do not rely on any information in this post without some assurance that the material is still current at the time it is read and that it applies to your particular circumstances. If you want a legal opinion that has teeth, consult your personal lawyer about your particular circumstances. If you don't have a lawyer and like what you see here, perhaps you should contact my law office to determine if I might be a good fit for you. To do so, simply click on my name above and you will be directed to my website, or you can reach me by telephone at (713) 626-2221. Messages left during non-business hours will be returned no later than the next business day. When responding, please refer to this Blog No. 54.

The flagging economy, although recently showing signs of an upswing, has resulted in numerous credit card users falling behind on their payments. Sure, there are some people that use the cards intending never to repay the card issuer, be it American Express, Citigroup, or whoever. But most of the debtors are good people who have simply fallen on hard tomes. Unfortunately, and I know this from having helped several of my clients in this area, the user, when hounded incessantly by the card issuer or its collection agent for payment, crawls into a hole and fails to stay in contact with the creditor. This of course eventually results in a lawsuit against the user. If that isn't bad enough, my experience is that the debtor will many times fail to answer the lawsuit and let a default judgment be entered. This allows the creditor to get a judgment on an obligation that it might not have been able to prove had the debtor answered the lawsuit and forced the creditor to come forth with evidence of the debt. Let me explain.

In a recent New York Times article on this  subject, one judge reported that "roughly 90 percent of the credit card lawsuits are flawed." That article went on to say that many of the same problems that plagued the residential loan foreclosure process have now emerged in the debt collection practices of credit card companies. It is apparent that lenders are filing large numbers of lawsuits, but they do so without sufficient records to support the claims. Think about it, if the creditor's records are in such bad shape that they cannot prove that the person they sued (debtor) owes the debt, then why would the creditor do so in the first place? Simple, because the creditor knows from experience that a large portion of the persons they sue:

• will represent themselves in the lawsuit because they cannot afford an attorney. The hard-nosed creditor's attorney will then convince the debtor that if the suit goes all the way to trial, not only will the debtor owe the entire amount of the delinquent debt, plus interest and court costs, but also the  entire amount of the creditor's attorney's fees (which will increase with every task performed by the attorney in preparing for trial, trying the case, and getting the judgment). Now fearful that the attorney's fees will eventually exceed the amount of the credit card debt, the debtor agrees to a judgment being entered that "only" allows the creditor to recover a much smaller attorney fee sum. By caving in, the creditor is given a quick judgment without ever having to prove that it is legally entitled to recover, i.e., that step is bypassed when the debtor, afraid of a humongous judgment with a large attorney's fee award, signs off on the "Agreed Final Judgment." 
• will not answer the lawsuit and allow a default judgment to be taken against him, with the same benefit to the creditor as noted above - the creditor never has to come forth with evidence that the debt actually exists and that the amount claimed is actually due, or if the creditor does present some documents at a default hearing, there is no one present that will contest the offered evidence.

Because so many of the lawsuits are flawed and devoid of accurate documentation, it is more important than ever that the debtor find a way to hire an attorney, file an answer to the lawsuit, and contest the creditor's claim. I have found that sometimes the creditor will (i) dismiss the suit when forced by the debtor's attorney to produce evidence of the claim that will be admissible at trial, or (ii) agree to a significant  reduction of the amount claimed by the creditor rather than go through with a trial at which shaky documents will be presented to the factfinder. As mentioned in the same New York Times article previously referenced, "[M]any judges said their hands are tied. Unless a consumer shows up to contest a lawsuit, the judges cannot question the banks or comb through the lawsuits to root out suspicious documents. Instead, they are required to issue a summary judgment, in essence an automatic win for the bank." The lesson? Get legal representation and don't let the creditor get that default judgment.

And now the disclaimer. What, you thought there wouldn't be one? Nothing in this post should be considered legal advice. Let's face it, chances are very good that you don't know me and I probably don't know you. My aim is simple - to provide the reader with some useful, but general, information about the topic. You should not rely on any information in this post without some assurance that the material is still current at the time it is read and that it applies to your particular circumstances. If you want a legal opinion that has teeth, consult your personal lawyer about your particular circumstances. If you don't have a lawyer and like what you see here, perhaps you should contact my law office to determine if I might be a good fit for you. To do so, simply click on my name above and you will be directed to my website, or you can reach me by telephone at (713) 626-2221. Messages left during non-business hours will be returned no later than the next business day. When responding, please refer to this Blog. No. 53.

I often assist clients with the purchase of an existing business.  When I do, the client sometimes voices her reluctance to hire an attorney at first because of the legal expense, but grateful when I inform her of the many legal duties I must perform, including the sheer number of requests for information that I must direct to the seller or its attorney. I have yet to see any such purchase transaction that should have been done without the services of an attorney. What I hate to see is a new client that comes to me after the closing, who purchased without using an attorney, and who is now complaining of problems that have surfaced that make her decision to purchase look bad indeed. I am always shocked when the new client shows me the written "contract" (if there even is one) that she and the seller prepared without an attorney, and further, that she paid the full purchase price in cash, and without benefit of reviewing the information described below. When I tell the new client that she has a very good lawsuit against the seller for fraud or DTPA (Deceptive Trade Practices Act) violations, she is initially optimistic, until I inform her of the legal fees she will incur, not to mention the fact that any judgment against the seller will probably be uncollectible because the seller has either spent the sales proceeds, is "judgment-proof," or left the state.

DON'T BE "THAT" NEW CLIENT. If you are considering the purchase of an existing business, hire an attorney as he or she will need to obtain much information to protect your future investment (or confirm why you shouldn't do the deal), including but not limited to, the following:

• financial information for the business (at least for the past 12 months, and maybe 24 months), including contracts with customers and suppliers, distribution or supply agreements, equipment leases and a schedule of all equipment by location, customer lists (for the last 3 years plus gross revenue from each customer who paid more than, for example, $10,000 in any year), and accounts receivable
• verification of assets and inventory of the business
• identification of all liabilities with customers or other third parties (whether by contract, existing court judgments, or potential liability from prior conduct of the current owner that might result in a later lawsuit)
• identification of all employees and any agreements with them, and also, all liabilities with employees (for example, sexual harassment or other employee claims)
• corporate records, including all governing documents, lists of owners/members, officers, and directors/managers
• governmental regulations and filings (federal, state, and local)
• existing loan and credit agreements, promissory notes and other evidence of indebtedness and guarantees
• intellectual property documents, including any agreements regarding patent, trademark, service mark, or trade name
• insurance documents
• tax returns
• real property (ownership and lease documents), including any reports of environmental problems)

The above list is not all-inclusive as certain businesses may require the production of differing types of information. The point to be made is that this is one area where you don't want to "go to a gun fight with a knife." You need legal help, and if you don't get it you may become "that client" that I too often see, who (i) arrives at my office after the sale is completed, (ii) complains of a business that is hemmoraging money, and (iii) when I ask for all the documents relating to the business purchase, presents me with a copy of her check she gave the seller at the closing (no, I'm not kidding).

And now the disclaimer. What, you thought there wouldn't be one? Nothing in this post should be considered legal advice. Let's face it, chances are good that you don't know me and I probably don't know you. My aim is simple - to provide the reader with some useful, but general, information about the topic. Do not rely on any information in this post without some assurance that the material is still current and applicable at the time it is read. If you want a legal opinion that has teeth, consult your personal lawyer about your particular circumstances. If you don't have a lawyer and like what you see here, perhaps you should contact my law office to determine if I might be a good fit for you. To do so, simply click on my name above and you will be directed to my website, or you can reach me by telephone at (713) 626-2221. Messages left during non-business hours will be returned by me no later than the next business day. When responding, please refer to this Blog No. 52.

I wish I had a dollar for every time a client told me (whether in my office or at the end of a mediation session in which the mediator just informed us that the other side refused to pay another dime to settle) "Screw them, we'll just take them to trial down at the courthouse." The client always made the statement believing that 12 people sitting on a jury will surely side with him and stick it to the other party, who my client was convinced was nothing more than a cheap son-of-a-_ _ _ _ _. Sometimes I actually would believe my client to be right, that we are certainly riding the white horse in this battle, and any reasonable jury will find in favor of my client, and return a verdict far in excess of the paltry amount now being offered to settle. But wait a minute, I have come across some sobering news.

The scary truth, if I am to believe some recent information that I read, is that sixty-one percent (61%) of plaintiffs will end up receiving the same or less money at trial than they were offered before trial. What does that mean exactly? It means that over 60% of my clients opting to go to trial after receiving what is viewed as a too small settlement offer would be wrong in believing that they would do better at trial. And that doesn't even take into account the emotional and financial costs associated with the actual trial of a lawsuit. let's make it even more clear. They should have taken the last settlement offer and they would have gotten a better result than the result they got at trial.

The article providing me with the aforementioned 61% figure attributes the high error rate of those plaintiffs who opt for trial to what is called "inside-view of the planning fallacy." Because I'm not smart enough to figure out exactly what that means, let me quote the article, "People who fall into this trap focus too much on the specifics of their case and too little on the statistical information that they know applies to similar cases." I believe that means that people who make more accurate predictions of an outcome do so because they rely more heavily on relevant statistical evidence about similar cases, rather than the particulars of their own individual case. In essence, those that fall into the 61% category are more likely to focus on the particulars of their case while ignoring or undervaluing the statistical information from similar cases. Why don't we try to make it even more simple? They engage in wishful thinking.

No, I'm not going to throw a cold bucket of water on my client when he rejects that final settlement offer and tells me that we are heading to the courthouse. However, I will try to get him to look at available statistical evidence about similar cases and to compare his case against that evidence before his "rush to judgment."

And now the disclaimer. What, you though there wouldn't be one? Nothing in this post should be considered legal advice. Let's face it, chances are good that you don't know me and I probably don't know you. My aim is simple - to provide the reader with some useful, but general, information about the topic. Do not rely on any information in this post without some assurance that the material is still current and applicable at the time it is read. If you want a legal opinion that has teeth, consult your personal lawyer about your particular circumstances. If you don't have a lawyer and like what you see here, perhaps you should contact my law office to determine if I might be a good fit for you. To do so, simply click on my name above and you will be directed to my website, or you can reach me by telephone at (713) 626-2221.  Messages left during non-business hours will be returned no later than the next business day. When responding, please refer to this Blog No. 51.