From Thompson Reuters:
Real Estate Law in Wisconsin
Attorney James N. Graham of Accession Law LLC is a real estate lawyer in Madison, Wisconsin.
Accession Law LLC
Aug 29, 2024
More Legal Challenges to FinCEN BOI Reporting
Jul 15, 2024
NEW Reporting Requirement for ALL ENTITIES in the US (unless exempt) - FinCEN BOI Report
WHAT IS THIS NEW FINCEN BOI REPORTING ALL ABOUT?
The United States Government, Department of Treasury Financial Crimes Enforcement Network (FinCEN) is attempting to determine who owns which small business entities throughout the entire country. This effort is required by the Corporate Transparency Act (CTA) which was promulgated as part the larger National Defense Authorization Act of 2020 (NDAA). Congress passed the NDAA and overrode then-President Trump's veto of the act in January of 2021 with an effective date of January 1, 2024.
The Corporate Transparency Act requires business entities (each defined as a “reporting company”) to file, in the absence of an exemption, information on their “beneficial owners” with the Financial Crimes Enforcement Network (“FinCEN”) of the U.S. Department of Treasury (“Treasury”). The information is not supposed to be publicly available, but FinCEN is authorized to disclose filed information to U.S. federal law enforcement agencies, prosecutors, judges and other enforcement agencies and to financial institutions and their regulators.
*PLEASE NOTE: This legislation is new, the process is new, and there is substantial uncertainty as to how this will play out in practice. We will attempt to update information as it develops, but do NOT substitute this general discussion for specific information and advice from your legal and tax advisor(s).
Is
my entity a “Reporting Company”?
Short answer: Yes, it probably is. Generally, any and all entities created by filing a document with a government office, (such as an LLC, corporation, LLP, association, and possibly an unincorporated association) is a “reporting company” and must comply with the CTA requirements. There are exemptions for large companies (20+ employees and $5M+ in gross receipts), banks, credit unions, insurance companies, certain types of tax-exempt entities, and several other exemptions that likely do not apply to you.
What is a Beneficial Ownership Information Report (BOIR)?
Each reporting company must identify for Dept of Treasury every “Beneficial Owner” including their “full legal name, date of birth, current residential address (or business address for a company applicant if in the business of forming entities), and an ‘identifying number’ and ‘image’ from documents like a U.S. Passport or driver's license along with information about the reporting company including its name, any dba, its address and its EIN.
Who is a “Beneficial Owner?”
A “beneficial owner” is not necessarily an owner of a reporting company. A “beneficial owner” is any individual who, directly or indirectly, (1) exercises substantial control over a reporting company or (2) owns or controls at least 25 percent of the ownership interests of the reporting company.
When must I file the FinCEN BOI Report?
The deadline depends upon when the reporting company was created. Companies created before January 1, 2024 have a deadline of January 1, 2025 to file a BOIR. Companies created between January 1, 2024, and January 1, 2025 have a deadline of 90 days after formation. Companies formed after January 1, 2025, have 30-days after creation to file the BOIR.
How is the FinCEN BOI Report filed?
There are two methods which can be used to file the BOIR, a .pdf filing version and an online form. Both are found at https://boiefiling.fincen.gov/fileboir.
What happens if I don't file?
Companies that fail to comply with the BOIR reporting requirements (filing a BOIR, updating a BOIR due to changes) face civil and criminal penalties, including fines and imprisonment. Individuals who willfully provide false or misleading information may also be subject to penalties. Any person violating the reporting requirements of the Corporate Transparency Act is liable for civil penalties of not more than $500 for each day that the violation continues and criminal penalties of imprisonment of up to two years and fines of up to $10,000. 31 U.S.C. § 5336(h)(3)(A).
Is this new FinCEN BOI reporting permanent?
There are likely to be challenges to the CTA including whether it is constitutionally permissible. As of the writing of this post, the law remains in effect, but one federal district court has ruled it unconstitutional and there are several other pending cases.
.....................................................................
See American Bar Association. “The Corporate Transparency Act—Preparing for the Federal Database of Beneficial Ownership Information.” https://www.americanbar.org/groups/business_law/resources/business-law-today/2021-may/the-corporate-transparency-act/
See
US Dept of Treasury, An Introduction to Beneficial Ownership
Information Reporting,
https://www.fincen.gov/sites/default/files/shared/BOI-Informational-Brochure-April-2024.pdf
Mar 29, 2024
U.S. District Court rules CTA’s BOI reporting requirements unconstitutional
"A federal district court in Alabama held that the Corporate Transparency Act (CTA), P.L. 116-283, which requires the reporting of beneficial ownership information (BOI) by businesses, is unconstitutional.
The district court granted the plaintiffs' motion for summary judgment Friday in the case of National Small Business United v. Yellen, No. 5:22-cv-1448-LCB (N.D. Ala. 3/1/24)."
May 26, 2022
City Requiring Property Owner To Install Public Improvements Is Unconstitutional Exaction
The City of Brookfield conditioned approval of a property subdivision (3 lot division) upon the owner's agreement to construct and dedicate a new public street. The court of appeals affirmed the circuit court's conclusion that this exaction was an unconstitutional taking and ordered approval of Fassett’s proposed property division.
https://www.wicourts.gov/ca/opinion/DisplayDocument.pdf?content=pdf&seqNo=511962
Oct 3, 2021
Wisconsin now has a 40 year statute of limitation to re-record easements
893.33(6) Actions to enforce easements, or covenants restricting the use of real estate, set forth in any recorded instrument shall not be barred by this section for a period of 40 years after the date of recording such instrument, and the timely recording of an instrument expressly referring to the easements or covenants or of notices pursuant to this section shall extend such time for 40-year periods from the recording.
https://docs.legis.wisconsin.gov/statutes/statutes/893/iii/33
May 5, 2021
Eviction Ban Ruled Unlawful
ALABAMA ASSOCIATION OF REALTORS, et al., Plaintiffs, v. UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, et al., Defendants No. 20-cv-3377 (DLF) UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
" The major questions doctrine is based on the same principle: courts “expect Congress to speak clearly if it wishes to assign to an agency decisions of vast ‘economic and political significance.’” Util. Air Regul. Grp. v. EPA, 573 U.S. 302, 324 (2014) (quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000) (emphasis added)); Am. Lung Ass’n v. EPA, 985 F.3d 914, 959 (D.C. Cir. 2021) (collecting cases). There is no question that the decision to impose a nationwide moratorium on evictions is one “of vast economic and political significance.” Util. Air Regul. Grp., 573 U.S. at 324 (internal quotation marks omitted). Case 1:20-cv-03377-DLF Document 54 Filed 05/05/21 Page 14 of 20 15 Not only does the moratorium have substantial economic effects,4 eviction moratoria have been the subject of “earnest and profound debate across the country,” Gonzales v. Oregon, 546 U.S. 243, 267 (2006) (internal quotation marks omitted). At least forty-three states and the District of Columbia have imposed state-based eviction moratoria at some point during the COVID-19 pandemic, see 86 Fed. Reg. 16,731, 16,734, though, as the CDC noted in its most recent extension of the CDC Order, these protections either “have expired or are set to expire in many jurisdictions,” id. at 16,737 n.35. Congress itself has twice addressed the moratorium on a nationwide-level—once through the CARES Act, see Pub. L. No. 116-136, § 4024, 134 Stat. 281 (2020), and again through the Consolidated Appropriations Act, see Pub. L. No. 116-260, § 502, 134 Stat. 1182 (2020). Accepting the Department’s expansive interpretation of the Act would mean that Congress delegated to the Secretary the authority to resolve not only this important question, but endless others that are also subject to “earnest and profound debate across the country.” Gonzales, 546 U.S. at 267 (internal quotation marks omitted). Under its reading, so long as the Secretary can make a determination that a given measure is “necessary” to combat the interstate or international spread of disease, there is no limit to the reach of his authority.
...
In sum, the Public Health Service Act authorizes the Department to combat the spread of disease through a range of measures, but these measures plainly do not encompass the nationwide eviction moratorium set forth in the CDC Order
May 1, 2021
Legal uses of property become legal non-conforming uses which may be continued after change in zoning
Village of Slinger v. Polk Properties, LLC, 957 NW 2d 229 - Wis: Supreme Court 2021
Generally, when the zoning restrictions applicable to a property are changed, property owners may continue to use their property in a manner that was allowed under the prior zoning ordinance. See Wis. Stat. § 62.23(7)(h) (2017-18).[10] Although prohibited under the newly applicable zoning ordinance, the existing use becomes a lawful nonconforming use. "Land use qualifies as `nonconforming' if there is an active and actual use of the land and buildings which existed prior to the commencement of the zoning ordinance and which has continued in the same or a related use until the present." Waukesha Cnty. v. Seitz, 140 Wis. 2d 111, 115, 409 N.W.2d 403 (Ct. App. 1987) (citation omitted). Section 62.23(7)(h) provides:
Nonconforming uses. The continued lawful use of a building, premises, structure, or fixture existing at the time of the adoption or amendment of a zoning ordinance may not be prohibited although the use does not conform with the provisions of the ordinance. The nonconforming use may not be extended. . .
https://scholar.google.com/scholar_case?case=5803006789917064782&hl=en&as_sdt=6,50
Sep 11, 2020
Why not give the seller the "right to cure?"
This Offer is contingent upon a Wisconsin registered home inspector performing a home inspection of the Property which discloses no Defects.The offer then provides a timeframe within which the buyer must deliver notice of any defects. Otherwise, the contingency is satisfied merely by the deadline passing. In a case in which the buyer serves notice of defects, what happens next is governed by whether the seller has the right to cure. If the seller has the right to cure, the seller can elect to kill the deal or the seller can elect to cure the defects. If the seller does not have the right to cure, the buyer elects to kill the deal by serving the notice.
In case either party has elected to kill the deal, the deal may not be dead. Obviously the parties are free to renegotiate a new offer.
In the case where the seller has the right to cure and elects to cure, the seller is supposed to cure the defect in a good and workmanlike manner and then deliver to the buyer a written report detailing the work done within 3 days prior to closing. Note that the buyer has no input into how the defect is cured.
What is the practice of buyers and sellers after the inspection? The vast majority of the time, when the inspection reveals "issues," (note I did not say "defects," because we don't necessarily have to determine whether the issues arise to the level of a defect in most cases), the buyer proposes an amendment as to how to resolve the issues. The seller either agrees or proposes an alternative. And back and forth until the buyer and the seller agree on how to resolve the issues. Then, the parties execute an amendment. Neither the notice of defect nor the right to cure are specifically implicated.
Jul 26, 2019
Home Seller Disclosure
#1 - The law, the industry and the marketplace all assume that most home sellers will complete a real estate condition report. According to Wisconsin statutes, the seller of a property shall furnish a RECR (or may substitute a professional written report). See sec. 709.02, Stats, reads:
709.02 Disclosure.
(1) In regard to transfers described in s. 709.01, the owner of the property shall furnish, not later than 10 days after acceptance of a contract of sale or option contract, to the prospective buyer of the property a completed copy of the report under s. 709.03 or 709.033, whichever is applicable, subject to s. 709.035, except that the owner may substitute for any entry information supplied by a licensed engineer, professional land surveyor, as defined in s. 443.01 (7m), or structural pest control operator, by an individual who is a qualified 3rd party, or by a contractor about matters within the scope of the contractor's occupation, if the information is in writing and is furnished on time and if the entry to which it relates is identified, and except that the owner may substitute for any entry information supplied by a public agency. Information that substitutes for an entry on the report under s. 709.03 or 709.033 and that is supplied by a person specified in this section may be submitted and certified on a supplemental report prepared by the person, as long as the information otherwise satisfies the requirements under this section. A prospective buyer who does not receive a report within the 10 days may, within 2 business days after the end of that 10-day period, rescind the contract of sale or option contract by delivering a written notice of recision to the owner or to the owner's agent.
Per 709.05, the buyer may rescind in writing a contract of sale or option contract if a defect is disclosed in a RECR received after the contract. Note, "The right to rescind under this section is the only remedy under this chapter."
709.08 Waiver. A buyer may waive in writing the right to rescind under s. 709.05. If a buyer proceeds to closing, the buyer's right to rescind under s. 709.05 is terminated. A buyer may waive in writing the right to receive the report required under s. 709.02.#3 - The two key sources of liability for home sellers after closing are claims of title defects and claims alleging misrepresentation/failure to disclose adverse conditions. There is no way to absolutely limit a seller's liability after closing. However, wise sellers try to reduce the likelihood of getting sued after closing. Title searching and title insurance are used to reduce the likelihood of title defect claims.
#4 - While an "as-is" provision may provide some protection and certainly would be better than the standard form in terms of defending against alleged seller misrepresentation, an "as-is" provision may not entirely remove the risk of a suit arising from an undisclosed condition. For example, in Green Spring Farms v. Spring Green Farms, 172 Wis. 2d 28 (Wis. App. 1992), some calves on the property had been killed by salmonella bacteria. The seller apparently believed that the problem had been alleviated and did not disclose the condition. The seller sold the property "as-is," the buyer later experienced problems with the salmonella contamination, and the buyer sued the seller. The Court held that the seller had a duty to fully disclose material adverse conditions even though the transaction was "as-is." The rationale is that the seller has this material information and the buyer is not able to discover the information.
#5 - The standard form real estate condition report asks the seller to disclose defects which are "known" as well as defects about which the seller has "notice." What does "notice" of a defect mean? The simple answer is we don't know. We know it means something different than actual knowledge. But we don't know whether the seller had "notice" of a later-discovered defect until the jury answers that question after a long and expensive legal battle.
Because of the risks relating to allegations of purported misrepresentation, it may be advisable for a seller to refuse to disclose anything and to refuse to permit buyers to rely upon the seller for information about the condition of the property. "What are you trying to hide?" and "Why not just be honest?" are two typical responses. However, note that there are many people who have been sued for alleged misrepresentations who thought were were completely honest and forthright. If the buyer feels as though information was withheld, they may allege that the disclosure was misleading.
Lawyer, vol. 66, no. 5, May 1993, pp. 18-56. HeinOnline.
Jul 2, 2019
Interview for "Smart Choices" series
A: It varies, some charge an hourly rate and some charge a flat fee. I offer either option, but if you look at the numbers, the typical attorney fee is a bargain. Let's look at an example: Assume a $300,000 house considering a 6% listing. That is $18,000. There are many attorneys in our market who will represent the seller on a flat fee for less than $1,000. If the attorney can negotiate the listing to a 4% listing, pay the brokers $12,000 and the attorney $1,000 and you've still saved $5,000 and gotten independent legal advice. What did it cost? Nothing, in that instance you gained $5,000. People may fear that they get less service for 3% than they would for 6%. With the assistance of your attorney, you should negotiate what you want done, what you will pay for it, and under what terms.
Q: Any final tips?
A: Buy low, sell high. Get good advisors and pay them enough to keep them happy. Don't take wooden bitcoins. That should about cover it.
Apr 2, 2019
Advertising Real Estate in Wisconsin
FRAUDULENT MISREPRESENTATION BY ANYONE:
All persons (all 3 classes) conducting advertising may be liable for misrepresentation.
Statutory fraudulent representation claims.
100.18 Fraudulent representations. (1) No person, firm, corporation or association, or agent or employee thereof, with intent to sell, distribute, increase the consumption of or in any wise dispose of any real estate ... or with intent to induce the public in any manner to enter into any contract or obligation ... shall make ... an advertisement, announcement, statement or representation of any kind to the public ... which advertisement, announcement, statement or representation contains any assertion, representation or statement of fact which is untrue, deceptive or misleading.There are numerous deceptive advertising practices defined by statute. For example, it is a deceptive practice to fail to "affirmatively and unmistakably" indicate when a transaction involves someone engaged in a business rather than by a private party not engaged in a business. 100.18(3), Stats. Another deceptive practice involves misleading advertising as to the plan or scheme involved in a transaction. 100.18(9), Stats. Finally, and more generally, any material representation or statement of fact relating to a transaction which is untrue, deceptive or misleading may be actionable.
Violation of sec. 100.18, Stats., will subject the violator to an action for civil damages plus attorney fees (sec. 100.18(11)(b) (except a real estate licensee isn't liable for attorney fees) and forfeitures, fines, and possible imprisonment (sec. 100.26).
Common law misrepresentation claims.
There also remain additional, cumulative common law claims which can arise from the same facts. A statement made by someone who knew or should have known it was false and which was (reasonably) relied upon by another to their detriment can give rise to a tort claim for negligent misrepresentation.
A false statement also may give rise to a strict liability misrepresentation claim. The elements of strict liability misrepresentation are: (1) statement of fact made by the defendant on personal knowledge or where he should have known whether the statement was true (2) which is false (3) that the injured party believed and relied upon to his detriment (reasonableness of reliance may or may not be an element) (4) in circumstances in which the defendant had an economic interest. Kailin v. Armstrong, 2002 WI 70, 252 Wis.2d 676, 643 N.W.2d 132, 148, fn. 23.
A person making statements in advertising relating to a real estate transaction could be liable under several different theories if the statements are not true. Further, the law recognizes that misrepresentation can occur by omission, In other words, the failure to make a statement of fact in circumstances where silence misleads the other party can be a misrepresentation.
FALSE ADVERTISING BY A LICENSEE
Real estate licensees are further restricted by REEB 24.04
Advertising.
(1) False advertising. Licensees shall not advertise in a manner which is false, deceptive, or misleading.
(2) Disclosure of name. (a) Except for advertisements for the rental of real estate owned by the broker, a broker shall in all advertising disclose the broker's name exactly as printed on the broker's license or disclose a trade name previously filed with the department, as required by s. REEB 23.03, and in either case clearly indicate that the broker is a business concern and not a private party. (b) Except for advertisements for the rental of real estate owned by the licensee, a licensee employed by a broker shall advertise under the supervision of and in the name of the employing broker. (c) A licensee may advertise the occasional sale of real estate owned by the licensee or the solicitation of real estate for purchase by the licensee without complying with pars. (a) and (b), provided that the licensee clearly identifies himself, herself or itself as a real estate licensee in the advertisement.
(3) Advertising without authority prohibited. Brokers shall not advertise property without the consent of the owner.
(4) Advertised price. Brokers shall not advertise property at a price other than that agreed upon with the owner; however, the price may be stated as a range or in general terms if it reflects the agreed upon price.
FALSE ADVERTISING BY AN UNLICENSED BROKER
A person who should be but is not licensed as a broker has numerous liability concerns in addition to the sec. 100.18 fraudulent representation liability noted above.
Certain types of advertising activity relating to interests in real estate falls within the definition of the activity of a "broker" under sec. 452.01, Stats., The fact that the broker is not licensed obviously would not provide any liability shield. Instead, the person would stand exposed to liability for violating the law relating to the practice of real estate. Penalties can include forfeitures, fines and imprisonment. Sec. 452.17.
In addition, any contract agreeing to compensate an unlicensed broker is void at inception. Badger III Ltd. v. Howard, Needles, Tammen & Bergendoff, 196 Wis. 2d 891, 539 N.W.2d 904 (Ct. App. 1995), 94-2531 The unlicensed broker is not entitled to compensation.
For example, a "broker" includes anyone who, for another and for consideration, offers or promotes an interest in real estate. This paragraph does not apply to a person who only publishes or disseminates verbatim information provided by another person. So some advertisement may be done for "another" provided that the advertiser is only publishing or disseminating verbatim information.
This exception for publishers would not seem to apply to a company that seeks out owners, contracts with them to obtain an option of some type on the property, and then advertises the property for sale, lease, lease option, land contract, etc. That activity almost certainly constitutes acting as a "broker."
A "broker" also includes anyone engaged in the business of selling real estate interests. There is a presumption that 5 sales in 1 year or 10 sales in 5 years shows that one is engaged in the business. A person engaging in such practice without a license
Note that a "broker" has a host of statutory duties. See, ex. 452.133, Stats. These duties do not apply only to licensed brokers. Rather, a broker who violates a duty and is unlicensed is violating 2 laws instead of one.
Advertising by an unlicensed "broker" almost certainly will not contain the disclosures required of brokers by Wisconsin law. Presumably the "broker" does not realize that they need to obtain a license to do what they are doing.
CONCLUSION
There are a host of varieties of misrepresentation that can arise in the advertisement of real estate. There also are considerations as to what must be said depending upon whether the person making the statements is an owner, a licensed broker, or a "broker" who should be licensed.
Oct 13, 2018
LLC - Why form an entity?
The reasons to have activities separated arise primarily from the desire to have only the creditors associated with that activity able to collect from the activity. Consider instead the following hypothetical: An LLC owns 5 properties. A tenant or guest at one of the properties is injured in some manner which is either not covered by insurance or not fully covered by insurance. Perhaps the damages exceed the limits. Perhaps the LLC had a homeowner's policy instead of a landlord policy. Perhaps the claim was otherwise excluded for some reason (water, mold, etc). The plaintiff sues and gets a judgment against the LLC. The plaintiff now has the potential of collecting that judgment from all 5 properties including the 4 that had nothing to do with the claim. Contrast the case where each property was owned separately. A creditor of one LLC has no right to collect against another LLC, it is a separate owner. The strategy is to protect each asset so that its equity is only subject to attack by creditors of that asset.
Note, there are some caveats to this strategy. First, it is critical to maintain the entities as separate and distinct and to maintain the "corporate formalities" for each. Likewise, it is important to disclose to creditors including the general public that they are dealing with a limited liability entity. Advertising, forms, notices, cards, etc should make clear that the owner is "123 Main St LLC" and not the individual owners of the LLC. Further, an LLC owner can voluntarily agree to create joint and several liability among its LLCs. Many creditors such as lenders will insist upon cross-collateralization of assets. For obvious reasons the bank would like as many assets as possible to secure its loan, and often the lender will request that the borrower agree that its loan is secured by its assets and by the assets of other unrelated LLCs. The borrower must assess whether it is willing to create this "can of worms" in order to obtain the loan.
The primary reason for creating a limited liability entity is to limit the liability. This means to shield the assets of the owner from attack by creditors of the entity. The entity also will attempt to reduce the ability of creditors of the owner(s) to disrupt the entity's operations. An LLC operating agreement, for example, typically will include provisions relating to a charging order for creditors of the owners.
There are a variety of limited liability entities which could be used. Absent special circumstances which are unusual with our clients, we typically use an LLC because it is the most flexible form of entity. An LLC can choose to be taxed as a partnership or an S-Corp (or a disregarded entity in the case of a single member LLC). The operating agreement is very flexible in terms of ownership rights for management, control, and operations. The LLC is easy to set up and not difficult to maintain.
Sep 21, 2018
Landlord Tenant Laws in Wisconsin Change Again
Feb 10, 2018
"As-is" clause in offer to purchase contract doesn't shield seller from misrepresentation claim
Note: A sec. 100.18, Stats., misrepresentation claim permits the plaintiff to recover their damages and attorney fees.
Feb 1, 2018
Update - What do I need to prepare a home purchase offer?
- Who is the seller and how do I contact them (email address??)? The first thing a lawyer should do is to check for conflicts of interest. I need to make sure the seller is not my client. I also search past clients to see whether the seller is someone who I've represented in an unrelated matter. While it may be possible to obtain the seller's waiver of any conflict of interest, my practice is simply to avoid these situations and to refer the buyer elsewhere.
- What is the property? I need the address, and it is helpful to know what other information you have about the property, so any MLS data sheets, marketing materials, condition reports, or other information you have received is helpful. Note that, in some instances, the property address is inadequate/incomplete information. For example, a street address to a house might currently include 40 acres, but the seller may be only selling 2 acres. One cannot tell the difference in those two cases by street address alone.
- What else do you expect to have included? The WB-11 form offer includes the real estate and "fixtures." What about other items which may not be "fixtures" such as a refrigerator, range/oven, dishwasher, washer, dryer, freezer etc? Is there an alarm system, a water softener, an LP tank, or any other "rented" appliances?
- When do you want to close?
- Do you need to borrow funds for the purchase? Do you have a prequalification or preapproval letter from a lender? Approximately how much do you expect to borrow?
- Do you need to sell a property?
- Any other "contingencies" meaning other events that will affect the purchase? We almost always include an inspection contingency giving the buyer the right to an inspection. We also may include a financing contingency, an appraisal contingency, well and septic inspection, survey contingency, use of property contingency etc depending upon the circumstances.
- What price would you like to offer, what is your target price, and what is the most you would pay?
Jan 24, 2018
First Weber Group, Inc., Plaintiff, v. Jonathan H. Horsfall,
1. Mr. Moermond appears to be general counsel or in-house counsel for First Weber, and as such, an employee of First Weber.