Partnership Tenant Conversion To Limited Liability Company

Massachusetts, like most other states, has passed a law recognizing a new legal entity known as the limited liability company ("LLC"). Many partnerships are converting to LLC status. If a partnership tenant converts to an LLC during a lease and it is later determined that the LLC lacks sufficient assets to cover unpaid rent or damage, the landlord will be left without a remedy against the individual partners.

Why This Is Important . . . Landlords should put extra protections in their leases such as requiring the consent of the landlord before the partnership tenant can convert to an LLC. Consent can be withheld until the landlord receives written personal guarantees of payment from the individual partners. Landlords should consider the provision even if they don't rent to partnerships since the lease could later be assigned to a partnership.

Requirements For Charitable Donations Over $250

Contrary to the belief of many taxpayers, a canceled check alone is not sufficient proof of a charitable donation in excess of $250. Internal Revenue Code section 170(f)(8) says that the taxpayer may not rely solely on the canceled check as substantiation for the donation. The taxpayer must have written substantiation from the charity of the contribution. Separate payments will generally be treated as separate contributions, but multiple checks given at the same time will be combined for the $250 threshold.

Why This Is Important . . . A taxpayer must get a receipt from the charity for a contribution over $250 to insure deductibility. Any donation should be made by check or credit card.

Punitive Damages Awarded For Failure To Delead Premises

In a case before the Massachusetts Superior Court, tenants of an apartment building sued the landlords after two children suffered serious physical injury from eating lead paint in the building. In addition to awarding damages for the injuries, the Court awarded punitive damages of three times the damages because the landlords knew of the presence of lead but took no satisfactory steps to correct the condition.

Why This Is Important . . . Landlords should take immediate action to comply with the law when they learn of the presence of lead paint. Failure to do so can result in severe penalties.

New Tax & Minimum Wage Law Described

President Clinton has signed the Small Employer Protection Act which contains many amendments to the Internal Revenue Code and the Minimum Wage Law. Many changes have not been well publicized and are important. Active Nicolai Law Group clients have received a memorandum describing the law.