CLARITY BLOG

Leases and Medical Marijuana Tenants

The State of Nevada legalized the use and cultivation of medical marijuana in 2014 and began allowing cannabis businesses to operate in 2015.  While California voters approved the use of medical marijuana some two decades ago, California law makers only put into place a regulatory scheme in 2015 thereby allowing dispensaries to operate legally.

Medical Marijuana and Leases

Cannabis law is currently a very fluid and rapidly changing area of law.  The legalization of medical marijuana at the state level presents significant conflicts with federal law in numerous areas including drug policy, banking laws, criminal law and so much more.  Under federal law, the use, cultivation and sale of marijuana – medical or not – is illegal.  As a result of the past war on drugs, federal law provides some very severe penalties for violations of federal drug law, including forfeiture.

The federal government does have the right to seize property used in the cultivation, manufacturing or selling of cannabis.  This can include real property where the owner of the real property is merely a landlord who does not participate in the cannabis business.  While the federal forfeiture laws do have an “innocent owner defense” many state cannabis laws require the lease to specifically state that the lease is for purposes of cultivation, manufacturing or selling.

As noted above, this is a rapidly changing area of law.  Just two days ago (October, 2015) the Federal District Court for the Northern District of California issued a ruling (a somewhat scathing decision, in fact), based on the 2015 Appropriations Act, halting the Department of Justice from expending funds to enforce federal laws that interfere with state laws that authorize the use, distribution, possession or cultivation of medical marijuana.

Until the conflict between the state and federal laws governing the use and sale of marijuana are entirely resolved, providers of services, goods and property, including landlords (both commercial and in some cases residential) are advised to seek legal counsel and to address new contract and lease provisions such as “escape clauses” and stated compliance with state cannabis law.

(this post was originally published in 2015)

Things to Consider When Buying Property in Tahoe

Things to consider when buying property in Tahoe.

Winter is a great time to buy in the Truckee/Tahoe area.  Whether you are looking to purchase a new primary residence or just a vacation home, there are a number of legal issues that you will want to consider.

  • TRPA/Building Restrictions. The Tahoe Basin is under the jurisdiction of a bi-state federal agency known as the Tahoe Regional Planning Agency (TRPA).  TRPA’s mission is, primarily, to preserve the environmental health and sustainability of the Lake Tahoe Region.  TRPA has the authority to establish and enforce land use planning, building and development restrictions.  The TRPA code may limit a homeowner’s ability to build, remodel, landscape and otherwise improve their property.

If you are purchasing within the jurisdiction of TRPA, it is important that you understand what you can and cannot do with your property with regard to improvements and the timelines for permitting and/or building within the Tahoe Basin.  Certain activities like grading and digging are generally prohibited October 15 through April 30.  If your property is within a scenic corridor or within a sensitive zone (like a stream zone) you may be subject to additional TRPA oversight.  TRPA does not make redevelopment, remodeling or improvement impossible, but it is important that you be aware that TRPA restrictions may impact your intended use of your new property.  There is a great deal of information available on the TRPA website.

  • Homeowners’ Associations. If you are looking at purchasing a condominium or town home that is within a homeowners’ association you should carefully review any applicable Covenants, Conditions and Restrictions (CCRs).  The CCRs will dictate any use restrictions on your property.  For many second home buyers in Tahoe, rental restrictions are very important.  Some Associations may limit the length of rentals or prohibit them entirely.  If you are intending to rent out your new house as a vacation rental or on a longer term basis, you should carefully review the CCRs for provisions relating to rentals.  It is also important that you understand if you will be required to pay monthly assessments, whether there are any planned or pending special assessments and the general financial health of the Association which should be evident in the operating and reserve budgets and financial reports.

 

  • Title Report/Title Insurance. An often overlooked document in the mountain of paperwork that you wade through when purchasing a home is the preliminary title report issued by the title company in preparation for the issuance of title insurance at the close of escrow.  The title report provides a list of recorded documents that will be excluded from title insurance coverage.  It is very important to review this list of exceptions and exclusions.  Often you will see easements affecting the property, any recorded use restrictions (like CCRs) and sometimes you may see issues relating to TRPA building covenants or restrictions.  The title insurance policy that you obtain will not insure against loss resulting from a claim that is related to a title condition that was listed on the exceptions list.  More importantly, certain title conditions can impact your intended use of the property (for example, if there is a public easement for beach access that goes right by your new master bedroom window….you may want to know about that).  It may be possible to remove some title exceptions and/or to insure around others.  You may want to seek legal counsel to understand the impact and possible removal of certain types of exceptions.  Your realtor should be able to guide you on when it is advisable to seek legal counsel to assist with title issues.

 

  • CA vs. NV? While the Tahoe Basin is one big beautiful region, there is one major tax difference that should be pointed out in case you are not already aware:  The State of California has individual and corporate state income tax, the State of Nevada does not.  When buying a second home that is intended for your personal vacation use, this may not be an important issue.  However, if you are intending your new Tahoe home to be your new primary residence, it is worthy of consideration.  Additionally, if you intend to rent out your property, thereby generating income, the rental income is likely to be subject to income tax – not such a big deal if you are already a California state taxpayer, but if you are a Nevada resident, you may be subjecting yourself to California income tax on that rental income.  Food for thought, and depending on circumstances, a reason to get in touch with your tax professional for guidance.

 

  • Real Estate Agents. As with any community, the Truckee/Tahoe area has many excellent realtors and a few that may not be quite so excellent…Chose an agent/broker by asking questions of both the realtor and people that you may know in the community.  Realtors that live and work full time in the community, and have for some time, are going to understand the many unique aspects of homeownership in Tahoe such as why you want to think twice about a long steep north facing driveway or when you should investigate your grand remodel plans with TRPA.  Many of the communities around the Lake and in the Truckee Area have a local Board of Realtors.  They can often be found online and may be a useful place to do a little research.

 

The Truckee/Tahoe Area is an amazing region rich with unparalleled beauty, outdoor adventure and close knit communities.  If Incline Law Group, LLP, can ever be of service to you in the purchase of your Tahoe home, or with other legal needs, please feel free to contact us.  Until then, we will see you out there!

Ready Your Small Business for Success in 2018

Ready Your Small Business for Success in 2018

Whether you are ready or not, year-end is here!  Incline Law Group LLP has compiled a list of small business resolutions that we feel can help position your business for a successful year ahead in 2018.

  1. Tax Planning: Year-end is a good time to meet with your account and/or CPA to assess the year behind and plan for the year ahead. This is a good time to review profit & loss statements and cash flow in order to best budget and plan for your business in the coming year. Don’t forget to review year-end retirement account contributions.
  2. Charitable Giving: Charitable giving is both tax deductible and a way to spread the spirit of the season and support organizations that you believe in. Did you know that most non-profits receive up to 30% of their annual fundraising income during the month of December?
  3. Business Registrations: All types of business entities, whether a corporation, LLC, LLP or other type have annual or bi-annual renewal filing requirements. Likewise, state and local business licenses may also need to be renewed. Do you know when your registration and license renewals are due? If not, you should take the time to find our and calendar them. If Incline Law Group serves as your Registered Agency, we will track and handle these renewals for you.
  4. Trademark Renewals: Trademark registrations have expiration dates. Is yours coming up? Is it calendared for on time renewal?
  5. Health Insurance: The Affordable Care Act (“Obamacare”) open enrollment period has been shortened for 2018 coverage and ends on December 15, 2017. Your current employee health care plan is also likely to have year-end renewal dates regardless of when you used to renew. Make sure you know your enrollment periods and have coverage in place before your current coverage expires.
  6. Employment Policies: When was the last time your business updated your employee handbook? If you are in a state with Medical Marijuana, have you created a policy? Social media becomes more prevalent each year – do you have a policy in place? Year-end is a good time to review, revise and/or add new policies that can be effective as of January 1.
  7. Leases: New leases or commercial lease renewals can take more time than anticipated. If yours lease expires in 2018, you should begin negotiations and planning now.

Bonus tip #8 (because, you know… it’s 2018)

Review your client list, and make sure all contact information is up-to-date: This is not just to achieve a clean holiday card list but can also help grow and engage your client base if you use digital communication channels such as an enewsletter. You might consider segmenting your contacts during this review based on the type of relationship, product or service they have or purchase with you to better segment your marketing and growth opportunities.

 

Avoiding Probate in Nevada and California with a Heggstad Petition

Avoiding Probate in Nevada and California with a Heggstad Petition.

The use of revocable inter vivos trusts, also known as living trusts have gained in popularity. A wide range of estate, tax and wealth planning objectives can be achieved by the use of living trusts.  A primary objective of the living trust is the avoidance of probate.

Problems can arise, however, when a trust is created but assets are not transferred into the trust, whether inadvertently or because of an ineffective transfer document.  When real estate assets are inadvertently not transferred to the trustee of the trust, it may still be possible to avoid a lengthy and expensive probate.

Under California law, a trust can be created by a written declaration by the owner that the real property in question is held subject to a trust, and no separate transfer by deed is required to fund the real property into the trust. (Estate of Heggstad (1993) 16 Cal. App. 4th 945.)  This ruling provides an opportunity to have a court declare real property to be subject to a trust through the filing of a petition that has become known as a “Heggstad petition”.  A successful Heggstad petition can allow the parties to avoid a more lengthy and costly probate proceeding.

Several provisions in the Nevada Revised Statutes (NRS) dating back to 1999 authorize a Heggstad-like petition in Nevada. The most recent addition to the NRS in this regard was enacted by the 2015 Nevada Legislature in Senate Bill 484, Section 64. The new amendment of NRS 164.015 confers additional explicit authority upon the Nevada District Courts in cases involving non-testamentary trusts to hear and act upon “petitions for a ruling that property not formally titled in the name of a trust or its trustee constitutes trust property…”

For more information on California or Nevada probate, and the possibility of avoiding probate, the attorneys at Incline Law Group, LLP may be able to assist.

How Should I/We Hold Title to My/Our Property?

How Should I/We Hold Title to My/Our Property?

When you get to the closing on your new home, the escrow company will often ask, “How do you want to hold title?”

The answer to this question may depend on a number of factors, such as whether you are married, whether you are purchasing the property with someone else or whether you have a trust for your estate.  There may be other factors such as whether this is a property intended for investment or whether you are purchasing in the name of a corporation or LLC.

But for most individuals, the most common options are fairly straight forward.  It should be noted that the discussion below is not exhaustive and that there may be other forms of vesting that could be of benefit in your specific circumstances.  Similarly, not all states are community property states and for those that are, the existence and terms of pre or post-nuptial agreements are critical to vesting decisions.  Vesting is the way we describe how the title to the property is held – with different forms of vesting comes different rights and obligations of joints owners that are not discussed here.  It is important that you consult with an attorney to determine the best form of vesting for your circumstances.

This post is broken up into 4 parts which are intended to cover the most common forms of vesting in the four most common circumstances: Part I) if you have a trust; Part II) if you are purchasing property in your name only; Part III) if you are unmarried and purchasing with another person; and Part IV) if you are married.  As a bonus, since we are talking about title(s), if you can name the artists for each of these songs titles, please post your answers!

Part I: A Matter of Trust

Generally if you have a trust, and the property is intended as your primary residence, you will likely title it in the name of the trustee of your trust.  This is true whether you are single or married and often if you are purchasing with someone else to whom you are not married. You should always consult with your estate planning attorney when transferring property into or out of your trust.

Part II: All the Single Ladies

If you are purchasing property as an unmarried person and in your name only, the vesting is pretty much just that, as an individual (you may see this written as a an unmarried woman/man or single woman/man which is a coded reference to whether you are divorced or never married – if you object to this, as I do, you can simply request that title be vested in your name as an individual).

If you are married, but you are purchasing the property as your separate property, the title will generally read just that: Jane Smith, a married woman as her sole and separate property.  In community property states, in order for your spouse to disclaim any community property interest in the property s/he may be required to sign a Quit Claim or Interposal Deed.

Part III: Our House

If you are purchasing property with another person that is not your spouse, you really have two choices:  “joint tenants” or “tenants in common”.  With joint tenancy, each owner has an undivided equal interest in the property.  More importantly, joint tenancy comes with an automatic right of survivorship.  This means that when one joint tenant/owner dies, his/her interest automatically transfers to the remaining owner(s).  If one of the joint tenants transfers her/his ownership interest during their lifetime, this can destroy the joint tenancy and convert the ownership to tenancy in common.

More than one owner can also own property as tenants in common.  In this case, each owner will own a percentage of an undivided interest in the property i.e. the ownership interest does not have to be equal.  With joint tenancy there is no right of survivorship and when one joint tenant dies the interest is freely transferable to the decedent’s heirs.  In Nevada, if the type of vesting is not specified, our statutes provide that the default vesting is tenancy in common.

Part IV: Love and Marriage

Married couples can also hold property as joint tenants or tenants in common.  However, both California and Nevada have the option for married couples to hold property as “community property” or “community property with right of survivorship”.  The community property with right of survivorship vesting carries two very important benefits, namely the automatic right of survivorship when one spouse dies and a tax benefit known as a “step up in basis”.

What this means is, when one spouse dies, the surviving spouse gets the benefit of a readjustment of the tax basis in the property up to the current value.  This is important if, say, a married couple purchased the house in 1970 for $100,000.  At the time of the death of the first spouse in 2016, the house is valued at $700,000.  The surviving spouse elects to sell and downsize, without the step up in basis the surviving spouse could be subject to capital gains tax on the difference between the original basis of $100,000 and the new value of $700,000.  If the property was vested as community property with right of survivorship, the surviving spouse would get the tax benefit of the step up in basis.

If a married couple holds title simply as community property (without the right of survivorship), they can take advantage of the step up in basis, but the transfer of title to the surviving spouse will not be automatic and may require probate.

As noted above, there are many ways for individuals to hold title to real property.  This post only discuses a few of the most common.  Because there are tax and legal consequences to how title is held, it is important that you consult with an attorney to help you sort out the best approach for your needs.  And do keep in mind that you can always change the vesting after close of escrow!

Bright Line Rule on “Date of Separation”

Date of SeparationThe “date of separation” is a pivotal issue in many California divorce cases. This date signifies the end of the community estate. It is used to determine everything from the characterization of community and separate property assets and debts to determination of the length of the parties’ marriage to determination of the length required for the payment of spousal support. It also develops a date to utilize for the calculation of the entitlement to reimbursements for payment of community expenses. It is an extremely important question and is often one of the most hotly contested issues in California divorce cases.

For the past 65 years, there has been much to argue about on this issue in any particular case. Determination had been determined largely on the interplay of various intentions, communications, facts and circumstances, unique to each case. Parties who lived under the same roof could still be “separated” under the prior case law just as parties who have lived in separate homes, sometimes for years, could still be deemed not to have separated. The determination in each case was unique to the facts and circumstances of each case and the flexibility provided for fairness.

Not anymore. The California Supreme Court just radically changed the landscape surrounding this issue. In re Marriage of Davis (2015) 61 Cal.4th 846 established a public policy bright-line rule requiring two people to actually cease living under the same roof in order to be considered living “separate and apart”.  While the intention may be to simplify things and give clarity to a confusing issue, it may likely have the opposite result.

People at the end of their marriages feel trapped in many directions and are facing a great deal of uncertainty. A bright line rule on an issue with such importance may prove to be quite limiting in a time that already feels very hopeless.  At first blush, having a clear rule may avoid the “he said, she said” that confounds lawyers and judges, making their jobs easier. However, it can only create more confusion and stress for family law litigants or those contemplating a divorce.  How will this rule impact parties who cannot afford to move out, especially with young children?  In order to file a Dissolution (e.g. divorce) in the State of California, the Petitioner must allege the date of separation. Do we now require that a person must move out of the home before filing for divorce?

I can’t even begin to imagine the strangulation effect this will have on stay at home mothers or disabled spouses who do not have the means to move out and must petition the court for the funds to do so. The time period between the decision one makes to leave his or her spouse and the time the Court first makes interim orders to protect the parties can already seem like an eternity. I have no doubt that the Davis decision will only add further complexity and stress during this period of transition and may create problems in its practical application to the realities of contemporary families.

Incline Law Group’s Family Law attorneys can help you navigate the application of this bright line rule and related issues.

Do you hire employees or independent contractors? The answer is probably both.

Do you hire employees or independent contractors? The answer is probably both.

Employers routinely consider a number of factors in whether to hire an employee or an independent contractor as their business grows.  It is important for businesses to be able to explain why the “independent contractor” the company just hired is actually an “employee” under the law or vice versa.  SB 224, recently passed by the Nevada legislature and signed by Governor Sandoval went into effect on June 2, 2015.  This law provides much more clear guidance on what qualifies for “independent contractor” status and what doesn’t.  SB 224 creates a conclusive presumption that an individual is an independent contractor for Nevada wage and hour claims if certain conditions are met. Do you hire employees or independent contractors?

This is yet another list of “factors” that business owners and their respective counsel must become familiar.  Of potentially greater importance will be determining which law will apply and when.  There is a different test in determining the employment classification of a person in each of the follow circumstances: (1) wage and hour claims under Nevada law; (2) wage and hour claims under federal law; (3) workers compensation claims; (4) and unemployment claims.  It is entirely possible that under the wage and hour law in Nevada an individual could be considered an independent contractor, but if terminated, the individual could file for unemployment and be classified as an employee.

While some of the factors in each test overlap, using all the factors in each test will, in many cases, result in different classifications for the same individual.  It is now more important than ever to consult your legal counsel to protect your business so that you can properly structure job descriptions for your employees and/or independent contractors to benefit your business as well as plan for the changes in classification that may occur in the event of injury (worker’s compensation claims) or termination (unemployment claims).

If you need more information or have any questions regarding how the new law may affect your business, do not hesitate to contact Incline Law Group, LLP for some clarity on the subject.

PROPOSED LAND SWAP – CRYSTAL BAY LAKE ACCESS AND INCLINE FLUME / BULL WHEEL

By Andrew N. Wolf, Attorney, Incline Law Group

The owners of the Ponderosa Ranch and the former Stack Estate on the Crystal Bay waterfront have proposed a land exchange with Washoe County. The Ponderosa Ranch contains a portion of the Incline Flume Trail and remnants of the Bull Wheel that was reputedly part of the Great Tramway of Incline used to hoist logs from what is now Incline Village up to the fluming system that sent logs to Virginia City.  The Incline Flume Trail — running from the Third Creek area of the Mount Rose Highway, through the Diamond Peak Ski Resort and all the way to Tunnel Creek Road — still contains remnants of the box flume that was constructed circa 1870s.

The county owns a number of public alleyways that project from County roads to the Lakeshore. One of the public alleyways extending from the County road to the lakeshore in Crystal Bay, eight feet wide by 200 feet long, lies between 44 and 61 Somers Loop, properties that are owned or controlled by the same group which controls the Ponderosa Ranch on the West side of Incline Village.  Several years ago, an attempt was made to abandon this particular alleyway to the adjoining parcels and the request was denied by Washoe County. The current owner has proposed a land exchange in which the alleyway would be traded for a parcel to be split off the Ponderosa Ranch property containing a portion of the Incline Flume Trail and the historic Bull Wheel.

To be clear, the alleyway that is proposed to be traded is not the public stairway that is located between parcels located at 22 and 90 Somers Drive.

There have been strong sentiments expressed on both sides of the issue.  On one side, opponents of the exchange note that public lake access is a limited and valuable commodity that cannot be replaced.  They point out that if public agencies want ownership of the privately held portions of the Incline Flume Trail or Bull Wheel, they have powers of eminent domain which can be used to acquire those lands for fair value.  On the other side, supporters of the land exchange would like the recreational resource of the Flume Trail and the historic resource of the Bull Wheel to be placed in public hands, so that the trail can be kept open, and properly marked and maintained. Over the years, the owners of the Ponderosa Ranch land have blocked access and/or posted no trespassing signs upon the portion of the Flume Trail that crosses private property.  Supporters of the exchange also note that the Crystal Bay alleyway to be swapped is extremely steep and may not be capable of any formal use, development or improvement.  Washoe County currently keeps it closed for safety reasons.

Washoe County has taken the initial step of exploring the concept of an exchange by authorizing appraisals of the affected lands and other investigative studies which are apparently being funded by proponents of the exchange.

Opponents of the exchange also argue that a decision to abandon a scarce Crystal Bay public lake access should not be mixed together with an analysis of whether the Incline Flume and Bull Wheel area should be acquired for public use, such as via eminent domain. They argue the questions are completely separate.

This is an important local issue.  Interested and concerned citizens can follow and attend public meetings and write their elected officials. The Washoe County staff report of May 13, 2014, and various public comments concerning the proposed land exchange can be found here:
http://www.washoecounty.us/large_files/agendas/051314/28.pdf

MEDICAL MARIJUANA DISPENSARIES TO OPEN SOON IN NEVADA

By Jeremy L. Krenek, Attorney, Incline Law Group

The legalization of marijuana has become a hot topic over the past decade as campaigns to legalize have gained serious support. States like Colorado and Washington have legalized marijuana for recreational use. Currently, 22 states, including Nevada and California have legalized marijuana for medical purposes if prescribed by a licensed physician. While Nevada passed its first medical marijuana law in 2000, it just recently passed a law (2013) allowing for medical marijuana dispensaries to open causing great debate.

Opponents of legalization are concerned with increased crime rates, increased substance abuse among both adults and adolescents, and a potential increase of dangerous drivers on the road (DUIs). Even though there are numerous states that have legalized medical use of marijuana, it is still too early to tell whether these concerns will actually come to fruition.

On the other hand, proponents are concerned because, while marijuana may be legal at a state level in some circumstances, it is still a federal crime. Since federal law preempts conflicting state law, those who have a medical marijuana card issued by a state can still be arrested and charged with a federal offense. This example has been on display for the entire nation to witness over the last couple of years in California where the federal government has made it a priority to crack down on an over billion dollar a year pot industry.

While both sides of the debate may have legitimate concerns, Nevada residents should take comfort in the fact that Nevada is familiar with regulating a product that not everyone wants to see legalized. Nevada has a regimented process for approving gambling licenses across the state. Many of the same guidelines will likely be utilized when it comes to marijuana dispensaries. Strict guidelines regulate those who can open a dispensary as well as oversee their management. The application process for opening a dispensary has numerous guidelines and checks that must be followed carefully in order to have an application considered. Counties also have the ability to impose further restrictions and guidelines including regulations as to where dispensaries can be located within each county.

Those with the goal of opening a dispensary have many legal hoops to jump through. Only time will tell the effect legalization of marijuana will have on our nation. Until then, hopefully the rules and regulations that are in place will help circumvent any negative effects the new legislation will have across our nation.

SUMMER LOVE – A TALE OF SPOUSAL SUPPORT

By Stacey F. Herhusky, Attorney at Law, Incline Law Group

During the summer, many couples decide to tie the knot. It is a happy time for new love. Men are planning their bachelor parties. Women are busy being fitted for wedding dresses. Family law attorneys are preparing Premarital Agreements. But perhaps nobody is as happy at this time of year as the ex-husbands who anxiously await termination of their spousal support obligations when their ex-wives remarry. In California, as well as most states, the obligation to continue paying spousal support to your former spouse terminates upon remarriage.

In a recent California case, we learn that it is not always that simple. In Marriage of Left (August 2012), a former lawyer used her knowledge of the law to find a way to keep her alimony payments coming even after her re“marriage”. Andrea and Andrew Left married in 2001. Shortly thereafter, Andrea got pregnant and decided to stop working. Prior to this, she had worked as a program attorney at ABC Entertainment and Touchstone Television, earning a substantial income and honing her legal skills. Her new husband, Andrew, was a very successful stock trader and founder of Citron Research. He earned an extraordinarily high income which enabled her to retire from law and stay home with their children. Sadly, they divorced in 2008. Since Andrea was a stay at home mom and Andrew was a earning a very high income, he agreed to pay Andrea $32,547 per month in spousal support and $14,590 per month in child support (yes, those figures were per month).

Within six months, Andrea decided to remarry. They set a date, informed the children’s school they were getting married, registered at Bloomingdale’s and mailed wedding invitations to their guests. The celebration with her physician boyfriend took place in Palm Springs. Andrea wore a wedding dress and signed a Ketubah (which is a Jewish marriage contract). The only thing they did not do was obtain a marriage license.

Mr. Left stopped paying support based on her remarriage and Andrea took him back to court for back support, ultimately garnishing his Etrade account for $255,000. The Court, upon learning that there was no marriage license, refused to recognize the marriage and ordered Mr. Left to continue paying support. The court cited California laws which hold that in order to have a valid marriage, a marriage license must be issued.  Until that happens, the former Mrs. Left was not remarried and she has proven that you can, in fact, have your wedding cake and eat it too.

 

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