Uncapping of Commercial Real Estate Assessments

Most are aware that the taxable value assessment of a commercial property is uncapped on its sale, but it can also uncap in the event of certain other transfers which do not involve the sale of property and the recording of a deed.

By way of background, Michigan real property taxable value assessments are “capped” and can only increase year-to-year at the lesser of 5% or the rate of inflation. Section 211.27a(6) of the General Property Tax Act defines “transfer of ownership” generally as the conveyance of title to or a present interest in property, the value which is substantially equal to the value of the fee interest. Section 211.27a(6) provides a variety of examples of what constitutes a transfer of ownership for taxable value uncapping purposes.

Many are unaware that the sale or transfer of an ownership interest in an entity which owns real property is a transfer of ownership of the entity’s real estate for tax purposes if the ownership interest sold or transferred is more than 50% of the total ownership interest in the entity. In other words, if you sell or transfer more than half of the ownership interest in an entity owning real property, you have created a “transfer of ownership” of the entity’s real property for real estate tax purposes. This provision is applicable to stock in a corporation, membership interests in a limited liability company and percentage ownership in a partnership. Such a sale or transfer will result in the “uncapping” of the property tax assessment of all real property owned by the entity. By way of example, suppose John Doe owns a majority of the ownership interest in Universal Widget and transfers it as a gift to his son, Peter Doe. The transfer will result in the uncapping of the property tax assessment on all real property owned by Universal Widget. If the transfer occurs in increments over time, the lifting of the taxable value cap occurs at the point John Doe no longer owns the majority interest in Universal Widget.

When a majority ownership interest in an entity has been sold or transferred, a Real Estate Property Transfer Affidavit must be filed with the local assessor. Section 10 of the Affidavit states “Type of Transfer: Transfers include, but are not limited to, deeds, land contracts, transfers involving trusts or wills, certain long-term leases and business interest.” Failure to timely file the Affidavit permits the assessor to go back and increase prior tax assessments (after the transfer took place) to adjust the property tax assessment, possibly resulting in (i) an increased assessment resulting in increased property taxes, (ii) interest on the difference on the tax that was paid and the tax that should have been paid and (iii) penalties.

Any time you are contemplating a sale or transfer of an ownership interest in an entity which owns real estate you should consult with your attorney about the means and ramifications of your proposed transaction.

Fraser Trebilcock’s Real Estate team has a depth of experience in advising clients on all issues of property law, and they strive to have their clients’ interests protected. You can contact them at (517) 482-5800, or by filling out the contact form here.

Seven Tips About Data Breach Prevention and Cybersecurity for Small Businesses

We see it in the news regularly. Major corporations like Anthem, eBay, Equifax, Sony Pictures, and Target have all suffered major data security breaches. But these breaches don’t only happen to large organizations. Companies of all sizes are targets. Sometimes, smaller companies are even bigger targets because protections may not be as secure.

So how do businesses of all sizes go about data breach prevention and cyber security? Here are seven tips to strengthen your business against a data breach.

1. Train employees and users on data breach prevention

Human error is often to blame for most breaches. The easiest way for a hacker to invade your network is by preying on an employee who doesn’t recognize the risk. Whether through a malware email attachment, or by downloading a document from an unreliable resource, there is a wide variety of easy phishing attempts that can lead to a data breach. The key to prevention is teaching your employees how to avoid making these common mistakes. Also, include a technology protocol section in your employee handbook where your team can easily access it. This section should cover proper steps to take to protect your technology, especially anything that could be considered a trade secret, or private customer/client information and data.

2. Store customer data in an encrypted database

Another tip for data breach prevention is to use a secure database and encrypt any items containing customer/client information or trade secrets. The encryption process converts that information or data into a code, which then works to prevent unauthorized access. A common example of this process is the one used when you make an online purchase. Once you enter your payment information onto an ecommerce website and it has been approved, your information is encrypted before it is stored on the website. When you later go back to the website to make another purchase from your account, your information is ready to use.

3. Improve cybersecurity with two-factor authentication

Two-factor authentication adds an extra layer of protection to logging into a website. After a user inputs the required login and password, an extra step is initiated to ask the user for another piece of information that only he or she would have. For example, a text message with a one-time code may be sent to the user’s phone, which is tied to the account. Two-factor authentication is very important for data breach prevention if your business has devices that go in and out of the office, such as tablets or laptops, making sure they are secure in the event they become lost or stolen.

4. Malware detection software on both servers and workstations

Each workstation inside your business, as well any servers, need to have malware detection software installed to help with data breach prevention. The detection software prevents malware from being installed. Malware can be hidden in a variety of formats, the detection software helps scan each item to ensure its safety. There are a variety of different software packages available for businesses, depending on the level of security needed.

5. Perform regular vulnerability checks

It’s critical that you perform regular vulnerability checks to minimize the risk and prevent data breaches. For example, it’s important that firewall configurations be reviewed regularly with penetration testing, to make sure only trusted networks are given access. Software updates may also vary with your malware protection software. There are programs that can run regular checks, or you can look to a third-party IT company for assistance. It’s also important that you continue to test and train employees through phishing emails to ensure they stay vigilant.

6. Require frequent remote data backups

Whether routinely completed on the cloud or on an external hard drive, remote data backups ensure that your data is stored securely. A routine backup allows you to have a reference point if your data is breached in the future. Most backup providers allow you to pick the frequency of the backup, time of day it occurs, and what level of information detail you would like to store.

7. Have a disaster plan ready in case of a data breach

Protecting your business against a data breach is an ongoing process. Under the Michigan Identity Theft Protection Act, in the event of a data breach that is likely to cause harm or result in identify theft, a business must provide a notice of the security breach to each affected Michigan resident, customers and vendors affected by the breach, as well as consumer reporting agencies. Keep in mind, the notifications must be precise and meet certain statutory requirements.

Unfortunately, even with planning, a cyberattack can still happen. Be prepared by having a disaster plan ready, and be sure to include the proper steps for employees to take both during and after an attack. Review the plan as an internal team frequently to ensure that everyone has a clear understanding of timelines and responsibilities. Time is of the essence during a data breach, and having a disaster plan prepared will make that stressful time more efficient.

To learn more, contact an attorney at Fraser Trebilcock at 517.482.5800 or by clicking here to fill out this form on our website.


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New Overtime Pay Rules

On September 24, 2019, the U.S. Department of Labor announced a final rule to make 1.3 million American workers newly eligible for overtime pay. The new rule is effective January 1, 2020 and includes the following changes to overtime rules:

  • Raise the salary level from the current $455 per week to $684 per week (or $35,568 per year for a full-year worker);
  • Raise the total annual compensation level for highly compensated employees from the current $100,000 per year to $107,432 per year (with a minimum weekly salary of at least $684);
  • Allow employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the salary level; and
  • Revise the special salary levels for workers in US territories and in the motion picture industry.

Of note, this final rule did not change the “duties test” for any exemption.

This message is a brief summary of a complex series of laws, rules and regulations. Please contact Edward Castellani at 517-377-0845 or ecast@fraserlawfirm.com, or David Houston at 517-377-0855 or dhous@fraserlawfirm.com with any questions.