Probate & Property - March/April 2022, Vol. 36, No. 2 by ABA Section of Real Property, Trust & Estate Law

THE LANDSCAPE OF BILLBOARD REGULATION

SUGGESTIONS FOR SMALL LEASES

VALUING REAL PROPERTY AFTER A RECENT SALE

VOL 36, NO 2 MAR/APR 2022

A PUBLICATION OF THE AMERICAN BAR ASSOCIATION | REAL PROPERTY, TRUST AND ESTATE LAW SECTION

WIRELESS LANDLORDS

She turned blueberry pie into an estate planning tool. When my father told me his plans for his estate, the blood drained from my face and I felt myself starting to panic. It wasn’t his intention but his plan would rip our family apart. I turned to our advisor, Nicole, for help. And she turned to blueberry pie. We all sat down to talk over dinner and she masterfully laid out an equitable estate plan that honored my father’s intentions and made sure every family member got a fair slice of the pie. While my father always sees the big picture, Nicole helped him to see the little things. — Kelsey, Newport Beach

CONTACT TIM MCCARTHY | 626.463.2545 | WHITTIERTRUST.COM/ABA $10 MILLION MARKETABLE SECURITIES AND/OR LIQUID ASSETS REQUIRED. Investment and Wealth Management Services are provided by Whittier Trust Company and The Whittier Trust Company of Nevada, Inc. (referred to herein individually and collectively as “Whittier Trust”), state-chartered trust companies wholly owned by Whittier Holdings, Inc. (“WHI”), a closely held holding company. This document is provided for informational purposes only and is not intended, and should not be construed, as investment, tax or legal advice. Past performance is no guarantee of future results and no investment or financial planning strategy can guarantee profit or protection against losses. All names, characters, and incidents, except for certain incidental references, are fictitious. Any resemblance to real persons, living or dead, is entirely coincidental.

Learn More

PROFESSORS’ CORNER A monthly webinar featuring a panel of professors addressing recent cases or issues of relevance to practitioners and scholars of real estate or trusts and estates. FREE for RPTE Section members! Register for each webinar at http://ambar.org/ProfessorsCorner

Tuesday, March 8, 2022 12:30-1:30 pm ET

RETHINKING THE ROLE AND VALUES OF MONUMENTS IN PUBLIC SPACES Tuesday, April 12, 2022 12:30-1:30 pm ET

TOM E. SIMMONS, University of South Dakota Law School BEVERLY MORAN,Vanderbilt University School of Law Moderator: BRADLEY MYERS, University of North Dakota

ZACHARY A. BRAY, Univ. of Kentucky Rosenberg College of Law SANFORD LEVINSON, University of Texas at Austin School of Law Moderator: SHELBY D. GREEN, Elisabeth Haub School of Law

PURPOSE TRUSTS: PLAGUE, PANACEA, OR JUST PLAIN PUZZLING?!

SPONSORSHIP IS ONE SIMPLE WAY TO MAKE A DIFFERENCE

Explore opportunities to get in front of more than 18,000 Real Property, Trust and Estate Law Attorneys. Sponsorship and advertising opportunities are available now! CHRIS MARTIN | Corporate Opportunities 410.584.1905 | chris.martin@mci-group.com BRYAN LAMBERT | Law Firm Opportunities 312-835.8978 | bryan.lambert@americanbar.org

Partner with us www.ambar.org/rptesponsorships

Published in Probate & Property, Volume 36, No 2 © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

March/April 2022 1

CONTENTS March/April 2022 • Vol. 36 No. 2

14 26 Features 14

Departments

Wireless Landlords: A Checklist for Protecting Landlord Rights and Budgets

Young Lawyers Network

By Gerard Lavery Lederer and Bennett Givens

Uniform Laws Update

What to Do When Reviewing a Small Lease—Some Practical Suggestions

Keeping Current—Property

By Scott W. Fielding

Keeping Current—Probate

The Changing Landscape for Billboard Regulation

Career Development and Wellness

By Daniel R. Mandelker

Valuation of Real Property When There Has Been a Recent Sale

Practical Pointers from Practitioners

Lawyers’ Assistance Programs

Technology—Probate

The Last Word

By Michael Rikon

How to Love Remote Work

By Sahmra A. Stevenson and Jonathan M. Bogues

March/April 2022

A Publication of the Real Property, Trust and Estate Law Section | American Bar Association EDITORIAL BOARD Editor Edward T. Brading 208 Sunset Drive, Suite 409 Johnson City, TN 37604

ABA PUBLISHING Director Donna Gollmer

Articles Editor, Real Property Brent C. Shaffer Young Conaway Stargatt & Taylor, LLP Rodney Square 1000 N. King Street Wilmington, DE 19801

Art Director Andrew O. Alcala

Articles Editor, Trust and Estate Michael A. Sneeringer Porter Wright Morris & Arthur LLP 9132 Strada Place, 3rd Floor Naples, FL 34108

ADVERTISING SALES AND MEDIA KITS Chris Martin 410.584.1905 chris.martin@mci-group.com

Senior Associate Articles Editors Thomas M. Featherston Jr. Michael J. Glazerman

Cover Getty Images

Associate Articles Editors Travis A. Beaton Kevin G. Bender Kathleen K. Law Amber K. Quintal Jennifer E. Okcular Heidi G. Robertson Aaron Schwabach Bruce A. Tannahill

Managing Editor Erin Johnson Remotigue

Manager, Production Services Marisa L’Heureux Production Coordinator Scott Lesniak

All correspondence and manuscripts should be sent to the editors of Probate & Property.

Departments Editor James C. Smith Associate Departments Editor Soo Yeon Lee Editorial Policy: Probate & Property is designed to assist lawyers practicing in the areas of real estate, wills, trusts, and estates by providing articles and editorial matter written in a readable and informative style. The articles, other editorial content, and advertisements are intended to give up-to-date, practical information that will aid lawyers in giving their clients accurate, prompt, and efficient service. The materials contained herein represent the opinions of the authors and editors and should not be construed to be those of either the American Bar Association or the Section of Real Property, Trust and Estate Law unless adopted pursuant to the bylaws of the Association. Nothing contained herein is to be considered the rendering of legal or ethical advice for specific cases, and readers are responsible for obtaining such advice from their own legal counsel. These materials and any forms and agreements herein are intended for educational and informational purposes only. © 2022 American Bar Association. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Contact ABA Copyrights & Contracts, at https://www.americanbar.org/about_the_aba/reprint or via fax at (312) 988-6030, for permission. Printed in the U.S.A.

Probate & Property (ISSN: 0164-0372) is published six times a year (in January/February, March/ April, May/June, July/August, September/October, and November/December) as a service to its members by the American Bar Association Section of Real Property, Trust and Estate Law. Editorial, advertising, subscription, and circulation offices: 321 N. Clark Street, Chicago, IL 60654-7598. The price of an annual subscription for members of the Section of Real Property, Trust and Estate Law ($20) is included in their dues and is not deductible therefrom. Any member of the ABA may become a member of the Section of Real Property, Trust and Estate Law by sending annual dues of $70 and an application addressed to the Section; ABA membership is a prerequisite to Section membership. Individuals and institutions not eligible for ABA membership may subscribe to Probate & Property for $150 per year. Single copies are $7 plus $3.95 for postage and handling. Requests for subscriptions or back issues should be addressed to: ABA Service Center, American Bar Association, 321 N. Clark Street, Chicago, IL 60654-7598, (800) 285-2221, fax (312) 988-5528, or email orders@americanbar.org. Periodicals rate postage paid at Chicago, Illinois, and additional mailing offices. Changes of address must reach the magazine office 10 weeks before the next issue date. POSTMASTER: Send change of address notices to Probate & Property, c/o Member Services, American Bar Association, ABA Service Center, 321 N. Clark Street, Chicago, IL 60654-7598.

March/April 2022 3

YOUNG LAWYERS NETWORK Actions to Take to Ensure Your Success as a New Lawyer 1. Make your first impression count. As with most things in life, first impressions matter when starting a position with your law firm. The most admirable qualities in a young associate are humility, diligence, and a positive attitude. If you are generally amiable, that will serve you well in your career. 2. Meet your billing target. Beginning the practice of law can be an apprenticeship, but it is essential to remember that it is a business first and foremost. Your ability to do good work and capture that time via the billable hour is paramount. Be sure that you understand your law firm’s expectations regarding billable hours. Set goals to make your billable hours and hold yourself accountable in doing so. 3. Find a mentor. The most successful associates at any firm have at least one mentor or advocate in their corner. This person will be a source of advice, knowledge, and counsel for the young associate. Ideally, the mentor will be a partner that can advocate for you when it’s time for a raise or a promotion. But any senior associate, or fellow associate who is respected at the firm and has been there longer than you, can serve as an important mentor. 4. Resist attempting to change the firm. Every firm has its own culture and personality. Some are

For more information on the RPTE YLN, please contact: Josh Crowfoot, Daspin & Aument, LLP, 600 Republic Centre, 633 Chestnut Street, Chattanooga, TN 37450.

extremely conservative; others are more laid back. Some have a particular political leaning, while others do not. Some do well at inclusion and diversity, while others do not. The collection of personalities in your practice group has the potential to run the gamut. Although it will be tempting to change things and make your opinions known, it is better to put your head down and work. 5. Demonstrate appreciation for support staff. As a new attorney, the support staff at your firm are your lifeline. They will be invaluable in assisting you in staying on top of deadlines and attending to other firm matters. The best support staff have been at your firm a long time. At the beginning (and probably long after that), they will be able to answer questions you will not want to trouble a senior attorney with (e.g., How does the scanner work here? What are the ins and outs of the document management system?) 6. Take ownership. When attorneys at the firm give you written feedback, hold onto it. Find a way to remember the feedback or to be able to retrieve it later when you need it. Attorneys who take time to give you feedback are doing you a great service and demonstrating that they want you to succeed. The best way to show the supervising attorney that you are capable is not to make that same mistake again—whether a drafting error in a transaction or a particular grammatical error when preparing a memorandum or brief. 7. Be ready to learn. Law school can teach only so much. Your

knowledge of the black-letter law (or your ability to do research and find the answer) is a given. But the practice of law encompasses so much more, including managing client expectations and developing new business. Learn as much as you can while you can. 8. Seek feedback. Feedback from your supervising attorney is crucial to your growth as a new lawyer. Some attorneys are better at giving feedback than others. If you happen to work for an attorney who does not provide feedback, be sure to ask for it (and give thanks for it, too). 9. Find your niche. As a new lawyer, develop a niche in your practice area as soon as possible. To the extent you can create expertise in an area that is useful to the firm and outside the knowledge base or skill set of colleagues, you are on your way to generating your own work at the firm. In time, you will become the “go-to” person at the firm for that specific practice area. 10. Take opportunities to improve. One of the most significant benefits of joining a law firm is the investment the firm will make in your growth and continuing education. Take advantage of as many opportunities to learn as you possibly can. For example, take a writing seminar. Bryan Garner’s company Law Prose has an excellent course called “Advanced Legal Writing & Editing.” See https:// lawprose.org. Even though my practice is primarily transactional, I received a tremendous benefit from attending the course and was thankful my firm provided that for me. n

March/April 2022

CALLING ALL LAW STUDENTS! The Section of Real Property, Trust and Estate Law is now accepting entries for the 2022 Law Student Writing Contest. This contest is open to all J.D. and LL.M students currently attending an ABA-accredited law school. It is designed to encourage and reward law student writing on real property or trust and estate law subjects of general and current interest.

1st Place

$2,500 award

2nd Place $1,500 award

3rd Place

$1,000 award

n Free round-trip economy-class airfare and accommodations to attend the RPTE Fall Leadership meeting. This is an excellent meeting at which to network with RPTE leadership! (First place only.) n A full-tuition scholarship to the University of Miami School of Law’s Heckerling Graduate Program in Estate Planning OR Robert Traurig-Greenberg Traurig Graduate Program in Real Property Development for the 2022–2023 or 20232024 academic year.* (First place only.) n Consideration for publication in The Real Property, Trust and Estate Law Journal, the Section’s law review journal. n One-year free RPTE membership. n Name and essay title will be published in the eReport, the Section’s electronic newsletter, and Probate & Property, the Section’s flagship magazine.

Contest deadline: May 31, 2022 Visit the RPTE Law School Writing Competition webpage at ambar.org/rptewriting. *Students must apply and be admitted to the graduate program of their choice to be considered for the scholarship. Applicants to the Heckerling Graduate Program in Estate Planning must hold a J.D. degree from an ABA accredited law school and must have completed the equivalent of both a J.D. trusts and estates and federal income tax course. Applicants to the Robert Traurig-Greenberg Traurig Graduate Program in Real Property Development must hold a degree from an ABA accredited law school or a foreign equivalent non-US school.

March/April 2022 5

FELLOWS

The ABA Section of Real Property, Trust and Estate Law Fellows Program encourages the active involvement and participation of young lawyers in Section activities. The goal of the program is to give young lawyers an opportunity to become involved in the substantive work of the RPTE Section while developing into future leaders. Each RPTE Fellow is assigned to work with a substantive committee chair, who serves as a mentor and helps expose the Fellow to all aspects of committee membership. Fellows get involved in substantive projects, which can include writing for an RPTE publication, becoming Section liaisons to the ABA Young Lawyers Division or local bar associations, becoming active members of the Membership Committee, and attending important Section leadership meetings. Applications due June 10, 2022. https://www.americanbar.org/groups/ real_property_trust_estate/fellowships-and-awards/

March/April 2022

Join an RPTE Group The Section of Real Property, Trust and Estate Law comprises three divisions: real property, trust and estate, and joint. Each division comprises high-level groups, which further comprise issue-specific committees. Group activity provides much of the basis for our high-quality educational programs like the ones produced for the National CLE Conference. View our list of Groups below and become involved in the Section’s work.

To join a Group visit: www.americanbar.org/my-aba/memberships/

JOINT GROUPS

TRUST AND ESTATE DIVISION

• Joint Law Practice Management Group

• Business Planning Group

• Joint Legal Education and Uniform Laws Group

• Charitable Planning and Organizations Group

REAL PROPERTY DIVISION • Commercial Real Estate Transactions Group

• Elder Law and Special Needs Planning Group

• Hospitality, Timesharing, and Common Interests Development Group

• Employee Plans and Executive Compensation Group

• Land Use and Environmental Group

• Income and Transfer Tax Planning Group

• Leasing Group

• Litigation, Ethics and Malpractice Group

• Litigation and Ethics Group

• Non-Tax Estate Planning Considerations Group

• Real Estate Financing Group • Residential, Multi-Family, and Special Use Group

• Trust and Estate Practice Group

• Special Investors and Investment Structure Group

March/April 2022 7

UNIFORM LAWS U P D AT E ULC Drafting a New Uniform Act on Restrictive Covenants in Deeds A racially restrictive covenant is a provision in a deed or declaration that prevents the affected real property from being sold to or occupied by certain persons. Throughout the first half of the last century, developers and sellers of real estate routinely used restrictive covenants to bar African Americans, and sometimes other ethnic and religious groups, from occupying or owning residential property in neighborhoods reserved for white people. The US Supreme Court held in Jones v. Alfred H. Mayer Co., 392 U.S. 409 (1968), that Section 1982 of the Civil Rights Act of 1966 bars racially restrictive covenants, and shortly thereafter Congress enacted the Fair Housing Act, which makes it unlawful to “discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling” or to “make, print, or publish…any notice, statement, or advertisement, with respect to the sale or rental of any dwelling that indicates any preference, limitation, or discrimination based on race.” 42 U.S.C. § 3604(b), (c). Even though racially restrictive covenants have been unenforceable for over 50 years now, the historical record of racism remains on the title to millions of residential properties in the United States, duly filed in local recording offices and available for public viewing. These vestiges from the not-so-distant past may have no legal effect, but they serve as a stark reminder of the officially sanctioned racism that resulted Uniform Laws Update Editor: Benjamin Orzeske, Chief Counsel, Uniform Law Commission, 111 N. Wabash Avenue, Suite 1010, Chicago, IL 60602.

Uniform Laws Update provides information on uniform and model state laws in development as they apply to property, trust, and estate matters. The editors of Probate & Property welcome information and suggestions from readers.

in segregated development patterns still visible in many American cities and towns. African American and Hispanic purchasers of real estate may feel understandable anger or pain upon discovering that the title to their home contains a lingering reminder of racist housing policies. White homeowners may likewise take offense at the presence of a restrictive covenant, either because of their commitment to racial equality or out of concern that others might perceive the covenant as evidence of the buyer’s tolerance for discrimination (or both). But homeowners of all races who want to remove restrictive covenants from recorded documents may be stymied by the local recording office’s need to preserve the integrity of the chain of title. A few states have begun to address the issue with procedures that allow the removal of offensive terms from publicly recorded documents while ensuring that historical land records are maintained. Procedures vary from state to state, however, and can cause confusion for title insurers and others searching land records. The state procedures adopted to date take one of three basic approaches.

Delaware and Maryland enacted statutes allowing a property owner to request redaction of offensive covenants. If the county attorney agrees the covenant is unenforceable, the recorder redacts the covenant from the public copy of the document but maintains the unredacted original version in the official records, sequestered from viewing without a subpoena or court order. Minnesota, Nevada, and Virginia do not permit redaction of recorded documents but allow the owner of the property affected by a restrictive covenant to record an additional form that “discharges” or “releases” the covenant permanently. A similar law in California requires a statement in 14–point boldface text on the cover page of any document that contains a restriction based on race or another protected class, stating that the restriction violates state and federal laws and is unenforceable. Finally, Oregon adopted a statute allowing the owner of the property affected by a restrictive covenant to petition a court for a judgment removing the restriction from title to the property. The statute does not direct the recorder to redact the covenant from the public record, but the court order can be recorded as evidence of the covenant’s removal. After monitoring these developments in the various states, the American Land Title Association proposed a project to the Joint Editorial Board for Uniform Real Property Acts to develop a uniform law governing the removal of restrictive covenants from deeds and other recorded documents, such as condominium declarations. The Uniform Law Commission recently acted on the recommendation and

March/April 2022

UNIFORM LAWS U P D AT E

appointed a drafting committee, cochaired by Commissioners Brian Flowers of the District of Columbia and Barry Hawkins of Connecticut. Professor Richard R.W. Brooks, the Emilie M. Bullowa Professor of Law at New York University, will serve as the Reporter. Karen Boxx and Jennifer Litwack will serve as Advisors from the ABA Section of Real Property, Trust and Estate Law. Other participants will include observers representing civil rights organizations, the property records industry,

and many other interested stakeholders. The committee will meet periodically over the next year to analyze the various procedures currently available in the states and attempt to draft a new uniform act that can help standardize procedures for the release or redaction of racially restrictive covenants while ensuring the integrity of land records, including the historical chain of title. RPTE members can sign up to follow the committee’s work and submit comments at www.uniformlaws.org.

The primary source for this edition of Uniform Laws Update is a memorandum by Professor R. Wilson Freyermuth, Executive Director of the Joint Editorial Board for Uniform Real Property Acts, to the ULC Scope and Program Committee (June 15, 2021) (on file with this column’s editor), recommending the formation of a new drafting committee on the release or expungement of racially restrictive covenants. n

The Editorial Board of Probate & Property magazine is interested in reviewing manuscripts in all areas of trust and estate or real property law. Probate & Property strives to present material of interest to lawyers practicing in the areas of real property, trusts, and estates. Authors should aim to provide practical information that will aid lawyers in giving their clients accurate, prompt, and efficient service. Manuscripts should be submitted to the appropriate articles editor: FOR REAL PROPERTY: FOR TRUST & ESTATE: Brent C. Shaffer Michael A. Sneeringer Young Conaway Stargatt & Taylor, LLP Porter Wright Morris & Arthur LLP Rodney Square, 1000 N. King Street 9132 Strada Place, 3rd Floor Wilmington, DE 19899-0391 Naples, FL 34108 bshaffer@ycst.com MSneeringer@porterwright.com On our website (www.americanbar.org/groups/real_property_trust_estate/publications/ probate-property-magazine/) click on the links under the "Probate & Property Resources" section for complete author guidelines and submission requirements. If you have any questions, please email erin.remotigue@americanbar.org. Published in Probate & Property, Volume 36, No 2 © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

March/April 2022 9

34th Annual RPTE 34th Annual RPTE National CLE Conference National CLE Conference

2022

| Dallas, Texas

CONFERENCE KEYNOTE SPEAKER FRIDAY, APRIL 29 | 12:00 - 1:00 PM 34th Annual RPTE National CLE Conference Virtual | In Person | April 26-29, 2022

Four Seasons Resort and Club | Dallas, Texas

* This program will be conducted with speakers presenting live from Dallas

Charles P. Rettig is the 49th U.S. Commissioner of Internal Revenue. As Commissioner, Mr. Rettig

presides over the nation’s tax system, which Annual RPTE National CLE Conference collects more than $3.5 trillion in tax revenue Virtual | In Person | April 26-29, 2022 Four Seasons Resort and Club | Dallas, Texas CHARLES P. RETTIG United States Commissioner of Internal Revenue

each year representing about 96% of the total gross receipts of the United States. In this regard, the continued success of our country depends upon a successful IRS because this revenue funds most government operations and public services. Mr. Rettig manages an agency of about 80,000 employees and a budget of more than $11 billion.

March/April 2022

REAL PROPERTY PROGRAMS AT-A-GLANCE 1:00 - 2:00 pm

Loan Basics: Recourse Guarantees

SALT Cap Workaround: Planning Opportunities and Traps to Avoid

2:30 - 3:45 pm

End of the Road: Key Considerations in Ground Lease Surrenders

Navigating Defaulted CMBS Loans from the Borrower’s and the Special Servicer’s Perspectives

WEDNESDAY, APRIL 27 10:00 - 11:00 am

Playing Chess: How to Best Position Your Landowner/ Developer Client for Potential Litigation of Land Use/ Permitting Applications

The Not-So Standard, Not-So Retail Shopping Center

11:30 am - 12:30 pm

Emerging Sustainability Issues In Real Estate Transactions

Don't be Casual about Casualty Provisions

1:00 - 2:00 pm

Let Your Light Shine Even When the Wind Blows: Wind and Solar Leases

Redacting Racism: Ridding Land Titles of Racial Covenants and Restrictions that Have a Segregative Effect

2:30 - 3:45 pm

Opinions Potpourri: Hot Topics and Current Issues in Real Estate Finance Opinions

Role of Affordable Housing Programs in The Biden Administration’s Social Safety Net Legislation

THURSDAY, APRIL 28 10:00 - 11:00 am

11:30 am - 12:30 pm

Options, Rights of First Refusal, and Rights of First Offer

Insurance and Risk Management in the Wake of Surfside

JOINT The Corporate Transparency Act — Welcome to the Future

1:00 - 2:00 pm

JOINT Faulty Appraisals and Assessment Gap: Racial Inequities in Home Appraisals and Assessment

FRIDAY, APRIL 29 9:30 - 10:30 am

Law Professors’ Update

10:45 - 11:45 am

The Great Debate in Valuing Big Box Stores — A Collaboration with the Appraisal Institute

12:00 - 1:00 pm

1:15 - 2:15 pm

A Fireside Chat with the U.S. Commissioner of Internal Revenue

JOINT Caring for Yourself While Caring for Others

2:30 - 3:30 pm

JOINT Keeping (Women) Lawyers in Practice

March/April 2022 11

All times are Central Standard time

TUESDAY, APRIL 26

TRUST AND ESTATE PROGRAMS AT-A-GLANCE 1:00 - 2:00 pm

Estate Planning in an Era of Heightened Tax Enforcement

Has Science Outpaced the Law? Updating the Paradigm on Evaluations of Capacity and Undue Influence in Trusts, Estates and Guardianships

2:30 - 3:45 pm

What's Old Is New Again — Tax Uncertainty, Or How's Your 2022 Going?

Are Guardianships Toxic?

WEDNESDAY, APRIL 27 10:00 - 11:00 am

The Parent Trap: How the Uniform Parentage Act Demands Attention to Familial Relationships in Modern-Day Estate Planning

Business Succession and Estate Planning with ESOPs

11:30 am - 12:30 pm

Mine, Yours, Ours, Theirs - Issues with Non-Marital Cohabitants and Tips to Resolve Disputes Before They Occur

Past, Present, and Future of the Duty to Inform: Practical Guidance on Advising Trustees

1:00 - 2:00 pm

Planning for Divorce: What Every Estate Planner Needs to Know

Who is the Fiduciary? Traditional and NonTraditional Roles in the Administration of Directed Trusts

2:30 - 3:45 pm

Family Office Trends: The New Vocabulary of the Next Generation and Your Annual Non-Tax Hot Topics

State of Charitable Giving and Tax Reform Hot Topics

All times are Central Standard time

TUESDAY, APRIL 26

THURSDAY, APRIL 28 10:00 - 11:00 am

Hot Topics in Business Planning

11:30 am - 12:30 pm

Don’t Be Nonplussed, a Non-Grantor Trust Must Be Discussed

JOINT

The Corporate Transparency Act — Welcome to the Future

1:00 - 2:00 pm

JOINT Faulty Appraisals and Assessment Gap: Racial Inequities in Home Appraisals and Assessment

FRIDAY, APRIL 29 9:30 - 10:30 am 10:45 - 11:45 am

12:00 - 1:00 pm 1:15 - 2:15 pm

How to Keep the Tail from Wagging the Dog: Difficult Client Counseling Scenarios

Fixing a GST SNAFU

Latest Developments Facing the Legal and Banking Communities

A Fireside Chat with the U.S. Commissioner of Internal Revenue

JOINT Caring for Yourself While Caring for Others

2:30 - 3:30 pm

JOINT Keeping (Women) Lawyers in Practice

March/April 2022

CONFERENCE RECEPTION Thursday, April 28 6:00 – 7:30 PM

For those who will be in Dallas to attend the sessions, we invite you to register to attend this reception, to be held at the Four Seasons Las Colinas and featuring hors d’oeuvres and cocktails. Tickets may be purchased for $50 per person. 34th Annual RPTE National Conference registration required to secure tickets.

• Don’t miss out on the opportunity to earn your CLE credits for the year • Listen live or at your leisure • All programs will be available 30 days after the conference ends • Trending topics in Real Property, Trust and Estate Law

March/April 2022 13

WIRELESS

LANDLORDS

March/April 2022

A Checklist for Protecting Landlord Rights and Budgets By Gerard Lavery Lederer and Bennett Givens

andlords should be on the lookout for an increasing number of requests for tower co-location, generator expansions, and new

sites across the country, as the nation’s largest cell tower management companies are forecasting levels of increased leasing activity not experienced in two decades. According to Crown Castle, the nation’s largest provider of communications infrastructure, cell site leasing activity in 2022 will be 50 percent higher than the company’s trailing fiveyear average. This is unprecedented in the industry. Landlords’ lawyers should prepare themselves in advance to deal with tower lease and license issues,

Getty Images

istockphoto

as suggested in the checklist below. Gerard Lavery Lederer is a partner in Best, Best & Krieger in Washington, DC, and Bennett Givens is an associate in the firm’s Los Angeles office.

March/April 2022 15

Unparalleled Growth The flurry of cell site leasing activity is largely driven by the three major carriers deploying upgraded 5G networks. Also significant, DISH Wireless is entering the market as a new nationwide competitor, which is contributing to the most co-location activity in Crown Castle’s history. Additionally, the buildout of wireless network infrastructure largely through co-location requests is fueling the activity to meet the industry’s rapidly expanding needs. This is expected to drive a 20 percent surge in core leasing tower activity in 2022 compared to 2021—a year that saw high levels. With T-Mobile actively pursuing its “Anchor” project (the addition of Massive Multiple-Input and MultipleOutput (MIMO) and Sprint’s 2.5 GHz

spectrum to T-Mobile sites) and Verizon kicking off C-Band and Citizens Broadband Radio Service (CBRS) upgrades on macros, there was a flurry of activity on existing sites, especially toward the end of 2021. The FCC & Wireless Infrastructure Not only is wireless infrastructure ushering in the modern mobile communications era; it is also playing a larger role in the future of information networks. Cell phone towers are the most established type of communications infrastructure and are still the most reliable way to deliver critical wireless coverage. The Federal Communications Commission (FCC) and the state of California have attempted to streamline the

regulatory process to meet the growing demand; however, it is imperative that both public and private property owners, and their counsel, understand that the regulatory relief provided does not affect important rights as property owners. Sites & Land Rights Adding to this frenetic level of activity is a late 2020 FCC Report and Order that mandates certain qualifying wireless facility modifications be approved by state and local governments. Report & Order, In re Implementation of State & Local Gov’ts’ Obligation to Approve Certain Wireless Facility Modification Requests, FCC 20-153 (Nov. 3, 2020), https://bit.ly/3m42Rce. Specifically, the FCC granted cell tower tenants and

March/April 2022

operators the regulatory right to deploy generators and other communications equipment up to 30 feet outside of their currently permitted site. A site is defined by the FCC as the “leased or owned property surrounding the tower” and “outside of the rights-of-way of a community.” In addition to the FCC Report and Order, California recently adopted a law that mandates cell tower operators have eight hours of backup power, resulting in a wave of generator siting requests. Gail A. Karish, New Macro Cell Tower Emergency Generator Law in California, Best Best & Krieger: Insights (Oct. 13, 2020), https://bit.ly/3GJpquK. The FCC first proposed this mandate in 2008 in response to the massive loss of service in the aftermath of Hurricane Katrina, but it was eventually vacated by OMB because of the lack of realistic implementation in the proposed time frame. California determined that the ensuing 13 years was time enough for carriers to meet this obligation. Other states, including New York and Connecticut, are considering similar legislation to mandate backup power generators at cell towers within their jurisdictions. Protecting Your Property Interests Cell tower tenants, operators, and their consultants may confuse recent state and federal streamlining efforts with grants of property rights. This is especially true when the property owner

Private entity owners should not be misled that a regulatory approval overrules the landowner’s authority under the lease or license agreement.

is a public entity that has both regulatory and proprietary authority over the land or rooftop on which a cell tower is sited. Public and private landowners, and their counsel, need to be aware that the FCC-expanded site approval and state level backup power resiliency requirements speak only to regulatory approval, not the transfer of property rights. Here is a checklist of issues to consider to help protect the landlord’s rights and budget: • Know the landlord’s legal rights. The FCC update to the U.S. Code of Federal Regulations, title 47, section 1.6100 Wireless Facility

Modifications, and the California legislation are limited to regulatory permitting authority. In fact, a number of local governments have challenged the order in the Ninth Circuit Court of Appeals. If the landlord is a private or public property entity, it has rights as a property owner under its lease or license agreement that are separate from its regulatory capacity. Similarly, private entity owners should not be misled that a regulatory approval overrules the landowner’s authority under the lease or license agreement. If the landlord is uncertain about whether it is acting in a regulatory or proprietary capacity, seek legal advice. The landlord shouldn’t rely on what the cell tower operator tells it. • Preserve the rights in writing. The landlord should reserve the right to approve cell site deployments and any changes either on the tower or on the site. Most operators will readily agree to the property owner’s prior approval of plans or changes. But the boilerplate lease or license agreement that providers will share with the landlord rarely includes such a clause. The landlord usually has to ask for it. The cell tower operator will be represented by counsel, so the landowner should also

March/April 2022 17

retain counsel to help be sure its property rights are protected. • Require that use of additional space pays you additional rent. Tower owners will typically agree to pay additional rent for additional space, be it for generators or additional equipment cabinets. Of course, they will rarely lead with such an offer, and some lessthan-scrupulous members of the industry have tried to claim that the FCC’s or California actions grant them the rights to deploy such facilities for free. Be sure this requirement is included in the lease. • Require that time and expenses are covered. The wireless industry is experiencing its highest level of tower activity in history, and it will continue to do so for some time for no fewer than three reasons: 1. Sprint and T-Mobile, which operate a total of 110,000 towers, have merged and need to harmonize their different networks and streamline their tower offerings by shutting down 35,000 towers and

Even if the landlord failed to include approval of plans in the lease or license, the landlord may have another chance to protect itself. building 10,000 new towers due to overlapping coverage as a result of the merger and filling of holes in the network; 2. DISH needs to build an entirely new wireless network from the ground up, contributing to the most co-location activity in history; and 3. Wireless providers are so busy adding 5G capacity to their towers that an 11 percent growth in adjusted funds from

operations per share is now expected. • These transfers, upgrades, additions, and equipment updates require hands-on management by landlords and other professionals. Counsel should require that the time and costs the landlord spends by employing professionals to help advise it be recoverable. These additional professional fees can add up quickly and will far exceed the rent payments the landlord receives. These recoverable costs should include legal counsel’s fees. • Don’t routinely sign off on property owner authorization requests. Even if the landlord failed to include approval of plans in the lease or license, the landlord may have another chance to protect itself. Most jurisdictions require that a permit application include a signed property owner authorization if the applicant is not the owner of record. If the agreement does not require that the landlord take on such obligations, don’t do so unless the landlord agrees with the plans

March/April 2022

and your expenses are covered. • Protect your client’s interests if the tenant changes from a carrier to a tower management company. Many carriers traditionally leased their own towers. To raise funds to purchase more spectrum, major carriers have sold or assigned their towers to tower management companies. A recent AT&T and Crown Castle $4.85 billion tower transaction includes AT&T’s agreement to lease the rights to approximately 9,100 of its company-owned wireless towers to Crown Castle, which will also purchase approximately 600 AT&T towers. Most leases or licenses require the landlord’s written consent before any such transfer can be made. Because the business plans of a tower company are significantly different from those of the carriers, the landlord should also make sure that all future licenses have such a requirement for its approval. When considering negotiation with a tower management company, these are four questions to consider in addition to the business terms of an access agreement. • Does the agreement protect the landlord in this changed environment and new circumstances? • Does the transfer comply with the requirements of the existing agreement? • Is the landlord named in insurance policies? • Has the tower management company provided sufficient documentation demonstrating its authority to act on behalf of the tenant? Conclusion Counsel for owners of cell tower sites should be prepared to negotiate license and lease agreements in order to protect their client’s property interests, keeping in mind the suggestions in the above checklist. n

RPTE PUBLICATIONS All RPTE publications can be purchased on the ABA Web Store, ShopABA.org, or by calling the Service Center, 800-285-2221.

Commercial Leases for Restaurants and Franchise Operations Mark Dall and Noble C. Hatfield Leasing issues and language from the perspective of both tenant and landlord. Written by experienced commercial leasing attorneys with over seventy combined years of experience in the area, this new book identifies the issues, pitfalls, and potential resolutions when dealing with restaurant leasing. The authors examine commercial leasing for restaurants and franchise operations from both tenant and landlord perspectives, as well as from a franchisor perspective for franchises, and discuss leases for in-line, outlot, and urban settings. This book also provides valuable, practice-tested restaurant leasing clauses and agreements for franchise operations.

2018, 208 pages, Paperback/eBook Product Code: 5431029 $129.99 List Price $89.95 RPTE Members

March/April 2022 19

KEEPING CURRENT PROPERTY CASES BROKERS: Broker is not procuring cause of sale to person who viewed property during term of listing agreement but negotiated to buy from seller after expiration of agreement. Seller and Broker entered into an exclusive one-year listing agreement for the sale of a large tract of land for an asking price of $435,000 and a fixed commission of $25,000. The agreement had a one-year “tail” that compelled Seller to pay the commission if within oneyear of the agreement’s expiration, Seller sold the property and Broker was the procuring cause. Broker listed the property on several websites, including “Farm & Forest” and showed it to several potential buyers, receiving only one offer below the asking price, which Seller rejected. After the first listing expired, the parties entered into two more one-year listing agreements with the same provisions, including a one-year tail. After the third listing agreement expired, a prospective purchaser who had seen the property earlier with Broker’s assistance expressed a renewed interest in the property. Broker requested that Seller sign an additional listing, but Seller refused. Months later, the same purchaser contacted Seller directly about the property, and they entered into a purchase and sale agreement at the original asking price. Broker sued Seller and the purchaser, alleging breach of contract, quantum meruit, and negligent misrepresentation. The trial court dismissed the claim against the purchaser and rejected the claims against Seller on the grounds that the terms Keeping Current—Property Editor: Prof. Shelby D. Green, Elisabeth Haub School of Law at Pace University, White Plains, NY 10603, sgreen@law.pace.edu. Contributor: Prof. Darryl C. Wilson.

Keeping Current—Property offers a look at selected recent cases, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.

of the contract were not satisfied and that quantum meruit is not available when there is an enforceable contract. The supreme court affirmed. First, the court noted that the plain language of the contract requires a commission only if the sale is effected within 12 months of the expiration of the agreement and Broker is “the procuring cause of the sale.” This means Broker must procure a purchaser ready, willing, and able to purchase at the price and terms prescribed by Seller. Here, although Broker placed the original advertisement in Farm & Forest, which first drew the purchaser to the property and showed the property, despite several later exchanges, Broker was unable to deliver an offer during the listing term or tail. Indeed, for a while, the eventual purchaser was actively engaged with another broker and looking at other properties. The successful negotiations between Seller and the purchaser occurred after Seller had disengaged from Broker. Masiello Real Estate, Inc. v. Matteo, 2021 VT. LEXIS 105 (VT. Oct. 15, 2021). CONSTRUCTION CONTRACTS: Owner does not have cause of action against unlicensed subcontractor who does not sign construction contract. The Pommers engaged Childs to build a garage on the Pommers’ property. Childs developed designs and invoiced the Pommers, who paid him directly. Childs also provided the

Pommers with estimates for project costs and time of completion. When the Pommers met Childs to sign the construction contract, Childs explained that he did not have a contractor’s license and introduced the Pommers to Granger, who was a licensed general contractor. The Pommers signed documents with Granger Construction Company listed as the contractor and paid Granger Construction the initial draw for the project. Construction commenced with both Granger and Childs working on the garage, and with both presenting invoices to the Pommers, which the Pommers paid with checks to Granger Construction. The Pommers questioned the extensive delays, the quality of the work, and why no other workers assisted Childs and Granger. Childs and Granger ultimately requested money beyond the estimate, the total of which the Pommers had already paid, and indicated they would not work any further without receiving additional payments. The Pommers hired others to complete the garage which, because of the substandard work of Childs and Granger, faced potential demolition. The Pommers filed suit, alleging breaches of express and implied warranties, fraudulent misrepresentation, and the tort of outrage. The trial court entered judgment for the Pommers against both Childs and Granger Construction, and both parties appealed. The supreme court affirmed the judgment against Granger Construction but reversed the judgment against Childs. The court reviewed the contract between Granger Construction and the Pommers, finding it undisputed that Childs was not a signatory, was not named in the document, and was not an owner or member of Granger Construction. Although the contract referenced contractor/subcontractor relations, it did not provide for any duties owed from a subcontractor

March/April 2022

KEEPING CURRENT PROPERTY

to a property owner. Therefore, Childs was not liable for breach of contract or breach of warranties. Childs v. Pommer, 2021 Ala. LEXIS 87 (Ala. Sept.3, 2021). COTENANTS: Judgment lien does not attach to property held in tenancy by entirety when transferred to nondebtor spouse at divorce. In July 2014, Blount obtained a judgment for over $1 million against her former attorney, Padgett. Thereafter, she employed several strategies to collect, including recording the judgment, filing a lis pendens, and initiating attachment proceedings. At the time, Padgett owned a home as a tenant by the entirety. In 2018, Padgett and his wife executed a property settlement agreement in anticipation of divorce. This agreement was thereafter incorporated into the judgment of divorce, entered on September 27, 2018, which became final on October 27, 2018. In the settlement agreement, Padgett agreed to relinquish all right, title, and interest in the home and to deed the property to his soonto-be ex-wife. The warranty deed was executed on the same day the divorce decree was entered. In 2019, Blount filed a complaint alleging fraudulent conveyance of title against Padgett and ex-wife. The trial court dismissed the complaint, ruling that property held as tenants by the entirety was not reachable by the creditors of one spouse. On the appeal, the court explained that the tenancy by the entirety exists to protect the marital relationship from the legal hazards confronting owners in other types of tenancies. That protection carries over to an extent after divorce. Under D.C. Code § 16-910, at divorce, title vests immediately in the proper parties in accordance with a court-determined distribution or agreement between the parties. This means that a lien that cannot attach to property held as tenants by the entirety during the debtor’s marriage will not necessarily attach to the property upon the debtor’s divorce. Here, because the divorce decree incorporated the property settlement agreement, there was no interim moment in time when there was any dual interest in the property

for a creditor to attach. And, because by definition, tenancy-by-the-entirety property is not the separate asset of the debtor spouse, it is not susceptible to a claim of fraudulent transfer under the Uniform Fraudulent Transfer Act. D.C. Code § 28-3104(a)(1). Accordingly, Padgett’s conveyance to his ex-wife did not hinder or delay Blount’s rights as a creditor because at no time did Blount have a right to attach the property. Blount v. Padgett, 261 A.3d 200 (D.C. 2021). ECONOMIC LOSS RULE: Action for defective design by geotechnical engineers is barred by economic loss statute. The Hayeses noticed cracking in the walls and foundation of their home fourteen months after its completion. More than ten years earlier, the builder contracted with Intermountain GeoEnvironmental Services (IGES) to provide a geotechnical report for the planned development. IGES reviewed geological maps of the area, conducted a field investigation, and conducted laboratory testing of soil samples to assess the soil’s pertinent engineering properties. IGES prepared a geotechnical report for the builder, which concluded that the site was suitable for the proposed construction, provided that the recommendations in the report were complied with, which were not at issue in the case. After cracks manifested, the Hayeses hired a different engineering firm to conduct another geotechnical exploration. That firm found a subsurface problem that IGES missed, concluding that the “existing slope of the site fails to meet the minimum factors of safety.” No contractor was willing to undertake the recommended remediation efforts. The Hayeses sued IGES, alleging negligence, negligent misrepresentation for wrongly concluding that the lot was safe and suitable for residential construction, and negligent infliction of emotional distress caused in witnessing the destruction of their home. They sought compensation for the damages and eventual destruction of their home, damage to the lot on which the house was built, moving expenses, and emotional distress

damages. IGES moved to dismiss the complaint, stating that the common law and statutory economic loss rule barred the claim because the Hayeses were seeking compensation in tort for purely economic losses and no exception or independent duty existed that would move the claim out of the rule. The trial court granted the motion and the court of appeals affirmed, noting that because there was a statutory economic loss rule, the common law rule did not apply. The supreme court affirmed, first explaining that the economic loss rule began as a judgemade rule to mark “the fundamental boundary between contract law, which protects expectancy interests created through agreement between the parties, and tort law, which protects individuals and their property from physical harm by imposing a duty of reasonable care.” The rule has particular application in the realm of construction projects, which are characterized by detailed and comprehensive negotiated contracts that form the foundation of the industry’s operations. In this sense, allowing property owners to bring negligence actions would impose “economic expectations upon parties” who were not known to the owners and had no contract with the owners.” Under the statutory rule, Utah Code Ann. § 78B-4513(1), an action for defective design or construction is limited to breach of the contract, but such action may include damage to other property or physical personal injury if the damage or injury is caused by the defective design or construction. Though the common law rule continues to apply generally, any “action for defective design or construction” is subject to the statute—meaning that it must be brought as a breach of contract claim rather than a tort claim, unless a statutory exception applies. Looking to other statutes and noting that the geotechnical report is an integral part of the structural design of a building’s foundation, the court concluded that geotechnical engineers were “design professionals” within the meaning of the statute; their report was a necessary component of the structural design of a home. Because the Hayeses’

March/April 2022 21

KEEPING CURRENT PROPERTY

action was for defective design, the economic loss statute applied and barred the negligence claims. And there was no independent duty that would remove the claim from the statute. That exception requires a showing that the Hayeses were in privity of contract with IGES, but they were not because the firm was hired by the builder. The court was sympathetic to the hardship the Hayeses experienced but felt bound to apply the statute as written. In the court’s view, the statute aims to encourage parties to protect their financial interests through contracts; the court was “not at liberty to graft onto the statute an exception that our legislature chose not to include.” Hayes v. Intermountain GeoEnvironmental Servs., Inc., 498 P.3d 435 (Utah 2021). EMINENT DOMAIN: Public or quasi-public entity may have liability for inverse condemnation even when entity does not have power of eminent domain over property in question. UGI Storage filed an application with the Federal Energy Regulatory Commission (FERC) seeking a certificate of public convenience and necessity to acquire and operate an underground natural gas storage facility, then owned by Central Penn Gas (CPG). UGI also sought to include within the certificate a protective buffer zone of 2,980 acres. FERC granted the certificate as to the storage facility but denied it as to the buffer zone on the basis that CPG did not show ownership to all the area. Later, FERC granted a partial certification only to those areas for which UGI had acquired the necessary property rights. Unable to establish title to the area, UGI claimed it had a right to conduct storage operations in the location under the state Eminent Domain Code, 26 Pa. Cons. Stat. § 502(c). UGI stated that it would work to acquire rights in the area, but it never notified property owners or took any formal action toward that end. Property owners filed suit, alleging a de facto taking under the state Eminent Domain Code, claiming that UGI applied for approval of the buffer zone to ensure that there would be no other oil and

gas exploration in close proximity to its operations and that UGI in any event utilized properties within the uncertificated segments in the same manner as those in the certificated areas, as an integrated 2,980-acre buffer zone. The owners claimed that the buffer zone effectively prohibited them from all mining by hydraulic fracturing and that leasing entities refused to lease or drill for exploitation of such rights. The trial court dismissed the petition on the ground that an entity must have a property-specific power of eminent domain before it can be liable to pay just compensation under the Eminent Domain Code. Here, the FERC certificate excluded the landowners’ properties from the proposed buffer zone, and the law gives eminent domain power only for lands within the scope of the certification. After a round of intermediary appeals and remand, the supreme court reversed. Under both the federal and state constitutions, private property may not be taken for public use without payment of just compensation to the owners. It is well-settled that the power of eminent domain and the concomitant duty of just compensation can be delegated in furtherance of the public interest. However, the existing statutory scheme contains no reference or suggestion of any requirement of a relationship or nexus between the power and specific property, but only that the condemnor has authority to act and that there is a public use. Hughes v. UGI Storage Co., 263 A.3d 1144 (Pa. 2021). FORECLOSURE: Sale at 9 percent of property value to interested party is not set aside for irregularity. In 2011, Elkins purchased residential property from Frelin. Frelin financed the purchase, and Elkins executed a promissory note to Frelin, secured by a deed of trust. In 2016, Elkins defaulted, and Frelin authorized the trustee, Fidelity Agency of Alaska to commence nonjudicial foreclosure. At the time of sale, the property was valued between $358,600 to $370,000 but was subject to additional encumbrances, including a tax lien, a condominium association lien, a judgment lien held by Thomas,

and a child support lien held by Alaska’s Child Support Services Division (CSSD). Fidelity gave the statutorily required notice of the default and pending foreclosure sale to all interested parties. Although Fidelity did not give CSSD, as a government agency, a statutorily-required supplemental notice, CSSD received actual notice of the default and sale. None of the notified parties responded or attended the sale. The only bidder at the sale was the Joseph P. Casteel Trust. It turns out that a beneficiary of the trust and daughter of the Casteel trustee was the Fidelity title officer who handled the foreclosure. She arranged for a Fidelity representative to bid on behalf of the Casteel Trust, which purchased the property for $26,443, just $1 over Frelin’s offset bid for the balance due on the promissory note. This represented about 9 percent of the property’s estimated value. Casteel Trust was prepared to bid $107,000 at the foreclosure sale but limited its bid in the absence of other bidders. Thomas, the judgment lien holder, filed a claim to set aside the foreclosure sale on account of gross inadequacy of sales price, seeking to impose a constructive trust on the property and to require a new foreclosure sale. The trial court rejected the claim, finding no substantial irregularities that would affect the fundamental fairness of the sale. Thomas had actual notice of the sale and chose not to participate. The supreme court affirmed. It pointed out that although insufficient notice might warrant setting aside a sale, the only procedural error identified by Thomas was the failure to give supplemental notice to the state. But that requirement aims to protect only the state, not Thomas, and the state was not complaining. The court also rejected the claim that the successful bid representing only 9 percent of the fair market value was grossly inadequate. Inadequate sale price alone generally is not enough to set aside a foreclosure sale unless the sale price is so grossly inadequate that it shocks the conscience by creating a presumption of fraud or is combined with procedural irregularities. The circumstances here

March/April 2022

KEEPING CURRENT PROPERTY

did not indicate fraud in the sale, and there were no procedural irregularities creating unfairness. Finally, recognizing some potentially questionable behavior on Fidelity’s part, given that the representative handling the foreclosure had a personal relationship with the winning bidder, this circumstance did not rise to the level of fraud to set aside the sale. As trustee, Fidelity conducted the sale in accordance with its contractual duties to Elkins and Frelin. Fidelity had no obligation to protect junior lienholders. There was no evidence that the sale unduly benefitted the Casteel Trust, and Frelin received the full amount of his secured interest. Thomas v. Joseph P. Casteeel Trust, 496 P.3d 403 (Alaska 2021). PROPERTY TAXATION: Parcels in tax increment financing district must be contiguous. The city adopted ordinances to establish a Tax Increment Financing (TIF) district, indicating the parcels within the redevelopment project area. The TIF Act requires that the parcels be “contiguous.” 65 Ill. Comp. Stat. 5/11-74.4-4(a). Two parcels were separated by a gas pipeline right of way. The school board challenged the TIF ordinances on the basis of lack of contiguity. The trial court found the requisite contiguity present despite what it characterized as a public utility right-of-way that it deemed “of no legal consequence.” The school board appealed, and the appellate court reversed. The supreme court affirmed the reversal, first noting that the municipal annexation statute requires contiguity and has an express exception for a public utility right-of-way. As the TIF Act does not define contiguity, the court relied on its own precedent from incorporation and annexation cases indicating that statutory contiguity means that the parcels must touch or adjoin one another in a reasonably substantial physical sense. The court considered this definition well-suited to which redevelopment areas are eligible to reap tax-increment benefits under the TIF Act. The court concluded that the parcels in the proposed plan were not contiguous. Unlike the municipal annexation statute, the

TIF Act has no public-utility-right-ofway exception for contiguity. Here, the two parcels were separated by land privately owned by a gas pipeline company that was outside the territorial limits of the city. Bd. of Educ. of Richland Sch. Dist. No. 88A v. City of Crest Hill, 2021 Ill. LEXIS 622 (Ill. Sept. 23, 2021).

TITLE INSURANCE: Limited partner of named insured does not qualify for coverage as successor because limited partner is not sole owner of named insured. Tithonous Tyrone, LP (Tyrone) is a limited partnership, comprising Tithonous GP, as general partner holding 0.1 percent, and Tithonous Partners, as limited partner holding 99.9 percent. Tyrone bought three parcels totaling 60 acres and used a portion as an assisted living facility. Tyrone obtained a policy of title insurance in the amount of $3.077 million, naming Tyrone as the insured. Thereafter, in connection with a mortgage refinancing Tyrone separated ownership of the

two-acre lot on which the assisted living facility sat and conveyed the vacant 58 acres to Tithonous Partners, the limited partner. Tithonous Partners did not obtain a new title policy. Two years later, Tithonous Partners subdivided the 58 acres and sold one lot to Port Pizza. Two years later, Port Pizza commenced an action against Tithonous Partners, alleging that Tithonous Partners had not owned a portion of the land. Tithonous Partners submitted a claim under the title policy issued to Tyrone. Chicago Title denied the claim, stating that a successor obtains the status of insured only when the named insured (Tyrone) is “wholly owned by” the claimant (Tithonous Partners). That was not the case here because the claimant, the limited partner, owned only 99.9 percent of the named insured (Tyrone). The court agreed with the insurer, explaining that contracts for insurance are to be read as written, absent ambiguity. Here, although not defined in the policy, the meaning of “wholly owned” is plain. It means whole ownership, not nearly whole or “effectively whole” as the claimant asserted. It means completely and entirely in an absolute and objective sense. Tithonous Partners, as a limited partner, did not wholly own Tyrone, the limited partnership. The court was not moved by the insured’s argument that this policy provision makes carry-over coverage between such related entities impossible. Tithonus Partners II, LP v. Chi. Title Ins. Co., 2021 U.S. Dist. LEXIS 195179 (W.D. Pa. Oct. 8, 2021). WATER: Equitable apportionment applies to allocate rights to water in

March/April 2022 23

KEEPING CURRENT PROPERTY

interstate aquifer. The Middle Claiborne Aquifer underlies portions of eight states in the Mississippi River Basin. It spans tens of thousands of square miles. Claiming an absolute ownership right to all water from the aquifer beneath its surface, even after that water has crossed it boundaries, Mississippi sued the city of Memphis, later joining the state of Tennessee, seeking $615 million in damages for pumping water from the aquifer. Mississippi claimed that even though the Memphis wells were drilled straight down, entirely in Tennessee, the wells and pumping created a depression, altering the historic flow of the water within the aquifer. Mississippi claimed the pumping was tortious and a wrongful taking of its property. It expressly disclaimed equitable apportionment. The Supreme Court granted Mississippi leave to invoke the Court’s original jurisdiction to bring an action against another state and appointed a special master to manage the proceedings. The master determined that the principle of equitable apportionment applies, given that the aquifer was an interstate water resource, and dismissed Mississippi’s complaint but recommended leave to file an amended complaint under that theory. The Supreme Court affirmed unanimously on the finding of equitable apportionment but declined to grant leave to amend. The Court first noted that Mississippi conceded that some water naturally flows from the part of the aquifer beneath Mississippi to part of Tennessee but only to the extent of some 30 to 60 feet per year. Mississippi’s claim was that the Memphis pumping had substantially hastened this existing flow, allowing Memphis to take billions of gallons of groundwater that otherwise would have remained under Mississippi for thousands of years. The equitable apportionment doctrine, which allocates rights to disputed interstate water resource after one state sues another under the Court’s original jurisdiction, traditionally is the exclusive remedy for interstate water disputes unless a statute, compact, or

prior apportionment decree controls. The Court had never before held that an interstate aquifer was subject to equitable apportionment, so this was a case of first impression. Equitable apportionment aims to produce a fair allocation of a shared water resource between two or more states. The guiding principle is that states have an equal right to make a reasonable use of a shared water resource. In deciding whether equitable apportionment is appropriate, the Court resisted general propositions and focused its analysis on whether equitable apportionment of the Middle Claiborne Aquifer would be “sufficiently similar” to past applications. The Court found similarity. In the past, equitable apportionment has applied only when transboundary resources are at issue, and this dispute involves a transboundary resource. Wells in Memphis and in northwest Mississippi were pumping the same aquifer. Also important was that water flowed naturally between states; the speed of the flow was not determinative. Although each State has full jurisdiction over the lands within its borders, including the beds of streams and other waters, this right does not confer unfettered ownership or control of flowing interstate waters themselves. The Court found no reason to treat underground aquifers differently from streams and rivers. Indeed, Mississippi’s ownership approach would produce an unsound result—it would allow an upstream state to completely cut off flow to a downstream one, a result contrary to equitable apportionment. Even though Tennessee’s wells are drilled straight down, pumping water located within its own territory, that circumstance is not determinative of rights because the origin of the water is relevant to equitable apportionment. The Court went on to rule that because Mississippi did not request to amend the complaint to assert a claim under equitable apportionment, the special master erred by granting leave to amend. Mississippi v. Tennessee, 142 S. Ct. 31 (2021). ZONING: Neighbor may not compel

city to enforce zoning ordinance against violator. The Havers believed that their neighbor Galan ran a group home in violation of a city ordinance and complained to the city’s code compliance division. After not receiving a satisfactory response from the city, the Havers filed a lawsuit against the city, zoning officials, and Galan. The trial court dismissed the Havers’ claims against the city and the zoning officials. The Havers later dismissed their claim against Galan but appealed the dismissal against the city. The appellate court reversed regarding the claims for injunctive and declaratory relief. The city successfully petitioned the supreme court for discretionary review. The supreme court quashed the appellate court decision in part and remanded with directions to dismiss the claims against the city. The court found that the appellate court decision was based on a misreading of precedent. Those cases involved only situations where a municipality had violated its own ordinance, which is not what the Havers claimed here. In none of those cases was there the issue of a city’s failure to take enforcement action against a third party. The court stated that it would be wrong simply to assume that all municipal zoning ordinance violations are equally remediable through injunctive relief. The court declined the invitation to interfere with administrative enforcement decisions that traditionally are discretionary and embody value-laden judgments about the proper allocation of scarce judicial resources. City of West Palm Beach v. Haver, 2021 Fla. LEXIS 1572 (Fla. Sept. 30, 2021). LITERATURE BEACH ACCESS: On the surface, this article is about beach access: the right of those seeking access to the beaches and landowners trying to keep them out. But reading deeper, Prof. Prof. Timothy M. Mulvaney, in Walling Out: Rules and Standards in the Beach Access Context, 94 S. Cal. L. Rev. 1 (2020), has much more in mind. Focusing on the different regimes in three states, Texas, Oregon,

March/April 2022

KEEPING CURRENT PROPERTY

and New Jersey, he challenges the conventional view that rule-like systems (grounded in robust exclusionary rights or unfettered access privileges) are superior to standard-like systems (contemplating reasonable access) because they produce determinate outcomes. He maintains that rules may be less determinate—indeed, more flexible—than they appear on their face. At the same time, standards that appear open-ended may become more defined by applications that reveal core concepts and, therefore, result in “holdings” that seem like rules. Prof. Mulvaney asserts that the concept of transparency best distinguishes the two. Rules, to the extent that they do not require open, discrete assessments may tend to inhibit transparency. Standards, on the other hand, often tend to embrace transparency. When determining access and exclusion, judges must evaluate competing claims and think about the reasons for deciding. In Prof. Mulvaney’s view, the reasonable access standard invites conversation and communication on what makes access valuable and how that value factors against an owner’s ability to exclude. Standards promise contextual and sensitive decisions. Whether states that have long held to rules are inclined to move openly toward standards under his scheme may well depend on the pace of the shifting tides toward accommodation in land disputes. CONSTRUCTION CONTRACTS: Construction contracts are fraught with risk. Getting the job completed on schedule and competently is often a juggling act. In Completion Guaranties Revisited, 56 Real Prop. Tr. & Est. L. J. 1 (2021), attorneys Brian D. Hulse and Kevin Badgley explain two forms of guarantees that are often used to keep contractors on schedule and to control unanticipated costs. First, completion guarantees assure the completion of the contemplated construction project in conformity with approved plans and specifications, in compliance with applicable laws and permits, by a required deadline, and without liens.

Second, carry guarantees cover a variety of costs relating to the financed property (other than design and construction costs) over a period of time specified in the guaranty. The costs often include property taxes, insurance premiums, maintenance and management costs, utility charges, ground rent, and interest. Although there is some overlap between the two guarantees, there are nonetheless significant differences in what they purport to cover and the recourses available under them. The authors give a comprehensive analysis of the mechanics of these risk-shifting devices and offer advice for drafting guarantees that are easy to interpret and enforce. ZONING: In The Euclid Proviso, 96 Wash. L. Rev. 811 (2021), Prof. Ezra Rosser calls for a reassessment of the value of local zoning as we enter the second century of the institution. Showing how this land use tool has traditionally operated to exclude, sometimes unwittingly, but often intentionally, he recounts the myriad costs of excluding—from concentrated poverty to economic stagnation to health detriments. The artificial boundaries created by zoning have led to dramatically divergent outcomes at the city and even block level. He proposes abandoning the automatic deference to local zoning governance in favor of statelevel limitations, as a way of attacking the entrenched inequality that resulted from Euclidean zoning. Prof. Rosser grounds the new thinking on what he calls “the Euclid proviso,” which would limit local authority when zoning is counter to the larger public interest. Although one or two legislatures have abolished single-family zoning, deference to local zoning remains the norm and single-family zones remain largely unassailable. Stringent limits on density and height keep out the poor and lower-middle classes. Prof. Rosser laments the failure of the “quiet revolution” to upset the status quo in local land-use planning. Although his focus is on top-down restating of the zoning hierarchy, local governments should

also pay attention to the Euclid proviso. Although Prof. Rosser is heartened by growing awareness among academics and policymakers that rising inequality is destroying society and the lives of large parts of the population, he cautions that undoing all the pernicious effects of local zoning is a long arc and will face strong resistance from those who have been privileged by the historic regime. LEGISLATION CALIFORNIA makes void and unenforceable any covenant, restriction, or condition that prohibits or unreasonably restricts accessory dwelling units. A lot must be zoned for single-family residential use and the units must meet certain minimum standards. Reasonable restrictions are allowed if they do not effectively prohibit the construction of accessory dwelling units or unreasonably increase their construction costs. 2021 Cal Stats. Ch. 360. NEW YORK eliminates one-month rent cap on deposits and advances for seasonal rentals of dwelling units. The exception applies when the dwelling unit is registered with a government agency, occupied by the tenant for seasonal use, not to exceed 120 days, and the tenant has a primary residence elsewhere. 2021 N.Y. Laws 428. NEW YORK requires assessment of the efforts of mortgage bankers to meet credit needs of local communities. On an application by a mortgage banker for change of control, the banking superintendent is required to consider the banker’s role in the community, including efforts in making its services known and the geographical distribution of applications, credit extensions, and credit denials. 2021 N.Y. Laws 549. n

March/April 2022 25

March/April 2022

By Scott W. Fielding

ost businesses will continue to need space to meet, operate, recruit, train, and provide storage (among other reasons) well into the

future, and leasing property is the means most likely to provide that space. A lease might provide such space at a significantly lower cost than fee simple ownership. For some businesses, the lease is the only means by which a business can afford to acquire office space. For others, the lower capital investment involved with leasing property offers them more flexibility as needs change—meaning that it is easier for a company to move from one location or expand at an existing

Getty Images

istockphoto

What to Do When Reviewing a Small Lease—Some Practical Suggestions

location. Scott W. Fielding is a member of Sherrard Roe Voigt Harbison in Nashville, Tennessee.

March/April 2022 27

The lease transaction is more complicated than most real estate purchase transactions; the lease involves affirmative and negative covenants and expenses that will last many years. Despite a lease’s importance and complexity, many commercial tenants enter into small lease agreements without legal representation, fearing the legal costs involved (or because they believe the landlord’s comment that the form is nonnegotiable). This is a mistake. The lawyer representing the tenant in a small lease transaction, however, needs to be efficient and render good judgment with issues that will be raised with the landlord. This article focuses on some of the essential issues most pertinent to the small office lease. For other good articles on this topic, which the author’s practice has undoubtedly benefited from, see Michael E. Meyer, Fifteen Pragmatic and Practical Tips for Negotiation of Small Leases, PLI Course Handbook: Negotiating Commercial Leases (2019), and Richard C. Mallory & Danna M. Kozerski, Commercial Leases Overview (Practicing Law Institute 2016).

Preliminary Thoughts—Brokers, Timing, and Guarantees There are important steps the tenant should consider besides involving a lawyer, including engaging a broker. A good broker understands leasehold values and market conditions to allow for a more informed negotiation of the rental rate, free rent, and improvement allowance. The broker can help with strategic planning to determine optimal facility needs and how to accommodate future space requirements and may have a level of construction expertise within its group that can assist in the buildout of the space and evaluate overall cost. The broker also provides knowledge of space availability. The tenant’s appropriate timing of the lease search and lease negotiation is also key. Many tenants don’t begin the search for and negotiation of the lease soon enough. The tenant needs to have enough time to consider alternative locations and to break off lease negotiations at one location and start negotiations on another space, if necessary. When the tenant has no time to consider alternatives, negotiating

leverage further shifts to the landlord. A longer window of engagement in the process of evaluating the market provides more opportunities to appropriately time market fluctuations and doesn’t pigeonhole the user into a specific timeframe that may be less tenant-friendly. The tenant’s leverage is greatest at the letter of intent and term sheet stage, and therefore if it waits too long to negotiate and the first lease does not work out, the tenant may be at the mercy of the next prospective landlord, who will likely know or find out that the tenant is in a time crunch. Probably the most important legal point in any lease for the owner of the small tenant (as opposed to a business point, like the amount of rent) is whether a personal guaranty will be involved. This issue needs to be resolved at the outset—the term sheet or letter of intent stage—because a guaranty requirement will be a showstopper for some tenants. Even if the landlord insists on some form of guaranty, the extent of the guaranty must be considered, including whether there is a cap or whether it burns off or expires.

March/April 2022

Construction Issues—Tenant Improvement Allowance, Buildout Costs, and the Rent Commencement Date Tenant Improvement Costs and Allowances As an inducement to enter into the lease, the landlord often provides the tenant an allowance for the buildout of its space, which may or may not be sufficient. To mitigate the uncertainty in buildout costs, the tenant should consider completing enough design work to receive meaningful quotes from contractors for the buildout cost before executing the lease. Admittedly, there is a balancing act here for the tenant; depending on the size of its buildout and the importance of its space, it may have to enter into the lease agreement before finishing its architectural plans. But even if the plans cannot get finished before lease execution, the architectural plans need to be sufficiently complete so the tenant can obtain a meaningful buildout cost estimate. The work letter, which will be legally binding upon execution of the lease, will likely contain a process for finalizing the tenant’s architectural plans. If getting the final design completed before lease execution is not practical, the tenant should include in its initial plans (which will be approved by the landlord) any items or specifications essential to the buildout of the space, so the tenant knows before execution that these items have been approved by the landlord. For instance, it may be quite important that a health care tenant know that its generator and the location of its generator have been approved before signing the lease. Because the tenant is paying for the tenant improvement (TI) allowance (it is included within the landlord’s calculation of base rent), the tenant should try to use all of its improvement allowance. One often-negotiated point is whether the allowance can be used for soft costs (e.g., architect or engineer fees). What about furniture, fixtures, and equipment (FF&E)? Moving expenses? The landlord, of course, will want the allowance to be used only for

hard construction costs and maybe soft costs like architect, engineer, and space planning fees. If a robust TI allowance is properly negotiated, it can often be stipulated at the time of the lease execution that some portion of the allowance can be, upon notice from the tenant, converted to rental abatement, which in turn can be used to offset other project costs such as moving or FF&E expenses. The tenant should ensure that the landlord competitively bids the construction work (gets bids from at least three contractors). The tenant may be able to suggest a preferred contractor to bid on the work, and perhaps the tenant can negotiate the right to approve the final contractor. If the landlord is in charge of the buildout of the space, the tenant should inquire about the landlord’s construction management and administration cost and negotiate this fee amount. The tenant also needs to make sure it has a right to enter the space before the commencement date to install its FF&E and to otherwise finish items that are not part of the landlord’s work.

Rent Commencement Date The date on which the tenant’s obligation to pay rent begins will either be a fixed date—a certain number of days after the date of lease execution, for example, if the tenant is in charge of the buildout—or be keyed to the date of substantial completion of the tenant improvements by the landlord. In many situations, there is a date by which, for business reasons, the tenant must be in the space—either as a result of moving from an old location with a lease that is expiring (so the tenant must be out of the space or risk being a holdover) or because of operational needs of its business. Counsel needs to discuss this with its tenant client, understand the date, and try to negotiate incentives within the lease to achieve that date. As a practical matter, small tenants—especially small tenants without some sophistication dedicated to the construction process—may be better off letting the landlord handle the construction. When the tenant is in charge of constructing its own tenant improvements, the landlord will insist

March/April 2022 29

on a fixed date for base rent to commence, whether or not the buildout of the space is completed. It is unlikely the landlord will allow the rent commencement date to be the date of substantial completion or certificate of occupancy because the landlord has no control over construction or completion. Accordingly, an unsophisticated tenant, or a tenant busy focusing on its business operations, could fail to appropriately supervise the construction of the tenant improvements and fail to get construction completed on time. As a result, the rent may commence well before the space is ready (and the tenant may be paying rent for two different locations simultaneously). Furthermore, because it is the landlord’s building, and the tenant is engaging the contractor, the tenant needs to be concerned with the tenant’s contractor not damaging the landlord’s building during construction. For these reasons, the unsophisticated tenant may allow the landlord to handle the buildout of the leased space. That said, some tenants prefer to enter into the construction

contract and pay the contractor directly to have more of a controlling hand in the quality of construction, the construction schedule, and the timing. These tenants are concerned that if they let the landlord handle the buildout, the landlord’s incentive will be to get the space built out as cheaply and as quickly as possible (so the rent commences). They believe the quality of the buildout will suffer as a consequence. If the landlord is handling the buildout, the tenant should get an estimated completion date, preferably both orally and in the lease. In addition to that estimated date, the tenant should try to negotiate for liquidated damages to accrue if the buildout is not completed by a certain date to incentivize the landlord to finish construction of the space on time. To be clear, this liquidated damages amount is something more than just a provision confirming that the rent won’t commence until the space is completed, but rather some additional stick (maybe additional rent abatement) in the event of a delay. The landlord may be able to pass this

amount on to its contractor, who won’t agree to it unless it is doable. Therefore, the landlord’s agreement to such a provision will provide good information about the likelihood that the landlord will complete by the date selected. The tenant’s main risk in this process is likely that a prior tenant will hold over and cause a significant delay in the construction. For that reason, the tenant should also negotiate for a right to terminate if the space isn’t completed by a certain date. This date may be much further out—and the termination of a lease doesn’t provide a great remedy for the tenant because the tenant will have to find alternative space. But at some point, if the landlord doesn’t perform, the tenant needs to be able to get out of the lease. The issue here, of course, is a little more complicated. The landlord may want to exclude any delays caused by the tenant and delays related to force majeure. What constitute a tenant delay and force majeure delay need to be carefully evaluated.

March/April 2022

Tenant Should Consider Adding Covenants Regarding Quality of Work If the landlord is handling the buildout, the tenant should consider adding covenants regarding the quality of work to be provided. Some lease agreements will provide that the landlord warrants that the tenant improvements will be (a) free of defects in design, materials, or workmanship; (b) constructed in a good and workmanlike manner by competent and supervised workers and suppliers; (c) in accordance with approved working drawings, subject to minor deviations that do not affect the usefulness or quality of the improvements; and (d) in accordance with all federal, state, and local laws, and all applicable covenants, conditions, and restrictions of record. These are the same warranties, in some shape or form, the landlord should receive collectively from its contractors and designers, so it seems reasonable for a tenant to request that these warranties be passed along. Exit Strategies (Assignment and Subletting) Especially with a long-term lease, it is quite possible that, despite good planning by the tenant, there will come a time when the tenant does not need all the space it has leased or any of the space, or that it will need to reduce its costs for economic reasons or to transfer rights to the space as part of a business transaction. Accordingly, the right to assign or sublease the space— and the approval standard of the landlord regarding the assignment or sublease—is a pretty significant right for the tenant to preserve. Tenant Should Require That Landlord Not Unreasonably Withhold, Condition, or Delay Consent to Assignment or Sublet Unless the lease prohibits assignment or subletting altogether (which would be unusual) or gives the landlord the right to withhold its consent to a request for assignment or subletting in its sole and absolute (or arbitrary) discretion, the case law is probably

The right to assign or sublease the space— and the approval standard of the landlord regarding the assignment or sublease—is a pretty significant right for the tenant to preserve. moving toward an implied obligation for the landlord to act “reasonably” and in “good faith” concerning any request to approve an assignment or subletting. In other words, if the lease states that the tenant may assign or sublease the premises with the prior consent of the landlord but does not allow the landlord to withhold consent in its sole and absolute (or arbitrary) discretion, then if Tennessee follows the trend in the law, the landlord is likely going to be held to a reasonableness standard. And it will be an objective standard as to whether its basis for saying “no” to the requested assignment or sublease was reasonable. See Restatement (Second) of Property, Land. & Ten. § 15.2 (prohibits a landlord from arbitrarily and unreasonably withholding consent to a proposed assignment or subletting unless such a right is freely negotiated and expressly stated in the lease); Pestana v. Kendall, Inc., 709 P.2d 837 (Cal. 1985). Nevertheless, not all jurisdictions follow that rule, so with respect to negotiating the assignment or sublet clause, the tenant’s practical approach here should be to request that “Tenant shall have the right to sublease or assign all or any portion of the Premises with landlord’s prior consent, which will not be unreasonably withheld, conditioned,

or delayed.” In other words, the tenant should require that any consent to an assignment or sublet not be unreasonably withheld (or conditioned or delayed) by the landlord. In addition, the tenant should consider adding a specific time period in which the landlord must respond or be conclusively deemed to have consented to such consent or sublease. A long-delayed landlord’s consent can be problematic for any assignment or sublease transaction. The tenant should also consider the “Permitted Use” clause in the lease in making this request. A prospective assignee or sublessee will need to comply with the “Permitted Use,” so the broader the permitted use rights the tenant can negotiate, the greater the tenant’s right to sublease or assign. The landlord should be able to “reasonably” deny a request to assign or sublet to a third party who cannot comply with the use of the premises allowed by the lease. There are two caveats that the real estate professional must consider. First, the lease will sometimes grant the landlord specific criteria that constitute a reasonable basis for rejecting an assignee or sublessee. The real estate professional needs to review these criteria and ensure they are not too broad in giving the landlord discretion to withhold its consent. Second, the real estate professional needs to make sure the lease does not limit the tenant’s remedies against the landlord to injunctive relief. If the tenant’s remedies are so limited, then it does not have a reasonable remedy because, by the time the tenant gets to court and obtains a judgment that the landlord’s conduct was unreasonable, the prospective assignee or sublessee will likely have moved on to other space. Tenant Should Negotiate That Certain Transfers Can Be Made Without Landlord’s Consent The tenant should try to negotiate the ability to transfer the lease to facilitate certain corporate transactions, business reorganizations, and affiliate transfers. The tenant does not want to

March/April 2022 31

be in a position where its significant business transaction—a sale of all the assets, merger, or transfer of stock— requires landlord consent. Accordingly, the tenant should negotiate a “permitted transfer” definition into the lease and clarify that an assignment or sublease, in whole or in part, can occur without landlord consent in a transaction involving a permitted transfer. The lease should exclude permitted transfers from other restrictions—recapture rights, sharing of profits, etc. Operating Expenses The lease can require the landlord to pay all operating expenses (call this a “gross lease”), or the tenant to pay all operating expenses (call this a “net lease”). The operating expenses are usually shared between the landlord and the tenant, however, with the tenant bearing responsibility for its proportionate share of the increase in operating expenses over the operating expenses in a base year (call this a “modified gross lease”). The tenant’s proportionate share is usually the ratio of the total square footage of the premises to the total square footage of the building. The square footage of the premises and building may be an agreed amount and, therefore, an agreed-upon proportionate share (which is the landlord’s preference). In the alternative, the premises may be subject to measurement and remeasurement following industry standards, such as the Standard Method of Measuring Floor Area in Office Buildings, ANSI Z65.1, commonly known as the BOMA Standard. Regardless of a lease’s size, the real estate professional needs to be concerned with the breadth of the definition of operating expenses. Some key items for the tenant of a small lease to consider follow. Negotiate the Definition of “Operating Expenses” and Exclude Most Capital Items Most operating expense clauses include a general definition of what the landlord can include, followed by a nonexclusive list of specific inclusions

Regardless of a lease’s size, the real estate professional needs to be concerned with the breadth of the definition of operating expenses.

and exclusions. The tenant should try to narrow the general definition so it is a balanced provision. For example, the tenant should try to limit operating expenses to the reasonably necessary and appropriate expenses of “operating, maintaining, and managing” the building (net of recoveries and reimbursements) and eliminate broad provisions that include the expense of ownership or replacement. Another approach is to include a broad, catch-all exclusion for any expense that, under generally accepted accounting principles, would not normally be passed through as an operating expense by the landlord of a similar building. Capital items and replacements should be excluded because most capital items tend to benefit the landlord in its ownership of the building. The landlord will receive the profit generated from the capital items—either in more rent or a greater sales price—and the tenant may benefit only marginally from such improvements. The common exceptions to these items are capital repairs or replacements required by new laws (or new interpretations of old laws) and capital repairs and replacements that reduce or are intended to reduce operating expenses. The cost of any included capital item should be

amortized over the expected life of the asset. See John Wood & Alan M. DiSciullo, Negotiating and Drafting Office Leases § 29.01 (provides a listing of some of the most important exclusions from the tenant’s perspective). Negotiate a Year-to-Year Cap on Controllable Operating Expenses The costs of many operating expenses are within the landlord’s control. The tenant, therefore, may be able to negotiate a cap on the increase of these controllable operating expenses. The definition of controllable operating expenses is negotiable, but typically it is all operating expenses other than certain excluded expenses, including taxes, insurance, and utilities. Whether the cap on controllable operating expenses is on a year-to-year basis or a cumulative basis is also negotiable. The landlord will want this to be on a cumulative basis, meaning that the historical average of such controllable operating expenses controls the determination of whether the increased controllable costs exceed the cap. By testing the cap on a cumulative basis, the landlord can offset low controllable costs in some years with much higher controllable costs in other years and still fit within the cap. The tenant, on the other hand, prefers the cap to apply on a year-to-year basis. Be Aware of the Occupancy Levels of the Building When Tenant Lease Begins and Confirm Landlord Will Gross Up Variable Operating Expenses in Base Year By way of background, certain operating expenses vary based on the level of a building’s occupancy. Some of these “variable operating expenses” or “occupancy-dependent” operating expenses may include such costs as cleaning, electricity, garbage removal, and HVAC. Fluctuations in occupancy, therefore, can lead to increases and declines in total operating expenses, which are the sum of the occupancy-dependent (variable) operating expenses and nonoccupancy-dependent (fixed) operating expenses—that is, those that don’t rise and fall with occupancy.

March/April 2022

A landlord’s standard lease often includes a right to gross up “variable occupancy expenses” so they reflect the expenses the landlord would have incurred had the building been 95 percent occupied or fully occupied. This is a fair provision that allows the landlord not to come out of pocket simply because the tenant is required to pay only its proportionate share of those expenses when it is receiving all the benefit (or a much higher benefit) of those variable services. See Mark Senn, Commercial Real Estate Leases: Preparation, Negotiation and Forms § 7.04 (5th ed. 2012). If the variable operating expenses are not grossed up in the base year when occupancy is low, then the tenant’s proportionate share over the base year will be higher than it should be when the occupancy level increases (or if the landlord can gross up these expenses in a later year). Accordingly, if this could be an issue, legal counsel should make sure during the base year that

the owner grosses up all occupancydependent expenses (variable operating costs) and the costs of all services and utilities that other tenants are paying separately—such as tenants paying their electric bills directly to their utility company. If those expenses and costs are grossed up only after the base year but not during the base year, the tenant could end up paying a much larger share of increases in operating expenses over the base year. One practical approach for tenants in a small lease transaction is to ask about the occupancy in the building during the base year—assuming the tenant is just paying operating expenses above a base year. If the building is almost fully occupied, and the size of the lease is quite small, then maybe the concern here is not that great. Maybe, in this case, the real estate practitioner gets data for a few years of historical operating expenses. If it looks reasonable, it moves on to other issues. If there is concern about the occupancy level (or

occupancy is low), however, the real estate professional should consider negotiating a gross-up provision into the lease (if it is not already there) and make sure it applies to the base year. Lease Should Give Tenant Express Right to Audit Books and Records The tenant should also ensure that the lease provides acceptable audit rights. Although the tenant may have a right to audit under common law, it is preferable to have an acceptable express provision in the lease rather than to be required to go to court to argue about the parameters of a common law right. The right to audit the books and records with respect to operating expenses needs to be available for a reasonable period of time after receiving a reasonably detailed statement describing the operating expenses. The provision should identify who has the right to conduct the audit, and it should include members of the tenant’s staff (i.e., its own facility manager or accountant)

March/April 2022 33

as well as third-party experts (certified public accountants, etc.; however, you probably don’t want to limit this to a CPA working for a national accounting firm). The provision should require that the tenant’s statement shall be appropriately adjusted and that any overpayment be credited or refunded to the tenant if the audit reveals an overpayment. In addition, the tenant should request that in the event of an error over a certain amount (maybe five percent), the tenant should be reimbursed by the landlord for its fees and audit expenses. Notice, Cure Rights, and Mitigation In addition to the obligation to pay rent, the typical lease includes a number of covenants, rules, regulations, and restrictions with which the tenant must comply. Because the breach of any of these provisions is a default, the tenant should seek to negotiate a reasonable grace period and the right to receive notice from the landlord and an opportunity to cure it before any breach becomes an “event of default” that allows the landlord to exercise remedies. The ramifications to the tenant arising out of the loss of a lease can be

devastating to its business. Therefore, the tenant needs to have some ability to receive notice and an opportunity to cure defaults before the landlord has the right to terminate the lease or otherwise exercise remedies. Although it is difficult to negotiate remedies after an event of default, the tenant should watch out for a remedy that allows the landlord to terminate the lease and declare all future rent immediately due and payable (discounted to the present at some interest rate). With such an acceleration remedy, the tenant needs to modify the clause so it is reduced by the fair rental value of the premises for the remainder of the term, discounted in a way similar to future rent. Without a reduction for fair rental value, the landlord gets a windfall; it gets both a return of the leased premises free and clear of the lease (and can then try to release the space), plus all the rent that would have been paid into the future had the premises actually been leased and occupied. Some jurisdictions by statute have recognized the need to reduce the landlord’s damages by the fair value of the leased premises and have included such into its calculation of damages. See, e.g., Cal. Civ. Code § 1951.2.

Insurance, Mutual Waiver of Claims, and Waiver of Subrogation The professional reviewing and negotiating the small lease must consider the insurance requirements and confirm that there is a mutual waiver of claims and waiver of subrogation by the insurer. As to the insurance requirements, the practitioner should send the appropriate sections of the lease with such requirements to the insurance advisor for the tenant to review and comment. The failure to carry the appropriate insurance coverages is a default under the lease and one that technically may not be curable because obtaining the insurance is not possible (or not curable per the terms of the lease) or curable only by significant out-of-pocket expense to the tenant in obtaining such coverage. The insurance advisor, however, needs to also consider whether there are appropriate insurance coverages in place to cover the allocated risks, perhaps with the practitioner’s help. For example, if there is a casualty to the building and the lease does not terminate, does the rent abate during the period of restoration? What about an event that prevents access or use of the premises even if not damaged by fire? If rent does not abate in these situations, the tenant needs to have business interruption insurance in place to cover the continuing rent obligation for the longest reasonable restoration period. Another example would be leasehold improvements— who owns those according to the lease during the lease term, and which party has an obligation to insure them against casualty? The professional representing the tenant also needs to review the lease and confirm that it contains an appropriate mutual waiver of claims and the requirement that the insurer waives its right of subrogation. A well-drafted landlord lease probably will contain such provisions, but if it does not, then the tenant needs to negotiate an appropriate provision. The point of these clauses is to ensure that the parties look to the property insurance coverages in place (or that are supposed to

March/April 2022

be in place) to cover the loss or damage to property and not to allocate the loss to the party whose acts or negligence caused the loss or damage. If the parties look to negligence to allocate responsibility for the loss or damage, then duplicative insurance would need to be carried to cover each party’s own negligence, which is inefficient and costly. Moreover, the small tenant in a large office building probably cannot obtain property insurance on the entire building to insure a loss that its negligence might cause. Even if it could, that should not be necessary if the landlord already has such coverage in place and the tenant is paying its pro-rata share of the cost of the coverage. The issue is a little more complicated than just including the mutual waiver of claims and the waiver of the right of subrogation. Other lease provisions need to be considered as to whether they are consistent with the mutual waiver of claims. For example, does the casualty provision provide that rent will abate during the period of restoration unless caused by the tenant’s negligence? Unless caused by the tenant’s negligence, the clause is inconsistent with the mutual waiver of claims and waiver of subrogation and should be deleted. For more detail, see, e.g., William L. Nussbaum, The Three-Legged Stool: The Interplay of Property Insurance, Mutual Waivers and Waivers of Subrogation in Commercial Leases, 31 The Fee Simple, no. 1, Nov. 2010, at 24. Other Miscellaneous Considerations (Renewal Rights and SNDAs) Another important right a tenant might ask for in a lease is a right to renew or extend the lease, usually on the same terms and conditions—except rent, which likely increases based on some adjustment factor or adjusts to the fair market rental rate. The easiest place for the landlord to find a prospective tenant is among its existing tenants (suggesting perhaps that a renewal right is not necessary), but there is always the risk that events could happen—like a larger prospective tenant having an interest in the same space

Because the landlord will be reluctant to negotiate too many points, the lawyer must be careful to raise only the most important ones.

and more—that create a disincentive for the landlord to negotiate an amendment extending the lease. The renewal right provides protection for the tenant from these events because it gives the tenant the unilateral right to extend the lease. Subject to the conditions to exercise, the landlord has no ability to prevent the tenant from extending the lease. The issues involved with the negotiation of a renewal right are beyond the focus of this article, but it is worth noting that the tenant needs to carefully consider the conditions to the exercise of the renewal or extension and the rental rate applicable to the renewal term. The tenant should also consider asking the landlord to obtain a nondisturbance agreement from its existing lender if that lender has an existing mortgage on the property. In a nondisturbance agreement, the landlord’s lender agrees that if the lender forecloses and takes ownership of the real estate, such ownership is subject to the lease, and such lender will recognize and agree to be bound by the tenant’s lease in accordance with its terms. This is necessary because when the lender’s mortgage or deed of trust is recorded before the lease, such a mortgage has priority over the lease. In the absence of a nondisturbance agreement, the foreclosure of the mortgage could lead to

a termination of the lease. For a small lease, the landlord is probably not going to want to spend the time and money pursuing such an agreement from its lender, and the lender will be more reluctant to provide such an agreement to a small tenant; the lender may not want to agree on the front end that it won’t terminate the lease should it foreclose. That said, there are circumstances—usually when significant improvement expenditures have been incurred by the tenant—where obtaining such an agreement is crucial to the tenant. In such cases, the tenant may want to negotiate this document as a condition precedent to the lease’s execution. Conclusion In conclusion, the prospective tenant should have a lawyer review even a short-term or small lease agreement. Because the landlord will be reluctant to negotiate too many points, the lawyer must be careful to raise only the most important ones. Although those issues may vary a little bit based on the tenant’s business needs and the type of lease, a few issues should always be considered. These include issues governing the responsibility for construction, the improvement allowance and the timing of completion of the buildout, and the rent commencement date. Assignment and subletting matters, which include requiring the landlord to act “reasonably” with respect to approving assignments and subleases and permitting assignments and subleases to affiliates or as part of larger business transactions without landlord consent, are also important. The breadth of the operating expense provisions needs to be reviewed and negotiated. The tenant should consider requesting a cap on controllable expenses and limiting the kinds of capital expenses that can be passed through to the tenant. The tenant should also negotiate notice and cure rights with respect to defaults, request a right to renew the lease, and be careful to ensure that the lease contains a mutual waiver of subrogation and has insurance requirements that can be met. n

March/April 2022 35

KEEPING CURRENT P R O B AT E CASES ADEMPTION: Specific gift adeems but reformation is possible. Spouses created a trust ending on the death of both, at which time the trustee is to distribute “all” of the stock in a private bank and all stock in a publicly traded corporation to the children of one spouse. The remainder of the trust property would go to the children of the other spouse. Before termination of the trust, the bank redeemed its stock and the trust received cash. In Connery v. Shea, 259 A.3d 118 (Me. 2021), the Maine high court affirmed a motion for summary judgment based on ademption of the gift of the bank stock. The court held that because the constructional rules applicable to wills also apply to trusts, the word “all” made the gift equivalent to a specific bequest in a will and remanded to consider reforming the trust to reflect the settlor’s intent. ADOPTION: Adopted-out descendant is included in an ancestor’s class gift made before the adoption. The settlor’s great-grandchild was adopted by a stepsibling after the parent lost custody of the great-grandchild. In Murphy v, Shehan, 633 S.W.3d 350 (Ky. Ct. App. 2021), the Kentucky intermediate appellate court affirmed the lower court holding that the adopted person was still a descendant of the settlor and therefore remained as a beneficiary of the trust. This is because the adoption did not end the biological relationship to the family before the adoption.

Keeping Current—Probate Editor: Prof. Gerry W. Beyer, Texas Tech University School of Law, Lubbock, TX 79409, gwb@ ProfessorBeyer.com. Contributors: Claire G. Hargrove, Paula Moore, Kerri G. Nipp, Prof. William P. LaPiana, and Jake W. Villanueva.

Keeping Current—Probate offers a look at selected recent cases, tax rulings and regulations, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.

ADOPTION: Blanket prohibition on appointment to adopted persons violates public policy. An inter vivos trust created a testamentary general power of appointment in the life income beneficiary. Many years after the beneficiary adopted the beneficiary’s stepchildren, the settlor amended the trust to prohibit the exercise of the power of appointment for the benefit of anyone adopted by another person or such person’s issue or ancestors. In Todd v. Hilliard Lyons Tr. Co., LLC as Tr. Under Will of Todd, 633 S.W.3d 342 (Ky. Ct. App. 2021), the Kentucky intermediate appellate court reversed the trial court’s grant of summary judgment for the trustee enforcing the restriction. The court held that it violated the public policy embodied in the statutory requirement in Ky. Rev. Stat. Ann. § 199.520(2) that adopted children be treated the same as “biological children” of the adoptive parent. FAMILY ALLOWANCE: The surviving spouse is entitled to a family allowance although the decedent was not survived by minor children. In In re Est. of Dowdy, 2021 COA 136, 2021 WL 5114690, the Colorado intermediate appellate court held that the family allowance under Colo. Rev. Stat. § 15-11-404 (identical to UPC § 2-404) for the surviving spouse and minor children, whom the decedent was

obligated to support, must be paid to a surviving spouse even though the decedent was not survived by minor children. HOLOGRAPHIC WILLS: A holographic will is invalid because it was not signed at the end. The decedent’s validly executed will was without effect because it devised the entire estate to decedent’s spouse, who predeceased. Three documents in the decedent’s handwriting were found after the decedent’s death; the decedent signed all three at the tops of the pages. In Willett v. Estate of Vesselle, 629 S.W.3d 20 (Ky. Ct. App. 2021), the Kentucky intermediate appellate court reversed the trial court’s finding that the will and the handwritten documents were a valid will and codicils. The court held that the will was without effect because the spouse had predeceased and that the documents were not valid testamentary instruments because they were not “subscribed at the end or close of the writing” as required by Ky. Rev. Stat. Ann. § 446.060. OPERATING AGREEMENT: Provision in limited liability company’s operating agreement purporting to transfer a member’s interest on death was invalid as testamentary substitute. In Potter v. Potter, 252 A.3d 17 (Md. Ct. Spec. App. 2018), the court held that a provision in an LLC operating agreement providing that, on the owner’s death, the owner’s interest would pass to the owner’s surviving spouse created an invalid testamentary substitute. The Maryland Court of Appeals recently granted certiorari. Potter v. Potter, 476 Md. 238 (2021). SPOUSAL ALLOWANCE: The statutory spousal allowance must be satisfied first from the probate estate passing to spouse. The surviving spouse claimed the statutory

March/April 2022

KEEPING CURRENT P R O B AT E

allowances. The decedent’s probate estate included only personal property devised by the will to the surviving spouse. The decedent was also the settlor of a revocable lifetime trust, 50 percent of which became irrevocable on the death of the decedent’s first spouse. Confirming summary judgment for the executor, the Supreme Court of Montana in Matter of Estate of Dower, 495 P.3d 1083 (Mont. 2021), held that a reference to “trust” in the definition of “estate” in Mont. Code Ann. § 72-1103(15) (similar to UPC § 1-201(15)), does not include a trust that is non-probate property. Such a trust is subject to the payment of debt and allowances, if at all, only if the probate estate is insufficient. The gifts in the will must abate to pay the allowances. TRUST ACCOUNTING: Value of the beneficiary’s interest does not affect standing to object to alleged breach of trust. The beneficiary of a $2,400 life annuity, payable from a trust corpus worth more than $72 million, objected to a trustee’s account and alleged various breaches of trust. The beneficiary also objected to a proposed new fee arrangement and a request to divide the trust. The question of the annuitant’s standing was appealed to the Pennsylvania Supreme Court. In Tr. Under Will of Augustus T. Ashton, Deceased Dated January 20, 1950, 260 A.3d 81 (Pa. 2021), the court unanimously reversed the intermediate appellate court and held that equitable relief is available to a beneficiary for a breach of trust even if the beneficiary cannot demonstrate that the beneficiary has suffered or will suffer a monetary loss. TRUST JURISDICTION: Statute cannot give jurisdiction over the trustee of a foreign trust absent minimal contacts. Nevada law directs the district court to assume in rem jurisdiction over trust property when the beneficiary of a foreign trust resides in Nevada. In addition, once jurisdiction is assumed, the court has personal jurisdiction over any trustee “confirmed” by a court under Nev. Rev. Stat. § 164.010. The Nevada Supreme Court in Matter of

Burgauer Revocable Living Trust, 495 P.3d 531 (Nev. 2021), held that the statute does not supplant the state’s longarm statute, Nev. Rev. Stat. § 14.065, that personal jurisdiction may not be asserted over a foreign trustee absent minimum contacts with Nevada. UNIFORM TRANSFER TO MINORS ACT CUSTODIANS: The burden of proof is on the party seeking removal of a custodian. The Connecticut intermediate appellate court in In re Probate Appeal of McIntyre, 207 Conn. App. 433 (2021), held that, just as in actions to remove other fiduciaries under Connecticut law, the burden of proof in an action to remove the custodian of an UTMA account is on the party seeking removal. TAX CASES, RULINGS, AND REGULATIONS ESTATE TAX: Trust provision prevented estate from using charitable deduction for proceeds transferred to a charitable trust. The decedent’s revocable living trust originally held an interest in a family limited partnership but transferred the interest to an irrevocable trust before the decedent’s death. Before the decedent’s death, the family limited partnership sold its interest in a farm to a third party. After the decedent’s death, the partnership transferred the proceeds from the sale of the farm to the irrevocable trust and then to the living trust and the charitable trust. The estate claimed charitable deductions for the funds transferred to the charitable trust. In Est. of Moore v. Comm’r of Internal Revenue, No. 20-73013, 2021 WL 5176461 (9th Cir. Nov. 8, 2021), the Ninth Circuit affirmed the Commissioner’s denial of the deductions. The partnership documents unambiguously stated that no limited partner had any interest in any of the assets of the partnership. Thus, even though the trust owned a 98 percent interest in the partnership that held the farm sale proceeds, it was not considered a trust asset. The trustee had no obligation to transfer the farm’s proceeds to the living trust and

eventually to the charitable trust at the time of decedent’s death. At the decedent’s death, the trust proceeds were considered to be an asset of the partnership and not of any decedent’s trusts. GIFT TAX: Donor’s purported transfer of member interests in an LLC failed to transfer the interests to his wife. A donor purported to transfer about 41 percent of his interests in an LLC to his wife, who then purported to transfer them to a dynasty trust the next day. The donor also directly transferred 8 percent of the membership interests in the LLC to the dynasty trust. The donor’s gift tax return reported only the 8 percent transfer as a taxable gift, claiming that the transfer to the wife was exempted from gift tax as a transfer to his spouse. The Tax Court held in Smaldino v. Comm’r, T.C. Memo 2021-127 (2021), that the transfer was ineffective because of restrictions in the LLC operating agreement. It maintained the donor’s execution of a certificate of assignment to his wife did not constitute a transfer because the LLC operating agreement distinguished between an assignment and a transfer of a membership interest. The operating agreement specifically stated terms that would allow the assignee of a membership interest to become a substituted member, but those terms were not met. Thus, the court determined the entire 49 percent interest was gifted to the dynasty trust and should have been reported on the gift tax return. GIFT TAX: Gifts are valued separately at the time of transfer, even when two gifts originated from the same parcel of timberland. The donor purchased large quantities of timberland and gifted interests in the tracts to his two sons. Each son received a 48 percent interest in each tract, and the donor valued the gifts using a fractional interest discount. In Buck v. United States, No. 3-18-cv-1253, 2021 WL 4391091 (D. Conn. Sept. 24, 2021), the district court held that the fractional interest discount was not prohibited, even though the taxpayer did not hold the interest in fractional form before the gift. The

March/April 2022 37

KEEPING CURRENT P R O B AT E

value of each gift is determined separately at the time it passes from the donor to the donee, not right before it passes to the donee. LITERATURE ELDER ABUSE: In their article, Inheritance Crimes, 96 Wash. L. Rev. 561 (2021), David Horton and Reid Kress Weisbord evaluate the benefits and costs of laws related to exploitation and abuse of elders. Although they acknowledge that these new sanctions deter elder abuse, such laws may be unconstitutional in some situations. This article argues that states should abolish criminal undue influence, harmonize civil and criminal rules, and create exceptions to abuser laws. ELDER LAW: In A Primer on Neuropsychological Testing for Elder Law Attorneys, 28 Elder L.J. 221 (2021), Colin A. Brietzke endeavors to familiarize legal practitioners with the objective, validated, peer-reviewed, and consistently administered nature of neuropsychological evaluations. The article is aimed to help attorneys better present or discredit this highly probative type of evidence and bring greater clarity to the beautifully complex but often murky subject of how the human brain works. ELECTRONIC WILLS: In his Note, A Testament to the Future of Testaments: Electronic Wills Are the Future, 17 Ave Maria L. Rev. 35 (2019), Kyle C. Bacchus focuses on the most pressing issues in the realm of online testamentary documents: implementation in a way that is secure, maximizes the discouragement of fraud, and, above all else, can convey clear and convincing evidence of the testamentary intent of the deceased. ESTATE LITIGATION: In Going, Going, What do You Mean My Estate is Gone?, 34 Quinnipiac Prob. L.J. 345 (2021), Angela Tylock discusses the duty imposed upon the probate court and the executor of an estate to follow the testator’s intent, which is incorporated in a will. She argues that when an

individual leaves the person’s estate to be distributed in particular ways and to particular individuals, persistent and endless litigation undermines the importance of the testator’s intent for the estate. It may even result in a direct contradiction of the testator’s wishes for the property. GRAVE OWNERSHIP: Anne K. Hansen analyzes the effectiveness of state and local laws and rules in resolving the issue of grave plot ownership claims. She also provides alternative approaches and adjustments to strengthen the cemetery authorities’ ability to resolve ownership claims and minimize the number of possible future claims in Who Is in My Grave? A Comparison of State and Local Laws in Illinois and Utah That Guide Resolution of Grave Plot Ownership Claims, 45 S. Ill. U. L.J. 139 (2020). ILLINOIS—PROBATE ALTERNATIVE: In Selling Land Owned with No Survivorship, Ill. B.J., Sept. 2021, at 10, Ellen Beth Gill explains how “[b]ond in lieu of probate can be a quick and easy alternative to transferring titles.” ILLINOIS—STATUTE OF REPOSE: In Repose in Peace, Ill. B.J., Oct. 2021, at 10, David C. Thies, Daniel R. Thies, and Mia O. Hernandez explain that a new Illinois statute “makes the six-year statute of repose for legal malpractice claims applicable to estate planning.” POSTHUMOUS SPERM RETRIEVAL: In her article, In re Zhu: Implied Consent to Posthumous Sperm Retrieval, 23 SMU Sci. & Tech. L. Rev. 89 (2020), Mary Kathryn Sapp posits that this case represents a departure from existing precedent on the subject of PSR because it rests on a much weaker evidentiary basis and the court based its decision on the decedent’s “presumed intent.” This case also shows the need for clear state legislation regulating PSR so that grieving families may take advantage of this advancement in reproductive science in a predictable manner.

SAME-SEX COMMUNITY PROPERTY: In his Comment, Separation Equality: Retroactive Community Property Regimes for Long-Term Same-Sex Couples, 30 Tul. J. L. & Sexuality 153 (2021), Andrew M. Albritton addresses the specific and unique effects that the retroactive application of marriage rights could have on community property regimes through an analysis of hypothetical couples. TEXAS—JUDICIAL UPDATE: In Wills & Trusts, 7 SMU Ann. Tex. Surv. 337 (2021), Gerry W. Beyer discusses relevant developments in the law of wills and trusts from December 1, 2019, through November 30, 2020. TRUST PURPOSES: Almost 20 years after the promulgation of the Uniform Trust Code, the Uniform Directed Trust Act touched on a latent ambiguity in the UTC’s specification of a trustee’s “fundamental obligation.” The resolution of that ambiguity is doctrinally knotty; the UDTA cuts the knot by means of a “Legislative Note.” In his article, Settlor-Authorized Fiduciary Indifference to Trust Purposes and the Interests of Beneficiaries under the Uniform Trust Code, 55 Real Prop. Tr. & Est. L.J. 123 (2020), James P. Spica suggests how the knot might be untied rather than cut. TRUST TERMINATION: F. Ladson Boyle, Howard M. Zaritsky, and D. Ryan Wallace discuss options when the life beneficiary of a trust does not like the restrictions and limitations of the trust and wants to escape them either by terminating the trust early through commutation of the various interests or disposing of interest in the trust in The Uniform Basis Rules and Terminating Interests in Trusts Early, 55 Real Prop. Tr. & Est. L.J. 1 (2020). WILL EFFECT: Although maxims such as “no will speaks” and “expectancies are not property” are common, Katheleen Guzman suggests in Wills Speak, 85 Brook. L. Rev. 647 (2020), that “nascent” wills actually do have much to say, and rightly so.

March/April 2022

KEEPING CURRENT P R O B AT E

LEGISLATION CALIFORNIA enacts the Supervision of Trustees and Fundraisers for Charitable Purposes Act, which imposes registration, reporting, and other requirements upon legal entities holding or soliciting property for charitable purposes. 2021 Cal. Legis. Serv. Ch. 616. CALIFORNIA enhances regulation of pre-need funeral trusts. 2021 Cal. Legis. Serv. Ch. 514. CALIFORNIA imposes additional requirements on a trustee of a revocable trust if, during the time that a trust is revocable, no person holding the power to revoke the trust is competent. 2021 Cal. Legis. Serv. Ch. 749. CALIFORNIA requires professional fiduciaries to disclose a schedule of the range of fees that they charge. 2021 Cal. Legis. Serv. Ch. 417. CALIFORNIA revises the probate court’s guardianship process, including changes to initiating investigations and providing potential guardians with understanding of their rights, duties, and obligations. 2021 Cal. Legis. Serv. Ch. 578. CALIFORNIA updates law applicable to transfer on death deeds. 2021 Cal. Legis. Serv. Ch. 215.

RPTE PUBLICATIONS All RPTE publications can be purchased on the ABA Web Store, ShopABA.org, or by calling the Service Center, 800-285-2221.

Understanding Life Insurance and Rethinking Policy Management and Evaluation: Explaining the Unexplainable Gary L. Flotron, M.B.A., CLU®, ChFC®, AEP® Comprehensive resource for planning your client’s personal and business insurance needs

Are you intimidated by life insurance? From questions about the amount and type of insurance coverage needed and the credit and investment risks involved to choosing a policy and carrier, life insurance can be an intimidating planning vehicle. This clearlywritten guide examines fiduciary risk management and the criteria and methods used to evaluate a life insurance policy. The author’s discussion and analysis of the fundamentals and the mathematics of life insurance are enriched by a carefully-selected collection of articles by these nationally known practitioners and advisors, who illustrate and offer unique viewpoints on the book’s topics: Guy E. Baker, Ben G. Baldwin, Jr., Jonathan G. Blattmachr, Marc A. Pasquale, Christopher H. Hause, Donald O. Jansen, Michael E. Kitces, Martin M. Shenkman, Charles M. “Mark” Whitelaw, E. Randolph Whitelaw, and George P. Whitelaw.

DELAWARE modernizes law relating to powers of attorney and electronic signatures for motor vehicle matters. 2021 Del. Laws Ch. 149. NEW YORK authorizes murderers, rapists, and other felons to serve as personal representatives unless the crime related to embezzlement, misappropriation of money, or breach of fiduciary duty. 2021 Sess. Law News N.Y. Ch. 486.

2020, 311 pages, 7 x 10, Paperback/eBook Product Code 5431118 $119.95 List Price $89.95 RPTE Members

OHIO allows people applying for or renewing a motor vehicle registration to certify their willingness to be an organ donor. 2021 Ohio Laws File 50. n

March/April 2022 39

The Changing Landscape

xpectation turns to the Supreme Court as it once more takes up a free speech dispute about billboard regulation. On June 28, 2021, the Court granted the City of Austin’s Petition for Writ of Certiorari in Reagan National Advertising of Austin, Inc. v. City of Austin, 972 F.3d 696 (5th Cir. 2020), in which the Fifth Circuit struck down the city’s ban on digitizing offpremises signs. Billboards have a long history of legal contention, and billboard intolerance is historic. Billboards have their place, but they can overpower the aesthetic environment and threaten traffic safety. Before they were regulated at the beginning of the 20th century, billboards overwhelmed rural and urban areas with massive structures that dominated the landscape. Concern about safety issues and an influential aesthetic movement led to stricter controls. They included sign ordinances that prohibited billboards, which courts upheld in early cases. Daniel R. Mandelker is the Stamper Professor of Law at Washington University in St. Louis, Missouri.

for

Digital billboards with moving, lighted displays create new problems. They differ from traditional billboards, which have static displays that can be changed manually but do not move. Local governments regulate signs, and sign ordinances decide what, when, and how signage speech may occur. Free speech doctrine intervenes and mediates government interests in billboard regulation, which creates two important free speech issues. Billboard speech is usually commercial speech, which has received less protection under the free speech clause. Sign ordinances also make distinctions between billboards, regulated as off-premise signs, and business signs, regulated as on-premise signs, which can create free speech problems. This article summaries the current application of constitutional free speech doctrine to billboard regulation. For a more extensive analysis of this topic by the author, see Daniel R. Mandelker, Billboards, Signs, Free Speech, and the First Amendment, 55 Real Prop., Tr. & Estate L.J. 367 (2020).

Commercial Speech, Central Hudson, and Metromedia The leading case on commercial speech, Central Hudson Gas & Electric Corporation v. Public Service Commission, 447 U.S. 557, 566 (1980), adopted four criteria to decide whether a restriction on commercial speech is constitutional: For commercial speech to come within [the First Amendment], [1] it at least must concern lawful activity and not be misleading. [2] Next, we ask whether the asserted governmental interest is substantial. If both inquiries yield positive answers, [3] we must determine whether the regulation directly advances the governmental interest asserted, and [4] whether it is not more extensive than is necessary to serve that interest. (Bracketed numbers supplied). Central Hudson raised several questions. The first criterion usually is not important in sign regulation, and the Court did not clearly explain what the

March/April 2022

Billboard Regulation

Getty Images

By Daniel R. Mandelker

other criteria mean. It held the fourth criterion means that a law must be “a more limited restriction on commercial speech” and must be “narrowly drawn.” This is a “narrow tailoring” requirement typically applied as part of strict scrutiny judicial review. The Court later said the criteria are not “entirely discrete,” and referred to the second criterion as the “penultimate prong.” Neither did Central Hudson indicate the judicial review standard that applies to ordinances that regulate commercial speech, which can decide when a sign ordinance is unconstitutional. The Court later said it intended intermediate scrutiny judicial review, a midlevel standard as compared with the three levels of judicial review commonly applied in equal protection cases. This standard suggests more judicial intervention than is possible under the usual rational relationship standard applied to social and economic regulation. Content neutrality is another major issue in billboard regulation and can be troublesome. Sign ordinances that regulate the content of

a sign are content-based, presumptively unconstitutional, and subject to strict judicial scrutiny. Central Hudson addressed content neutrality and held that laws regulating commercial speech, such as sign ordinances, did not have to be content-neutral. It defended this conclusion in a footnote, claiming commercial speakers are wellsituated to evaluate their messages and that commercial speech is a “hardy breed of expression” not susceptible to being crushed. This conclusion is now suspect. In Metromedia, Inc. v. City of San Diego, 453 U.S. 490 (1981), a plurality of the Court applied the Central Hudson criteria to uphold a prohibition on commercial billboards in a sign ordinance. There were five opinions. Justice White’s opinion for the plurality was joined by three justices, and all federal circuits except one have accepted it as controlling. It has dominated judicial review of laws that regulate commercial speech. Justice White swept away any problems the Central Hudson criteria might have presented by holding the billboard

prohibition constitutional as a matter of law. As he explained in his opening statement, billboards present special problems, and “[e]ach method of communicating ideas is ‘a law unto itself,’ and that law must reflect the ‘differing natures, values, abuses, and dangers’ of each method. We deal here with the law of billboards.” He found “little controversy” with the first, second, and fourth Central Hudson criteria. It was “far too late” to contend that traffic safety and aesthetics were not substantial governmental goals, a more generous view than some states have accepted, and a majority of the justices in Metromedia accepted this conclusion. He rejected a claim that the ordinance was broader than necessary. If billboards are a traffic hazard and unattractive, he concluded, “then obviously the most direct and perhaps the only effective approach to solving the problems they create is to exclude them.” Tolerance also is clear in Justice White’s treatment of the fourth Central Hudson criterion. He disposed of it quickly, holding that if the city has

March/April 2022 41

Commercial messages connected with a site were no more valuable than noncommercial messages, and noncommercial messages located where commercial messages are allowed were not more threatening to traffic safety and the beauty of the city.

a “sufficient basis” for believing that billboards are traffic hazards and unattractive, “then obviously the most direct and perhaps the only effective approach” is to exclude them. The third, “directly advance,” Central Hudson criterion presented “the more serious question,” but Justice White had little difficulty finding compliance as a matter of law. For traffic safety, he said, “[w]e likewise hesitate to disagree with the accumulated, common-sense judgments of local lawmakers and of the many reviewing courts that billboards are real and substantial hazards to traffic safety.” He reached a “similar result” with respect to the aesthetic justification: “It is not speculative to recognize that billboards by their very nature, wherever located and however constructed, can be perceived as an ‘esthetic harm.’” The ordinance directly advanced the governmental interests he approved. Provisions in the ordinance that prohibited off-premise but allowed on-premise signs raised more difficult problems. They defined off-premise signs as signs advertising goods and services not available on the premises, and on-premise signs as signs offering

goods and services available on the premises. These definitions are typical, but they endangered the ordinance because they are content-based, and because allowing on-premise while prohibiting off-premise signs arguably undercuts the aesthetic purpose of the ordinance. Justice White’s response was mixed. He held the different treatment of on-premise signs did not make the ordinance underinclusive by undermining its protection of aesthetic character. Allowing on-premise signs was justified, did not denigrate the city’s interest in traffic safety and beauty, and did not defeat its own case. As a matter of law, billboards, with their “periodically changing content,” presented a more acute problem than on-premise signs. The city could “reasonably conclude” that a business has a stronger interest in identifying and advertising its business than in advertising businesses elsewhere. The ordinance reflected the city’s decision that its interest in on-premise advertising was stronger than its interest in traffic safety and aesthetics. Justice White struck down the provision that allowed on-premise signs to

advertise goods and services available on the premises because it discriminated against commercial speech. Commercial messages connected with a site were no more valuable than noncommercial messages, and noncommercial messages located where commercial messages are allowed were not more threatening to traffic safety and the beauty of the city. He did not consider a possible content-neutrality issue. He also held unconstitutional a group of exceptions to the off-premise sign prohibition because they permitted only a limited number of noncommercial signs. Other noncommercial signs were prohibited. Some of the permitted signs were content-based, though some were not, but Justice White did not consider the contentneutrality issue. Though not entirely favorable, Metromedia brought in an era in which courts generally accepted billboard regulation. Reed and Reagan National The legal landscape changed when the Supreme Court held another sign ordinance unconstitutional because it contained content-based distinctions

March/April 2022

among different types of noncommercial signs. Reed v. Town of Gilbert, 576 U.S. 155 (2015). The ordinance exempted 23 noncommercial signs from a general permit requirement and provided different requirements for each sign. There was no evidence that the ordinance was maliciously directed at any type of speech. Justice Thomas considered only the exemptions for ideological signs, political signs, and temporary directional signs relating to a qualifying event and held the exemptions unconstitutional as content-based. Reed clarified the conflicting tests that the lower courts had adopted for deciding when an ordinance is content-based. It concluded that content-neutrality must be determined by examining the ordinance on its face. The Reed ordinance was a “paradigmatic example of content-based discrimination,” and Justice Thomas held that the commonsense meaning of content-based regulation requires courts to consider whether a regulation of speech on its face draws distinctions based on the message a speaker conveys: “Some facial distinctions based on a message are obvious, defining regulated speech by particular subject matter, and others are more subtle, defining regulated speech by its function or purpose.” Content-neutrality has always been a critical issue in defining the constitutionality of sign ordinances, but the restatement of this requirement in Reed gave it prominence. A critical question still remains unanswered. Justice Thomas did not indicate whether Reed reversed course by applying contentneutrality to commercial speech, an uncertainty made more problematic by his not citing any of the Supreme Court decisions that had dealt with commercial speech. Most lower courts that have considered this question have held that Reed does not change the law, but the omissions in Reed cast doubt on the earlier Supreme Court holding that laws regulating commercial speech, such as billboard regulations, need not be content-neutral.

Problems with the different treatment of off-premise and on-premise signs and the content-neutrality issue came together in a case now before the Supreme Court, Reagan National Advertising of Austin, Inc. v. City of Austin, 972 F.3d 696 (5th Cir. 2020). Reagan filed an application to convert existing static billboards to digital billboards, but the city denied it because the sign code prohibited digitizing off-premise signs but allowed digitizing on-premise signs. The court held this distinction content-based because an off-premise sign was defined, generally, as a sign advertising goods or services not available on the premises. This decision meant that whether an off-premise sign could be digitized depended on its content. In Metromedia the ordinance had a similar definition, but the Court did not consider it. Strict scrutiny applied because the ordinance was content-based and applied equally to commercial and noncommercial speech. Laws subject to strict scrutiny must serve a compelling governmental purpose. Here, the different treatment of off-premise and on-premise signs did not serve

a compelling governmental purpose because aesthetic differences between off- and on-premise signs did not justify stricter limits for off-premise signs. Strict scrutiny accomplished what intermediate scrutiny in Metromedia could not do. The content neutrality issue in Reagan is reflected in the question presented to the Supreme Court: Whether the Austin city code’s distinction between on-premise signs, which may be digitized, and off-premise signs, which may not, is a facially unconstitutional content-based regulation under Reed v. Town of Gilbert. Conclusion Whether the Court will end the gentle touch of Metromedia by moving beyond this narrow issue to hold that laws regulating commercial speech must be content-based is not certain. Oral argument held in Reagan National on November 10, 2021 was not helpful, as justices traded anecdotes and were not interested in precedent. We do not know whether another chapter in the law of billboards will be written. n

STAY ENGAGED STAY CONNECTED ambar.org/rpte

March/April 2022 43

March/April 2022

Valuation of Real Property When There Has Been a Recent Sale By Michael Rikon

n any trial to determine the value of real property, whether it be to determine just compensation in an eminent domain taking or an application to reduce assessed taxes, a recent sale of the parcel will be extremely relevant.

Getty Images

Basic Principles If a sale is an open market transaction with a buyer under no compulsion to buy and a seller under no compulsion to sell, the transaction, unless explained away, will be considered a fair market sale at the time of its execution. Keator v. State of New York, 23 N.Y.2d 337 (1968). Normally, appraisers use the market data or comparable sales approach Michael Rikon is president and a shareholder of Goldstein, Rikon, Rikon & Houghton, P.C., in New York, New York.

to valuation. In this approach, the appraiser values the subject parcel by comparison with other properties. To be considered comparable, the sales must be sufficiently near in time to the valuation date and sufficiently similar to the parcel in character, size, situation, usability, and zoning. This makes it clear that the sales are comparable in value and that the cash equivalent prices realized for the properties sold fairly compare to the property being valued. Dennis v. Cnty. of Santa Clara, 215 Cal. App. 3d 1019 (1989). The Ohio Supreme Court made clear that a recent sale price is not an absolute determinant of a property’s valuation. Instead, it held where the parcel has been the subject of a recent arm’s-length sale, the sales price is the best evidence of the true value of the property, but this presumption may be rebutted by evidence that indicates

otherwise. Ratner v. Stark City Bd. of Revision, 35 Ohio St. 3d 26 (1988). The California Supreme Court held that the sale price of the subject parcel may be considered even if it may have reflected “project enhancement value.” The court must be able reasonably to determine that the sale price, despite it reflecting some projected enhancement value of the land, still evinced fair market value. Interestingly, if a judge instructs the jury to disregard that part of the compensation representing project enhancement, a claimant might be awarded less than it paid. Los Angeles v. Retlaw Enters., Inc., 16 Cal. 3d 473 (1976). The rule is that “the sale of real property in an arm’s-length transaction, if recent and not explained as extraordinary, is the best evidence of value for tax assessment purposes because it directly reflects the property’s market

March/April 2022 45

value and does not require the court to engage in speculation.” Blue Hill Plaza v. Assessor of the Town of Orangetown, 280 A.D.2d 544, 545, 720 N.Y.S.2d 527, 527 (2002) (citing 50540 Realty, Inc. v. Tax Commission of City of New York, 136 A.D.2d 699, 524 N.Y.S.2d 55 (1988). Put another way, “[a] recent sale has been characterized as evidence of the ‘highest rank’ in determining market value.” Rite Aid Corp. v. Huseby, 130 A.D.3d 1518, 1520, 13 N.Y.S.3d 753, 755 (2015). Cedar Manor Case: Rebutting the Presumption For example, in a recent New York tax assessment case, Cedar Manor Acquisition LLC v. Assessor and Board of Assessment Review of the Town of

Ossining, Index No. 62538/2020 (Sup. Ct. N.Y., filed Sept. 29, 2021) (unpublished), the Honorable E. Loren Williams of the Westchester Supreme Court had before him an application by a nursing home to reduce the assessed value of its property. The transfer tax form filed with the county clerk indicated that the purchase price included both the price of the real estate and of the business enterprise. The transfer tax form indicated that the property sold for $23,715,000 and that the real estate was apportioned in the amount of $18,800,000. The court found that “[t]he best evidence of value, of course, is a recent sale of the subject property between a seller under no compulsion to sell and

a buyer under no compulsion to buy.” Id. at 7 (quoting Matter of Allied Corp v Town of Camillus, 80 N.Y.2d 351, 356 (1992). “Petitioner maintains that the $51,000,000 sales price is not indicative of the fair market value of the property since it was an arbitrary figure established as a business convenience . . . . We must reject its claim that the $51,000,000 figure does not represent the sales price of the subject property, particularly as it may be reasonably inferred that it is continuing to utilize the $51,000,000 sales price to obtain corporate and income tax advantages.” Id. (quoting Matter of Meditrust c/o Conifer Park Inc. (The Mediplex Group Inc.) v. Rosalie Fahey, as Assessor of the Town of Greenville, 226 A.D.2d 999 (1996)).

March/April 2022

The Court found it important whether the sale of a property in question is an arms-length transaction and whether the price paid by a purchaser is consistent with the value of the property as determined by the tax assessor’s expert (subject to market trends).” Id. (citing Rite Aid Corp. v Otis, 102 A.D.3d 124, 127, 954 N.Y.S.2d 666, 668 (2012)). The court concluded that it is the price that Manor paid in an open market that determines value in this case. “Generally, the best evidence of value, if not explained away as abnormal in any fashion, is a recent sales price established in an arm’s length transaction.” Id. at 13 (quoting Matter of Meditrust v Fahey, 226 A.D.2d 999, 1000, 641 N.Y.S.2d 202, 203 (1996), citing W.T. Grant Co. v. Srogi, 52 N.Y.2d 496, 511, 438 N.Y.2d 761, 768 (1981)). The sale between the buyer and seller was an arms-length transaction, and there was no testimony in the record or evidence presented at trial that disturbs that fact. Id. The court held: Based on the foregoing, this Court finds Petitioner has failed to maintain its burden and in addition this Court finds the

Generally, the best evidence of value, if not explained away as abnormal in any fashion, is a recent sales price established in an arm’s length transaction. Petitioner’s appraisal uncredible. Therefore, the Manor failed to withstand the Court’s threshold inquiry of producing “substantial evidence” to overcome the validity of [the] assessments, and their petitions for the years 2017, 2018, 2019, and 2020 [are dismissed]. Id. at 15. As the holding in the Cedar Manor case shows, it is clear that if one wishes to limit the recent purchase price rule, one must rebut the presumption by

evidence that indicates otherwise. All property in condemnation must be valued at its highest and best use on the vesting date. For example, one could show a change in the highest and best use or a reasonable probability of a zoning change that did not exist on the date of sale. Or one could show substantial improvement to the property or other significant addition to the property. Conclusion The important question, then, is whether the property owner can establish that the recent sale was not a fair market sale and does not reflect the property’s true value and that therefore the court should disregard the price it yielded. One can challenge a recent sale price using evidence other than the recent sale price to show its true value: for example, did the market change in the period between the purchase date and vesting? How so? Was there a zoning change? Was the project or other major development announced that created an increase in value due to project enhancement? It is clear that although the recent purchase price rule will always be considered, it is not chiseled in stone. n

March/April 2022 47

How to Love Remote Work

By Sahmra A. Stevenson and Jonathan M. Bogues

March/April 2022

Getty Images

istorically, the practice of law has been an office-based profession. After all, that is where the equipment necessary for efficient practice was located, from the typewriter, to the word processor, to desktop computers networked to high-efficiency printers and scanners. As a profession, the legal field has been slow to adopt new technologies and practices, and many aspects of the practice of law remain unchanged (e.g., civil procedure, billable hours). Over the past decade, the rapid evolution of technology has made it possible for attorneys to work in places other than traditional offices (for example, continuing to service clients while on vacation by accessing email from a smartphone). This evolution has accelerated in the COVID-19 pandemic, which forced many firms and attorneys that had not previously considered remote work to adopt and embrace remote work. Because this switch to remote work occurred on an emergency basis, without the benefit of advanced planning or consideration, many firms and attorneys have transitioned to remote work on an individual trial-and-error basis, with each individual figuring out what works best for her. Adoption of remote work during the pandemic has empowered many attorneys to recognize the benefits of remote work, however, and to incorporate those benefits into their practices more permanently. For example, one of the authors of this article was able to use enhanced remote work capability to be able to attend the Section’s Fall Leadership Meeting in St. Louis, Missouri, in person while simultaneously negotiating final deal points with landlord’s counsel from Baltimore, Maryland, for a commercial lease of a site in Raleigh, North Carolina. The author now travels Sahmra A. Stevenson is the founder of S.A. Stevenson Law Offices, Office Without Walls and Wills On Wheels, Inc., with offices located in Columbia, Maryland. Ms. Stevenson also provides her services to clients as a transformation and mindset coach. Jonathan M. Bogues is a real estate and non-profit attorney at Michael Best & Friedrich, LLP, in Raleigh, North Carolina.

like never before because of the ability to work on the road. Building on the experience of teams who made the transition to remote work intentionally (i.e., prior to the pandemic), this article distills such experience into advice for those who are interested in making remote work part of their practices permanently, with simple techniques that every individual can adopt and adapt to his own specific needs. Flex Your Routine for Mental and Physical Health Lawyers constitute a very diverse group, in terms of our demographics, our practice areas, and our personalities. Not only do our practices have different demands and routines, but how we work differs based on our personalities, preferences, and life experiences. One of the challenges of adapting to remote work is that there is no cookiecutter methodology that works for every individual: Flexibility is key. For example, one attorney may be an early bird, doing her best work before others have started the day; while another might be a night owl, doing his best work in the midnight hours, after the phone has stopped ringing and emails during the traditional business day have stopped. Working remotely can be a prime growth opportunity, as well as an opportunity to flex one’s routine. Flexing a routine allows one to schedule appropriately and rank tasks and responsibilities for a suitable time. Start small. Attorneys should start small by adding something different once or twice a week to their daily routines. For instance, one can start by taking an online fitness class during a break, incorporating a daily walk to get some fresh air and sunlight, or any other productive self-care activities that attorneys may not have time to do with traditional work schedules and office environments. Keep track. To be the most productive working remotely, attorneys should keep track of what works best for them. If a certain self-care activity such as yoga or meditation allows the lawyer to produce her best work, then the lawyer should revisit those activities and

incorporate them into daily or weekly routines. But lawyers should not limit themselves to just those activities and should not be afraid to explore similar or ancillary activities. Flex with confidence. A lawyer should not feel guilty about taking part in activities that allow the lawyer to be at his best while working remotely. So long as the lawyer is meeting his work requirements, is productive, and produces quality work, the lawyer should continue to participate in these activities. This is the new normal, and many employers even encourage this type of activity to boost employee morale and mental health while working remotely and being limited in traditional inoffice social interactions. Always Be a Learner Working remotely does not mean one can stop pushing himself to be a better lawyer. Continue to learn more about the practice area or other practice areas. Our in-person social interactions have been limited during the pandemic, and we often suffer from “Zoom fatigue.” Still, the widespread adoption of virtual platforms such as Zoom, Microsoft Teams, RingCentral, BeaconLive, and others, during the pandemic has allowed us to connect with clients and other professionals from all over the globe and across several time zones as if we were all in the same room. Staying up to date with technology and learning the best way to use these virtual platforms provide an opportunity to distinguish oneself with clients and colleagues. Learning about the latest technological advances can help add value for clients and firms. Further, investing in the new remote environment can help one put her best (virtual) foot forward in connecting with both current and prospective clients. Some employers provide a stipend or reimbursement for equipment to help succeed while working remotely; if this is the case the lawyer should take advantage of this opportunity to obtain equipment to provide seamless remote service, such as a second monitor, a printer-scanner combination, or a ring light.

March/April 2022 49

Intentionally diversify your perspectives each day by seeking out new connections and stepping out of your comfort zone.

Stay in Touch with Your Why We all went to law school and became lawyers for a purpose: basically our “why” for wanting to practice law. Our whys are all different, whether it’s to make a difference and provide quality legal service in our communities, to leave a legacy for our families, or to make significant amounts of money, all of which are legitimate “whys.” However, our whys may have been overlooked or forgotten over time and in our daily grinds. It can be easy to go through the motions every day, and to lose touch with what motivated us in the first place. This may be even more true during a pandemic. The tips below will help one stay in touch with his why: Develop morning rituals or mantras. Developing a morning ritual or mantra helps set the tone for the day as well as increase focus and productivity. Practice curiosity and ask questions. This will allow one to continually grow and reach new levels in her career. Spend time in nature and exercise. This will allow one to break the monotony in his daily routine and break up the daily grind. Take a pause and breathe. This will allow the lawyer to take a moment to

reconnect to her why during stressful, chaotic times. Keep a journal and take inventory of wins, both big and small. We can all use a little reassurance and reminders of why during the ups and downs of our careers. Keep Connected Working remotely can have negative effects on our social lives, and we can easily fall into isolation traps and mundane daily routines. Here are few things a lawyer can do to stay connected: Make a call list and use it. Check in with one’s social circle and loved ones regularly. Your social circle may be feeling disconnected and out of touch. Schedule Zoom coffee, lunch dates, and other social events. While we may be suffering from “Zoom fatigue,” it is still imperative that we stay connected with others who may also work remotely. Schedule in-person work dates with other remote professionals. There may be other remote workers who are also feeling disconnected. This may serve as an opportunity to create a support group for each other. To the extent everyone is comfortable, set up a lunch, coffee date, or happy hour for other

remote workers who may not have social interactions with their offices. Get out of the house (or work space) and into nature. As previously mentioned, getting out into nature and breaking the monotony of the daily grind can allow one to reconnect with one’s purpose; if the lawyer invites a friend or colleague to join him it can provide that purpose for both, and allow both to keep connected. If one is unable to have a friend or colleague join him in nature in person, call that person as casually strolling in one’s neighborhood; it can do wonders for morale and overall well-being. Let people know when you’re feeling lonely. Do not hesitate to reach out to others when feeling lonely or isolated. Friends and loved ones will understand and be there for you in your time of need. Others are likely feeling the same way, or have felt this way at some point over the last two years, and have craved social interaction at some point. Check in with yourself and take breaks regularly. Even without the added layer of practicing law during a public health emergency, we are all aware of the stresses and rigors of the legal profession under normal

March/April 2022

circumstances. Therefore, be patient and give yourself grace, as we have all had to adapt and cope with additional stressors during the pandemic. Seek New Perspectives Working remotely can involve the same daily routines, and new perspectives may not be as readily available as in a traditional office setting. However, seeking new perspectives allows us to step out of our comfort zones, take a step back, and see things objectively, which better enables us to solve problems. In its essence, the practice of law is a problem-solving exercise: Clients call us with problems, and it is our job to solve them. Different perspectives can be key to solving problems. Intentionally diversify your perspectives each day by seeking out new connections and stepping out of your comfort zone. Engage in pro bono, bar association, or other passion projects.

Working from home may leave you with more free time, by decreasing your commute time or time getting ready each day. This may be the right time to engage in pro bono work and get more involved with the American Bar Association, your state bar, or local bar associations. Also, working remotely may allow time to take on new passion projects such as home improvements, learning a foreign language, or engaging in a new hobby. One could also mentor a young lawyer or law student. Both of these activities will continue to push our profession forward and can be done remotely. There are also pro bono initiatives that can be completed remotely. With the effects of the pandemic still being felt, there are opportunities to help with the eviction crisis, or to provide legal assistance to people in need after a natural disaster, even if that type of work is outside of your area of expertise and your comfort zone.

Truly work remotely. If you are successful working remotely at home, working remotely from a different location may present an opportunity to step outside of your comfort zone and test your limitations. For example, you could take your office on the road by staying at a short-term rental in a different location (for example, at the beach or in the mountains, providing you with expanded opportunities to connect with nature, as suggested above). Conclusion At this point in the pandemic, lawyers may have already incorporated some of these tips and practices into daily life. Remote work is here to stay, although the extent of adoption will continue to vary by practice, firm, and individual. Continuing to explore best practices for successful remote work will help you learn to love remote work. n

March/April 2022 51

Deliberate Wellness— The Resilient Lawyer

n late February 2020, I enjoyed a fantastic latte at Goddess and the Baker in Chicago, Illinois. I was in Chicago to speak at ABA Women of Legal Tech and teach yoga at ABA Techshow. After my Women of Legal Tech presentation, I met my law clerk for the latte. Ten days later, I was home in Omaha canceling trips because of the outbreak of the COVID pandemic. Days after that, I took my law office mostly remote and worked endless hours to help people navigate the COVID-19 crisis. During the first week of the pandemic, almost every call brought me near to tears. The first week was lay-offs, and almost every client I had ever worked with asked immediately for updated health care powers of attorney and wills. The second week was business after business shutting down or figuring out how to function as an essential business amid a pandemic. The practice of law is challenging in times that don’t include a pandemic. Lawyers often arrive at the office to an inbox full of e-mail, a voicemail full of messages, and an inbox full of urgent items to address. A lawyer’s day is filled with meetings, deadlines, demands, and urgency. Amidst all that, a lawyer must function at a very high level in terms of work product and communication skills. When an alreadychallenging professional lifestyle collides with a pandemic that results in a sudden and unplanned transition to remote work, zoom meetings, drive-by document signings, and clients in a state of panic, you have a recipe for testing the resilience of even the most resilient lawyer. I have dedicated a lifetime to fitness, meditation, mindfulness, yoga, coaching, and healthy living. My long-time mantra has been “never compromise a workout or healthy activity for work.” I found my resilience tested at an all-new level during the pandemic and since. In the first few weeks of the pandemic, despite my long-time mantra, I found myself struggling to find the time to engage in my long-time practices. My phone started to ring in the wee hours and continued all day, every day. I wanted to be able to take care of

Career Development & Wellness Columnist: Mary E. Vandenack, JD, ACTEC®, COLPM®, is the founding and managing member of Vandenack Weaver LLC in Omaha, Nebraska. Mary also has an advanced certificate of positive psychology from the University of Pennsylvania and is a long-time Yoga RYTE.

everyone who called. There was so much suffering and so much concern. I asked all that I could of myself and those who worked with me to support clients trying to find their way through the pandemic. On top of the legal demands, my home life faced challenges. I focused my energy on the pandemic, and I was susceptible to personal attacks. By the end of week four of the pandemic, I was tired, cranky, and irritable. My shoulders hurt. My neck hurt. And I was becoming short with those who were trying to support me. I recall being on the phone one day with someone I value and catching myself noticeably impatient. I recognized that the pandemic stress was getting to me. For me, years of work on resilience paid off. I was able to see what was going on. I made a conscious decision to stop, breathe, and find a way to engage in the practices that had created resilience in my life. While the pandemic brought the need for resilience front and center, the fact is that being a lawyer, a partner, a parent, a friend, a family member, and a member of the community requires resilience even in times that don’t involve a pandemic. This article intends to provide a working definition of resilience and some practices that you can engage in to improve resilience. What Is Resilience? Resilience involves the ability to overcome negative emotional experiences and difficult life experiences by adapting to the changing demands of stressful experiences. A resilient person can meet life’s challenges regardless of significant demands made. A resilient person bounces back from adversity. A resilient person also grows from challenges. The good news is that anyone can develop resilience. Resilient People Have Strong Relationships Nurture relationships. Supportive and positive relationships matter, especially when you are going through a difficult time. Those who have resilience have invested in building relationships with those capable of supporting them through life challenges. When life is challenging, it is imperative to surround yourself with those who love you as you are at that moment. It is really easy to let the legal profession’s demands get in the way of building relationships.

March/April 2022

DELIBERATE WELLNESS

Make time for building relationships with people who love you exactly as you are. There is little in life as valuable as someone who sees you in your darkest hour and says, “I love you. You will find your way.” Gratitude Practice Engage in a regular gratitude practice. One of my favorite approaches is from positive psychology. The approach involves identifying, each day, three things that went well and expressing gratitude for that which went well. In addition to identifying what went well, it is essential to recognize why something went well. The reason something went well may be simple. For example, perhaps you had a client that called you in immediate need of a health care power of attorney. You were able to

get one executed by the end of the day because you showed up at work, took the phone call, and coordinated with a paralegal. Another example of something that went well can be as simple as a positive interaction with someone at work. You may have had a positive interaction because you recognized that a colleague was having work-related challenges, and you took the time to encourage them. Self-Awareness Self-awareness is about taking a breath and noticing what is going on internally. Stop, breathe, notice your thoughts. Are your thoughts helping you with the situation, or are you giving in to thought traps such as catastrophizing? Can you identify how you are feeling? Can you identify your

behaviors and reactions, what is helping you, and what is harming you? Are we attuned to the connection between emotions and physiology? Self-awareness also involves being aware of one’s strengths and achieving better outcomes using those strengths. One strategy to develop awareness is meditation. Meditation doesn’t require that you sit on a mat and say OM for hours but requires taking a deep breath, noticing the breath, and staying in the present moment. I try to practice mindfulness throughout the day. If I am in a long line to check out at the grocery store, I use that time to take some deep breaths and notice what is going on in my mind and body. Engage in self-evaluation. Work with a coach or professional who is a good fit for you and who will provide you

March/April 2022 53

honest and direct feedback. Seek mentors who have focused on health and well-being despite choosing a challenging profession. Self-Regulation Self-regulation is different from controlling emotions. When people overly control emotions, they essentially pile them up in a closet. The closet gets too full one day, and everything comes tumbling out. Self-regulation is about realizing that your fight-orflight response is engaged but that there isn’t really a battle. Resilience is about recognizing that you need to down-regulate all that fight or flight and calm the waves. By way of example, you might have a conflict with your life partner. Perhaps she has a different view than you do about the actions of someone you consider a friend. The self-regulated person will see that the difference of opinion is simply a matter of differing perspectives. He will find calm, keep lines of communication open, and act following his values. A person who is not self-regulated may instead get himself worked up, attack his partner with unrelated issues, and let anger take control. The absence of self-regulation looks like a childish tantrum, but the person engaged in it may fail to see it. Effective self-regulation strategies include mindfulness, cognitive

reappraisal, and ensuring one’s actions align with one’s values. To practice selfregulation, you must become aware of issues that trigger you and develop strategies to avoid triggers or manage reactions effectively. In every situation, you have the choice to approach, avoid, or attack. Approach is the skill of the resilient self-regulated individual. Mental Agility Mental agility is the ability to look at things from multiple perspectives. As lawyers, seeing differing views is part of what we do. While we may find it easy to do when we are thinking about a client’s problem, we may not always find it as easy when dealing with a situation involving our own emotions. At work, we are trying to manage multiple challenges and stay calm. It can be challenging to take the time to listen to an associate about a process the associate sees differently. Still, it is essential to engage in problem-solving in work and personal relationships as well as in client issues.

Optimism Optimism a critical 1x1 andis 2x3 foraspect KK of resilience. If you are optimistic, you are more likely to persist in finding solutions to challenges. Part of optimism involves identifying what you can control in a situation and what you cannot. A resilient person thinks about stressors as challenges rather than threats. Optimism can be developed by becoming aware of mind traps and finding ways to counter them. Perhaps you catastrophize things. You receive a call 34th Annual RPTE from a client who has decided to use APRIL 26-29, 2022 National CLE Conference a |different In your Virtual In Person |lawyer. April 26-29, 2022 mind, this Dallas, Texas becomes a catastrophe: “ITexas will never be Four Seasons Resort and Club | Dallas, able to satisfy any client, and my career and ability to originate is over….” You can challenge this by becoming aware of the thought process and consciously shifting the thoughts. “This client was not a good fit for my practice area or me, and the fact that the client chose to move on provides me the ability to focus more on clients who are a good 34th Annual RPTE National CLE Conference Virtual | In Person | April 26-29, 2022 fit for me. I have several other clients Four Seasons Resort and Club | Dallas, Texas who have stayed with me and value my work.”

Find Purpose Sometimes we get lost in figuring out the meaning of life and our purpose in the process. We may look for some dramatic purpose. Resilient people find purpose in small ways every day. Perhaps an essential purpose in your day is simply taking the time to have coffee with your paralegal and provide him with some supportive comments about how he is making a difference for clients. Making a difference in a small way for one person a day can change many lives. Practice I once attended a driver training course at a racetrack. The instructor suggested practicing what you would do in an emergency. He suggested that when you are driving daily, you should think about how you would respond if the car in the left lane suddenly swerved in front of you. His thought was that you could imagine how you would respond and build the skills. The same is true for difficult life experiences. You can practice making positive comments on a day when you are in a bad mood. What will you say to a client who just lost her spouse to COVID? What will you say to your life partner when he or she tells you how upset he or she is about something that happened that day? Take Amazing Care of Yourself A healthy person is likely to be more resilient. It is easy to get caught up in the stress of a legal career, busy lives, taking care of a parent, or challenging relationships. When a lot is going on, it can be challenging to take care of yourself as you should. When you are dealing with many life stressors, it is more important, not less, to take care of yourself no matter what. Schedule time in your calendar to work out, make time for food preparation, connect. I was taught to schedule my wellness time early in my career. I have done that for my entire career. Doing so matters. As much as I value my work, I value my health, wellness, and resilience first. Work is the rubber ball of life. If a rubber ball is dropped, it bounces back. Health and relationships are crystal balls that break when dropped. n

March/April 2022

On Demand Programming Streaming Now Take advantage of all your excusive RPTE Member Benefits. You can listen to past CLE programming on-demand from the Section of Real Property, Trust and Estate at your leisure—legal education on the go. Check out the latest programming on-demand.

ambar.org/ondemand

March/April 2022 55

PRACTICAL POINTERS FROM PRACTITIONERS Arkansas Reduces the Burden of Estate Recovery Arkansas, like many other states, participates in the Medicaid program, providing, among other services, financial support to those in need of long-term care. As a Medicaid participant, federal law requires Arkansas to recoup some costs through estate recovery, which includes collection from a deceased recipient’s estate from sources such as first-party (d)(4)(A) special needs trusts, Miller Trusts, Medicaidcompliant annuities, and property passing via beneficiary deed. A beneficiary deed conveys a grantor’s interest in real property to a grantee upon the grantor’s death. Arkansas’s 2021 legislative session brought about a significant change in the state’s Medicaid estate recovery rules related to property transferred via beneficiary deed. Specifically, House Bill 1162 proposed eliminating the power of the Arkansas Department of Human Services (DHS) to place liens on real property transferred by beneficiary deed. Under the prior law, a grantee’s interest in a beneficiary deed was subject to DHS’s claim for reimbursement of federal or state benefits, including Medicaid, from the estate of the grantor. The new law removed all reference to estate recovery by DHS from the statute, releasing the grantee’s interest in the inherited real property from potential encumbrance. This change did not eliminate estate recovery altogether in Arkansas. DHS can still recover the cost of benefits from a decedent’s estate through traditional probate recoveries and the other sources mentioned above.

Contributing Author: Maya Goree, Cross, Gunter, Witherspoon & Galchus, P.C., Little Rock, Arkansas.

Ultimately, the legislature codified this change by amending Arkansas Code Sections 18-12-608 and 20-76436. Arkansas’s General Assembly adopted House Bill 1162 on April 5, 2021, and the law took effect on July 28, 2021. This change in the law has both practical implications for practitioners and some broader policy implications to consider. For practitioners advising clients on Medicaid planning, this change offers another tool clients may use to preserve their assets for the next generation. For many clients seeking benefits, their home may be the largest or only asset available to leave for loved ones. Further, in Arkansas, an applicant’s home is excluded from the calculation of her assets, as are any expenditures to improve the home. Knowing that a home is not subject to estate recovery if transferred via beneficiary deed gives clients more options. Practitioners have even more incentive to advise clients not only to complete a beneficiary deed but also to make any necessary improvements on that home as part of a spend-down strategy when appropriate. In addition to the practical implications for advising clients, this change in Arkansas’s estate recovery law has some policy implications worth noting. Estate recovery is designed to recoup the costs of Medicaid, but, in reality, states recover very little of the costs for long-term care through this process. According to a study by the Medicaid and CHIP Payment and Access Commission (MACPAC), states recover as little as .53 percent to .62 percent of the cost “of the Medicaid fee-for-service longterm services and supports.” Updates on Medicaid Estate Recovery Analyses, September 2020 at slide 9, available at https://bit.ly/3pmFg8K. This minimal

contribution points to the reality that the effort likely does not achieve the intended purpose. Although this change does not eliminate estate recovery in Arkansas, it takes an important step toward limiting what is likely an inefficient tool. The potential drawback of this change is that it shifts Medicaid costs to taxpayers and away from individual Medicaid recipients and their families. Although this may be a legitimate concern, it ignores the purpose of the benefit to begin with—to help individuals in need of long-term care who cannot provide for themselves. When the state provides this benefit, it is worth asking whether the burden of the cost should be charged disproportionately to the recipients who survive loved ones. By reducing the burden of estate recovery, the state also reduces the burden of generational poverty by lowering the cost on the next generation for reimbursement of a government benefit used by a deceased loved one. Taking a recipient’s home off the table for estate recovery may have another benefit: reducing individual hesitancy to use Medicaid benefits. The threat of estate recovery may discourage potential clients who need Medicaid’s services from using available benefits because of fear of losing the only asset they may have to pass on to their children or loved ones. By eliminating this source of stress, clients may be more inclined to engage an attorney for both advice and Medicaid benefits for their healthcare needs. Arkansas’s most recent change to its estate recovery laws may be a small step with a big effect on the lives and loved ones of recipients of Medicaid long-term services and supports. n

March/April 2022

RPTE PUBLICATIONS All RPTE publications can be purchased on the ABA Web Store, ShopABA.org, or by calling the Service Center, 800-285-2221.

NEWLY PUBLISHED

Taxation and Funding of Nonqualified Deferred Compensation: A Complete Guide to Design and Implementation, Fourth Edition By Marla J. Aspinwall, Michael G. Goldstein, and Megan A. Stombock

2021, 457 pages, 7 x 10, Product Code 5431121 $139.95 List Price $109.95 RPTE Members

This updated and expanded edition of Taxation and Funding of Nonqualified Deferred Compensation is a complete and current resource for using this extremely flexible planning device to best address your client’s financial goals. Written by specialists in the field, this book defines the perspective of both the employee and employer in using this planning tool. The authors demonstrate how NQDC can provide solutions to complex compensation issues and provide up-to-date information on: • • • • •

•

The ways that NQDC can be tailored to serve the needs of employers and employees, and the tax consequences for each Differences in the timing of NQDC benefits under income tax and FICA rules How NQDC arrangements can be structured to comply with Section 409A Opportunities to minimize potential estate and income taxes on death benefits paid under NQDC How Section 457 of the IRC is applicable to NQDC arrangements for tax-exempt organizations and the unique burdens this puts on state and tax-exempt employers and their employees Issues with financial accounting and securities laws, and more

March/April 2022 57

LAWYERS’ ASSISTANCE PROGRAMS Lawyers’ Assistance Programs—A Primer What is a lawyers’ assistance program, and how can it benefit lawyers, law students, judges, and paralegals? Is it confidential? And why should RPTE members take notice of this article? Types of Lawyers’ Assistance Programs In general, a lawyers’ assistance program provides confidential services and support to judges, lawyers, paralegals, and law students (participants) who face substance use disorders or mental health issues. See https://bit.ly/3eZs1F0. At last count, all 50 states and the District of Columbia had a program for lawyers. In some states, the program is a private, non-profit 501(c)(3) affiliated with the state bar. See, e.g., Ohio’s Ohio Lawyers Assistance Program, Inc., https:// www.ohiolap.org/about. Florida Lawyers Assistance, Inc. (FLA) stresses that it is independent of the Florida Bar but receives funding from the Florida Bar. See Florida Lawyers Assistance, Inc., https://www.fla-lap.org/what-we-do. Pennsylvania’s Lawyers Concerned for Lawyers program (PLCL) website stresses that it is an independent, nonprofit corporation run by judges and lawyers. PLCL’s Annual Report emphasizes that it receives funding from the Supreme Court of Pennsylvania and the Contributing Author: Michael Sneeringer is a partner in the Naples, Florida, office of Porter Wright. He is Probate & Property’s Articles Editor for Trust and Estate and the group chair of the RPTE Section’s Non-Tax Estate Planning Considerations Group. He is a Director of Florida Lawyers Assistance, Inc. The opinions and materials contained herein do not reflect the opinions and beliefs of Florida Lawyers Assistance, Inc.

Pennsylvania Bar Association’s Lawyers Assistance Committee. See Annual Reports, https://bit.ly/3eXWe7g. In other states, the program is a direct member service. See, e.g., Wisconsin Lawyers Assistance Program (WisLAP), https://bit.ly/3F1Nk35. In some states, a direct affiliation between the bar and program is present, but the funding is provided by the state bar in other states. These state bar programs differ from traditional rehabs or organizations geared toward substance use disorders. Although a state bar program may help a lawyer find treatment, provide a personalized treatment plan, and refer legal professionals to qualified healthcare professionals, it does not offer inpatient treatment at a facility. See, e.g., Addiction Treatment for Professionals, Hazelden Betty Ford, https://bit. ly/3n3kcm2. Attorneys who contact lawyer assistance programs are not always put into one bucket. For example, a state may differentiate further among young lawyers, lawyers, and aging lawyers and consider how the different needs of lawyers who are just starting their careers differ from the needs of lawyers who are well into retirement age. See, e.g., Florida Lawyers Assistance, “Aging Lawyers,” https://www.fla-lap. org/aging-lawyers. Different approaches may be used for speaking with diverse age groups. Is My Inquiry Confidential? Participants’ inquiries are confidential. For example, WisLAP informs potential participants that each request for help is treated with the same confidentiality as a lawyer-client relationship. See Wisconsin’s Wisconsin Lawyers Assistance

Program, https://bit.ly/3t1ia9R. It notes that WisLAP is exempt from reporting professional misconduct to the Office of Lawyer Regulation under Wisconsin Supreme Court Rule 20:8.3(c)(2) and the Judicial Commission under Wisconsin Supreme Court Rule 60.04(3). Id. Furthermore, it does not require callers to its 1-800 number to disclose their identity or keep any case records. Id. Likewise, the OLAP, PLCL, and FLA websites cite state bar rules indicating the protection of those who contact those programs for help. Why Would I Inquire? Attorneys are under an enormous amount of stress to perform their best. Often, that stress begins in law school, as it is the most challenging academic exercise that many students have ever experienced. Stress, anxiety, depression, alcohol and substance use, and other mental health disorders can all be present around the ages where many begin their law school or law practice journeys. Instead of internalizing those issues or paying for outside help (as a means of the first resort), a law student, attorney, paralegal, or judge can initiate the confidential services. There may be a helping and listening ear, directions to the nearest lawyer’s assistance meeting, or, in emergent cases, a referral to a hospital or other necessary third party for treatment. For some, the stigma of stress, anxiety, depression, alcohol, and substance use often keeps them from seeking help. Others practice law or attend a law school in a small community—they are concerned with privacy. Contacting a state’s lawyers assistance program is a solution to both concerns. On the one hand, the initial contact points are

March/April 2022

LAWYERS’ ASSISTANCE PROGRAMS

trained on how to relax the inquirers used to being stigmatized for the way they feel. On the other hand, for the person seeking privacy, the point of the initial contact from within the program is often (not always) located outside his or her legal circle. Nonetheless, any communication with a lawyer’s assistance program is confidential. Why Is This in an RPTE Publication? As part of the Section’s Special Committee on Career Development & Wellness, lawyers must remember that they are

not alone. As a trusts and estates lawyer, I can report that sometimes these attorneys hear and see things that weigh heavily on an attorney’s mind. Though I do not practice real estate law and am not an expert on that area of the law, I observe that real estate lawyers face similar challenges (such as a closing that goes wrong or a deadline getting missed). Accordingly, what confidential outlet would I have to express or unload some of this stress? As a benefit of being in the practice of law, if things get tough, consider picking up the phone and dialing one

of those state lawyers’ assistance programs’ 1-800 numbers. Sure, it feels weird at first. “I am a quitter,” or “I am weak” or “I will get through this” might go through your head. “How can I trust this stranger on the other line of the telephone?” creeps into your mind. But to eliminate the daily pain and suffering, sometimes we need to take that valuable first step. And if you are in the middle of your legal training—a paralegal, a lawyer, or a judge—a loving voice on the other end of a call to the state lawyer’s assistance program may get you the help you seek. n

RPTE LAW JOURNAL JOIN THE PRESTIGIOUS RPTE LAW JOURNAL EDITORIAL BOARD Are you a real property or trust and estate professional looking to contribute your expertise and give back to the legal community? The RPTE Law Journal is offering an opportunity for you to influence the conversation among real property practitioners, to work with an outstanding editorial team, and to contribute to the Section. The Journal is seeking two editors for real property articles: Acquisitions Editor and Articles Editor. Acquisitions Editor. An Acquisitions Editor reviews for publication scholarly articles that authors have submitted to the Journal and solicits articles for publication. Despite the “editor” title, an Acquisitions Editor is not required to perform actual editing. Articles Editor. An Articles Editor reviews and edits for publication scholarly, property-related articles that the Journal will publish. An Articles Editor ensures that the substance of the article remains sound and offers any feedback for further improving the article for publication. Interested? Contact Amy Milligan, Editor, by May 1 or reach out for additional information regarding qualifications and time commitment. milligal@law.sc.edu, 803-777-3386.

March/April 2022 59

TECHNOLOGY P R O B AT E A New Era in Estate Planning for the Digital Age Today’s business and personal planning landscape is dramatically different from what we left behind in 2020 and 2021. The rapid adoption of technological innovations underscores the overused cliché that these are “unprecedented” times to navigate pandemic realities. During times of global crisis, the threat of uncertainty fosters creativity to overcome obstacles or to develop solutions never previously contemplated. There are three drivers of change disrupting the estate industry: the increased digitization of processes, acceleration of technology, and the increased usage and continued adoption of technology during and anticipated post-pandemic. Technical advancements have enabled the normalization of electronic document signing, with traditional wet signatures and paper-based estate planning no longer aligned with many clients’ expectations. The knowledge base surrounding the category of digital assets and the technical, legal, and practical challenges of planning for a client’s digital assets from email accounts to non-fungible tokens (NFTs) has burgeoned. Suppose professionals are lagging in advising clients on their use of technology on their estates. In that case, a sense of urgency is heightened as the technical planning spectrum will Technology—Property Editor: Ross Bruch, Brown Brothers Harriman & Co., One Logan Square, 14th Floor, Philadelphia, PA 19103. Contributing Authors: Jennifer L. Zegel, LL.M., TEP is the practice leader of Kleinbard LLC’s Trusts and Estates Group, based in Philadelphia, Pennsylvania. Sharon Hartung, Captain (Ret’d), PEng, TEP, is a professional engineer and author of Digital Executor®: Unraveling the New Path for Estate Planning and Your Digital Undertaker: Exploring Death in the Digital Age in Canada.

Technology—Probate provides information on current technology and microcomputer software of interest in the trust and estate area. The editors of Probate & Property welcome information and suggestions from readers. only increase. Clients will expect their estate plans to include their digital assets. Their representatives will ultimately hold practitioners accountable if they are not legally and technically accessible at the time of incapacity or death. Although we should be long past talking about social media and digitally-stored photos, it is worth revisiting basic terminology. Fundamentally, digital assets are our memories, financial records, documents, identities, collectibles, and information stored in digital form. The Uniform Law Commission’s model legislation, the Revised Fiduciary Access to Digital Assets Act (RUFADAA), defines digital assets as an electronic record in which an individual has a right or an interest. Most US states have adopted a version of RUFADAA. As overwhelming and abstract digital asset planning may appear to some, a professional advisor must prepare for this digital reality. This article orients the reader to digital awareness and aims to provide the perspective to affect the development of estate planning and administration practices. Integrating digital analysis into traditional estate planning requires a new planning paradigm. Digital Asset Entanglement: Unraveling the Intersection of Estate Laws & Technology, co-authored by the writers of this article and forthcoming by

LexisNexis® in March 2022, proposes a client persona framework to navigate a client’s digital universe. The book explores this developing framework against the case study of Gerald Cotten and his cryptocurrency exchange, Quadriga CX. Cotten died under mysterious circumstances in December 2018, leaving no plans for the management of his company, the largest cryptocurrency exchange in Canada. Quadriga was forced into bankruptcy, uncovering an abundance of issues. His estate was probated in the Probate Court of Halifax, Nova Scotia. Digital Assets Are Pervasive Within Client Portfolios Globally, court cases have emerged with families suing cloud service providers to provide access to digital assets. Examples include Ajemian v. Yahoo!, Inc., 84 N.E.3d 766 (Mass. 2017), where family members requested access to the deceased’s Yahoo account, and the UK’s Rachel Thompson case, where a widow sought access to her husband’s iCloud account. In the Matter of White, 2017 WL 8944064 (N.Y. Sur. Oct. 3, 2017), the administrator requested that the court grant access to emails containing information about the decedent’s business. The court limited the disclosure, in that case, to contact information in the account because the will was silent on digital assets. More complex issues stem from estates without cryptocurrency planning, such as the Estate of Matthew T. Mellon II (probate is ongoing in California, Los Angeles County Superior Court; Case No. 18STPB04491). Mr. Mellon died in 2018 with approximately $193 million of the cryptocurrency XRP on the Ripple blockchain, leaving no information to access the private keys (alphanumeric

March/April 2022

TECHNOLOGY P R O B AT E

codes) to transfer the crypto. For years, his estate has been tied up with massive tax bills and access issues to most of his fortune. His estate did enjoy the novelty of negotiating a deal with Ripple, however, for reasons that are not fully clear and would be nearly impossible in most other circumstances, to access his holdings and enter into an agreement to slowly sell them over time, as reported in December 2021 by the Dailydot. Although cases exist, how widespread is the issue of digital assets in the estate industry? The Society of Trust and Estate Practitioners (STEP) Digital Assets 2021 global survey report Digital Assets a Call to Action (conducted by STEP and the Microsoft Funded Cloud Legal Project at Queen Mary University of London) gives evidence on how pervasive digital assets are in an estate practitioner’s practice. Three key findings follow, which sets the context of the disruption facing the estate industry: 1. 90 percent of estate practitioners predict client demand for advice about digital assets will increase. 2. 24 percent of estate practitioners reported that clients had difficulties accessing or transferring digital assets on death or incapacity. 3. Only 6 percent of estate practitioners considered there was a straightforward process for accessing digital assets stored in the cloud in their jurisdiction. The most cited obstacles to accessing cloud-stored digital assets included technical restrictions, lack of clarity around property rights, and lack of estate planning. The five providers most mentioned were Apple, Google, Facebook, Microsoft, and Dropbox. More than half of the global population uses social media. Gartner predicts that, in the United States, remote workers will represent 53 percent of the workforce in 2022. The estate industry is digitizing every aspect of its

estate planning and administration processes, which will affect all advisors in the industry. As jurisdictions enact electronic wills legislation, it will further propel change with data integration across the entire process from client engagement to probate processes. (Refer to Digital Executor®: Unraveling the New Path for Estate Planning for more information.) Shiny New Objects in Estate Portfolios Moving beyond digital assets like email and photos are cryptocurrency, NFTs, and the metaverse. Cryptocurrencies, once taboo, have become mainstream. Countries such as El Salvador now recognize bitcoin as legal tender. The British overseas territory of Gibraltar began reviewing a proposal in 2021 for the blockchain Valereum to require the Gibraltar Stock Exchange to trade cryptocurrency along with traditional investments, which could result in the territory becoming a global hub for cryptocurrency. The IRS has expanded its crackdown on crypto-tax evasion and sought funding to bolster its enforcement unit. Currently, the IRS generally treats digital assets as personal property for income tax purposes. This is likely to change as laws, regulations, and technology progress, adding more items for an advisor to track. NFTs have been sensationalized in the media, and they present a host of challenges for estate planners. An NFT is a one-of-a-kind digital token with an embedded smart contract stored on the blockchain. A smart contract is a set of codes that trigger specific automated actions in pre-defined contexts. NFTs can be a digital collectible, like a sports trading card, artwork, or even a digital version of physical property rights. NFTs add multiple elements to planning, such as potential copyright issues, licensing restrictions, and other prohibitions in Terms of Service Agreements (TOSA) that may not be readily apparent. Many do not realize that an NFT is not the actual digital collectible; the NFT merely points to the location on the internet where the digital asset is

stored, which may not always be on a blockchain—presenting other long-term storage and access issues. The metaverse, which comprises online virtual worlds with various interconnected functions, is likely the future of our digital identities, entertainment, work, and even digital assets. For example, companies are establishing virtual space in Decentraland, a metaverse, where attorneys also set up virtual shops. Meta (formerly known as Facebook) recently launched its metaverse, Horizon Worlds, and has committed to spending $10 billion over the next ten years on its development. Most of us have been oblivious to integrating our physical and digital footprints. Still, social media, AI bots, gaming, digital currency, avatars, and digital identification are all indications of an integrated digital world with tech giants battling for dominance. While the metaverse and other technologies present new digital planning problems, considering digital assets as an asset class helps conceptualize and leverage existing estate planning and administration processes. The Digital Assets Journey Has Begun Recognizing that a multi-disciplinary approach was required to address the integrated nature of digital asset planning, Digital Asset Entanglement: Unraveling the Intersection of Estate Laws & Technology sets forth client personas to assist in identifying the implications of legal, tax, and technical strategies for digital assets in estate planning and administration based on a client’s technological behavior. Many types of clients with varying digital usage may affect both technical and legal aspects of a plan. Digital asset planning cannot be done through a single lens because needs will be diverse and changeable over time. The following are examples of a few client personas: • Basic users are clients who use email, but the use and purpose of the email must be explored. Are there multiple accounts for

March/April 2022 61

business and personal use? Are bill payment and other household maintenance functions tied to a single email account? Have any pre-planning settings offered through a service provider’s platform been used to determine access at death, such as Google’s Inactive Account Manager or Apple’s Legacy Contact? Are there paper trails to this information? What devices are owned and used? These types of questions begin to shape the implications of email and device dependency for a client, which will be necessary information in the planning process to increase efficiencies for a fiduciary. • Content creators and gig economy users are also basic users, but how a client’s personal life intertwines with his business life must be explored for this category. Clients encompassing this persona include artists selling photos online, small Etsy-type virtual shops, and bloggers. Often hobbies turn into meaningful revenue streams that could present obligations, require action, or necessitate the protection of copyrights. Domain and website ownership are important considerations for these clients, as well as the existence of payment or merchant accounts. • Innovators, tech entrepreneurs, and crypto enthusiasts are an expanding universe of individuals resulting from the blockchain revolution, central bank digital currencies, and decentralized finance. Many clients in this category may own NFTs and other digital collectibles as well as crypto and other novel digital assets, on top of being a basic user. In addition to more advanced estate planning strategies to ensure both legal and physical access to these types of digital assets at death or incapacity, this type of client needs a technical management guide or

team to ensure intentions are followed upon death or incapacity. The client persona framework raises awareness of digital behaviors and their effect on the estate industry, including the future development of estate plans, administrative policies, technical management guides, and practices. Digital Assets Readiness Starts with Awareness If the challenges from the pandemic have taught us anything about technology and innovation, it is that organizational policies, practices, and tools need to adapt, be augmented, or change as new situations arise. The early pandemic years increased our awareness of the need to address digital assets across the estate industry. Apple’s announcement of its Digital Legacy Program validated the industry’s need to address incapacity and death for digital account holders and online users. We all have a digital life, and we must acknowledge that managing our digital footprint, including our devices, accounts, and assets, is a natural part of the planning process. Examples of basic life planning hygiene follow: • Cybersecurity awareness is a dependency when operating in our digital world. Just as we have seen the COVID-19 virus mutate, the bad actors in the cyber world also vary their tactics, readying them to strike at account vulnerabilities. Cybersecurity is also about reducing your digital footprint. If an account is not required, delete it. • Consider selecting a password manager to manage digital accounts for personal use and inquire about password managers for company accounts. If clients are hesitant to use a password manager for personal use, the good old-fashioned way of password management still works. Write down the names of your accounts, your username, and your passwords, and store the list

in a safe and secure place. But sharing passwords for accounts maintained by service providers is generally a breach of the TOSA. Sharing passwords has other cybersecurity risks, but ensuring the fiduciary has an access plan that accounts for legal, tax, and technical management considerations are critical. • In Digital Asset Planning 101, all the basics apply that are used in traditional estate planning, such as inventorying assets and creating at least a will and financial power of attorney that addresses digital assets and a fiduciary’s access to those assets. If clients have digital assets of significant sentimental and monetary value or have other complexities, it will be necessary to engage experts on legal, technical management, tax, and valuation aspects during the estate planning and administration process. • Although controversial, tech entrepreneurs are already embedding estate planning business processes in consumer-based AI solutions. Business Insider reported in 2021 that venture capital has come to the end-oflife planning industry, according to their interviews with CEOs and PitchBook data. They report the median deal value in the industry is $2.65 million, up 194 percent from 2020. Stay tuned as the #estatetech area evolves. Like physical assets, real property, and traditional property rights, digital assets have an assortment of characteristics that matter in estate planning and subsequent estate administration to meet client wishes and preferences. There are additional technical and practical access planning requirements if the future fiduciary will have any hope of first finding and successfully (and legally) transferring or disposing of these assets. Although we suggest using traditional planning methods, there are two fundamental differences between

March/April 2022

TECHNOLOGY P R O B AT E

digital and traditional assets. Digital assets, by their nature, are virtual and may be difficult to find, and the law has not had hundreds of years of legislation and case law to work out the kinks. This poses unique challenges to the planner as the industry tries to keep pace with the emergence and acceleration

of this asset class. A client’s usage and technological behavior while living will dramatically affect the accessibility of these assets at death or incapacity. Clients must plan for their digital estates to ensure that the result will meet their wishes. Digital assets are not all the same, and advisors need multiple options to

address the realities of planning and administration. Despite all these new planning challenges, there is a tremendous opportunity to help shape the estate industry by embracing change and creating general practices and frameworks for the benefit of all. n

All RPTE publications can be purchased on the ABA Web Store, ShopABA.org, or by calling the Service Center, 800-285-2221.

LEGAL ISSUES IN REPRESENTING NTS VULNERABLE CLIE

2020, 207 pages, 6 x 9, Paperback/eBook Product Code 5431119 $129.95 List Price $99.95 RPTE Members

Undue Influence and Vulnerable Adults By Sandra D. Glazier, Thomas M. Dixon, and Thomas F. Sweeney Age-related issues, including diminished capacity, often indicate the potential vulnerability of a client to undue influence. Looking at the topic from a legal perspective, this new book by practitioners with extensive experience in the area explains the relevant considerations in representing vulnerable adults and provides strategies when litigation is required. Their practical and legal advice helps planners identify issues and create effective plans for these clients that may better withstand attack. Topics look at these issues and more: • Understanding capacity, defining undue influence, and the ethical considerations in representing vulnerable adults • How fraud and duress are different from undue influence • Presuming undue influence and rebutting the presumption • No-contest clauses and probable cause • Litigating undue influence cases • Using experts and understanding medical evidence • Attorney-client privilege • Video recording, electronic wills, and remote witnessing and notarization

March/April 2022 63

THE LAST WORD Apropos Apostrophes (Part 1) Apostrophes are having a moment: the New York Times recently reported that a real estate agency filed suit in Australia, claiming that its former agent libeled the owner of the agency when the agent accused the owner of “failing to pay his employees” the retirement funds owed to them. Livia AlbeckRipka, Missing Apostrophe in Facebook Post Lands a Man in Defamation Court, New York Times (Oct. 11, 2021), https:// nyti.ms/3ehmBVn. Did the post intend a singular possessive, meaning one employee’s benefits were not paid, or plural possessive, meaning that all employees’ benefits were not paid? The judge permitted the claim to proceed because the lack of an apostrophe communicated the libelous assertion that the plaintiff engaged in a systematic scheme concerning all employees’ retirement funds. Other lawsuits have hinged on a drafter’s use of—or failure to use—an apostrophe indicating a possessive. For example, in a will, a simple reference to “my brothers children” rather than “my brothers’ children” can create a family dispute if the decedent has more than one brother and each of them has children. See Money v. Money, 176 So. 817 (Ala. 1937); In re Rosenberry’s Estate, 20 Pa. D. 1047 (Orphans Ct. 1911). Further, if a construction subcontract states that the retainage will be paid “within 35 days after completion of the subcontractors work,” does the named subcontractor receive its retainage after completion of its own work or the work of all subcontractors? See Regency Midland Constr., Inc.

The Last Word Editor: Marie Antoinette Moore, Sher Garner Cahill Richter Klein & Hilbert, L.L.C., 909 Poydras Street, Suite 2800, New Orleans, LA 70112, (504) 2992100.

v. Legendary Structures Inc., 254 Cal. Rptr. 3d 624 (Ct. App. 2019). In addition to causing disputes, misused apostrophes (including those denoting possession) make grammar nerds like Lynn Truss spitting mad. See, e.g., Lynn Truss, Eats, Shoots & Leaves 35-67 (2003) (devoting 33 pages to apostrophe-use outrage). To avoid contract ambiguities—and lip-curling by grammar nerds—drafters and others need to know and comply with a few simple (and not-so-simple) rules governing the use of apostrophes to create possessive nouns: Possessives of Singular Common Nouns: • Use ’s to form the possessive singular of a common noun; for example, attorney’s fees and year’s end. For the beloved (and necessary) references to attorney’s fees, Professor Garner advises the use of the singular possessive generally but permits attorneys’ fees if more than one lawyer will be paid. Bryan A. Garner, The Redbook; A Manual on Style 154 (3d ed. 2013). • Most say that ’s is also correct for common nouns that end with an s; for example, access’s path. However, this rule does not appear to be immutable. In one section of his Redbook, Professor Garner excludes the use of ’s in situations where the word would be “truly hard to pronounce” (Huh? All of these words are excessively sibilant). Id. at 56. In another section, however, he states there is “no exception for sibilant endings.” Id. at 134. Benjamin Dreyer agrees with the “no exceptions” position and explains that formations like princess’ tiara are “positively spooky-looking.” Benjamin Dreyer, Dreyer’s English 38 (2019). So, do your best—but don’t create an ambiguity as to whether

you’re talking about a singular, for example, brother, or a plural, all brothers. Possessives of Plural Common Nouns: • Generally, add just the apostrophe to make a plural noun possessive, as in drafters’ mistakes. This clearly means all drafters, not just one. • But Professor Garner permits a narrow exception for use of an ’s to form the possessive of some irregular-form plural nouns; his examples are mice’s and geese’s. Garner, supra, at 136. Possessives of Names—Singular and Plural: • The possessives of names, even those that end with an s, follow the same rules as the possessive plurals of other nouns, with exceptions (of course). So, use the ’s for the possessive form, as in Justice Roberts’s opinion. See, e.g., Dreyer, supra, at 39. • For more than one person in the same family, form the plural with the s, as in the Washingtons, or es if the proper name ends in s, as in the Adamses. Then, add the apostrophe, so the Washingtons’ house or the Adamses’ opinions. There are many other rules and conventions for forming possessives, and a few possessive mistakes that all of the authorities decry—for example, the unbending rule that it’s must never be used to mean the possessive of it. This is an apostrophe abomination. Use it’s only to mean it is. The possessive plural of it is its. Don’t ask why—it’s what it is, so to speak. The frequent misuse of it’s illustrates the confusion sometimes created by apostrophes in contractions. In the next issue of Probate & Property, we’ll look further at apostrophe use in contractions and the dreadful mistake of using apostrophes to form plurals. n

March/April 2022

RPTE LAW JOURNAL

Don’t forget to check out the latest articles from the Digital RPTE Law Journal Fall/Winter 2021 Articles Standing in Land Use Litigation Daniel R. Mandelker Can a Pledge of Equity Interests Be a Prohibited Clog on the Equity of Redemption? Brian D. Hulse Conservation Easements and the Proceeds Regulation James P. Spica Boswell’s Entail: A Study in Legal Reasoning Douglas H. Frazer

To review the latest Digital RPTE Law Journal visit

www.ambar.org/rptejournal

Have you renewed your ABA Membership? Don’t miss out on practice specific content. Renew today to maintain access to resources like this and more.

Scan the QR Code to renew.

This publication is an exclusive ABA Member Group benefit. If you have recently renewed, thank you for your continued membership.

Probate & Property - March/April 2022, Vol. 36, No. 2

Articles inside

Technology—Probate

Lawyers’ Assistance Programs

Career Development and Wellness

Practical Pointers from Practitioners

How to Love Remote Work

The Changing Landscape for Billboard Regulation

Uniform Laws Update

Valuation of Real Property When There Has Been a Recent Sale

Keeping Current—Property

Keeping Current—Probate

What to Do When Reviewing a Small Lease—Some Practical Suggestions

Wireless Landlords: A Checklist for Protecting Landlord Rights and Budgets