Tuesday, May 20, 2014

After the Lease Expires: Holdover Tenants

In a general month-to-month tenancy in Ohio, the landlord must give a tenant at least thirty (30) days notice of termination prior to the periodic rental date, which is the date on which rent is due. For example, if monthly rent is due on May 1, the landlord must give notice on or before April 1. If the landlord does not give notice until April 3, however, the tenant can stay until May 31.

But what happens if notice is given but the tenant does not leave? A landlord can either 1) have the tenant evicted or 2) accept payment from the holdover tenant. (Baltimore & Ohio RR. Co. v. West, 57 Ohio St. 161, 165-166 (1897)). If a lease expires and the tenant continues to pay rent, and the landlord continues to accept the rent payment, the “holdover tenant” has created a new periodic tenancy.

The length of the term of the new tenancy is based on the expired lease. A lease that provided for annual rent will be held as a year-to-year tenancy, and one that required rent to be paid monthly will be a month-to-month tenancy. A provision that states an annual Base Rent payable in equal monthly installments is considered, under Ohio law, a year-to-year tenancy. (Cesta v. Manfredi, 101 Ohio App.3d 326, 329 (1995)).

For example, imagine a tenant who rents a commercial space for $12,000 annually (payable in monthly installments) from June 1, 2012 until May 31, 2013. If the tenant continues to pay rent after the lease expires, and the rent is accepted by the landlord, a new one year term is created. Assuming the tenant is still paying the annual rent in equal $1000 monthly installments, he can argue that a year tenancy was created and can occupy the premises until May 31, 2014, regardless of when notice to vacate is given by the landlord. If the holdover tenant vacates prior to the end of the term, the landlord can require him to pay the annual $12,000 that is due for the entire new term, but the landlord is still under a duty to mitigate damages, including finding a new tenant.

As always, it is essential for both landlords and tenants – particularly in commercial settings – to ensure that their lease has a well-drafted holdover clause.

Tuesday, May 13, 2014

Forming an Ohio Nonprofit: An Overview

The Ohio Attorney General reports more than 42,000 registered nonprofit organizations in Ohio. How do you add your great idea to the list?

The first decision you must make is what type of nonprofit organization to form. Probably the most common is the nonprofit corporation, because it enables the founder(s) to limit liability. Under Ohio law governing nonprofit corporations, the founder must file articles of incorporation with the Ohio Secretary of State. In addition to an initial filing fee of $125, you will need, among other things, a distinctive name and a well-defined purpose for the organization.

Once your nonprofit corporation is formed, you must still meet additional requirements to continue operating. Ohio law requires you to regularly make filings. For example, every five years nonprofits must file a statement of continued existence. Additionally, the Ohio Attorney General requires an annual charitable registration filing.

In order for your organization to be tax-exempt, you must apply for tax-exempt status with the Internal Revenue Service, not the state of Ohio. The IRS lists a variety of different tax-exempt organizations  – each with slightly different rules – so it may be helpful to consult an attorney to ensure that your corporation meets the correct guidelines. Annually, you will have to file Form 990 with the IRS; if you do not, your tax-exempt status could be revoked.

More helpful nonprofit resources are available from the Ohio Secretary of State or the Ohio Attorney General.

Tuesday, May 6, 2014

Listen....Do You Want to Know a Secret?

“Three may keep a secret, if two of them are dead.” Benjamin Franklin, Poor Richard’s Almanack

Secrets, especially business secrets, are hard to keep, and companies may take extreme measures to protect their valuable confidential assets. There are times, however, when your confidential information may need to be shared in a limited manner.  When discussing a potential business sale, franchise agreement, collaboration, subcontractor hiring, or other transaction, it’s important to protect yourself from the intentional or accidental spilling of secrets.

Before you begin sensitive business discussions, we recommend that the two parties begin by signing a nondisclosure or confidentiality agreement. A nondisclosure agreement enables you to explore a potential business relationship without fear that your existing business secrets will be compromised. In essence, the parties agree that certain confidential information may only be used to evaluate the potential relationship and may not be disclosed to third parties.

Among the important questions to examine are:
  1. What information must be kept confidential?
  2. Are there any exceptions in which confidential information may be disclosed? For example, can the information be shared with your attorney or financial advisor? 
  3. What efforts are required to prevent disclosure? 
  4. How long does the confidentiality agreement last? 
  5. If confidential information is disclosed in violation of the agreement, what remedies do you have? 
Because there are at least 45 tips to consider when reviewing a nondisclosure agreement, you may wish to consult an attorney to make sure that your secrets are well-kept.