Friday, November 22, 2019

A new law may fix student loan debt when filing for bankruptcy

It's almost impossible to get rid of student loan debt when filing for bankruptcy, but help may be on the way
From: Business Insider
By: Mike Brown,LendEDU

Tuesday, November 19, 2019

Taxi medallion owners win class-action status as reported in Cranes New York Business

"A lawsuit charging that the city sold 400 taxi medallions under false pretenses about their worth and then breached its contract by letting ride-hail operators enter the market and undermine medallion values has been certified as a class-action suit.

The suit, brought by five medallion owners and filed in early October, could now apply to more than 150 medallion owners, according to Daniel Ackman, one of the lawyers for the plaintiffs. The decision in State Supreme Court in Queens County was delivered late last week.

The disputed medallions were bought at three auctions held by the Taxi and Limousine Commission in 2013 and early 2014—when prices were still astronomically high and Uber had barely dented the market. The sales netted the city $360 million.

 Mystery buyer snaps up taxi medallions as prices fall further
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 Cab drivers and owners get caught in the headlights of a troubled taxi lender
Ackman is asking for the city to take back the medallions from the auction winners and return the $360 million they paid for them. The medallions' prices ranged between $803,000 and $965,000 for independent medallions and $1.025 million and $1.259 million for corporate medallions, according to the suit.

Medallions are currently selling at private auctions for less than $150,000 apiece.

"Not once before the Auctions did the City warn prospective buyers that it was about to radically change the economics of the taxi industry by allowing a massive influx of new for-hire vehicles—principally cars hailed through electronic apps—that would decimate the value of the yellow taxi medallions," attorneys write in the suit. "Nor did the TLC disclose that it would license the e-hail taxis as “black cars” despite the fact that they did not qualify for these licenses. Instead, Defendants omitted this information which, had it been known, would have dissuaded potential Auction bidders."

Both the city and the plaintiffs have asked the court for summary judgment.

The city's law department and the Taxi and Limousine Commission did not respond immediately to a request for comment.

But in a related suit brought by Ackman that is currently before the same court, the city has argued that in its contracts with the medallion owners it made no claims "as to the present or future value of a medallion, or the present or future application of TLC rules."

The city also noted that the contracts did not imply an "obligation to protect [the medallion purchasers] from competition from app-based companies such as Uber, when their contracts explicitly said otherwise, and when Uber was already operating in the market at the time of their purchases."

A private-equity firm buying up taxi medallions could take on Lyft and Uber
The city and the TLC have a good record defending themselves from the claims of medallion owners who blame them for the plunge in medallion values. In one noted case in Queens Supreme Court in 2015, a judge ruled that an e-hail was a prearranged ride--essentially what black car services have always provided--and did not conflict with medallion owners' street-hail privileges.

Ackman maintains that his case is narrower than earlier suits, applying only to medallion owners who bought the assets directly from the city, and centers on the contractual relationship between them. It is also coming at a time when there is wider recognition of the hardships medallion owners have faced--highlighted by multiple suicides--and more interest among elected officials in taking steps to help them.

A favorable ruling "could have implications beyond this case," Ackman said. "It's possible if a judge says, 'Yes, the city's conduct destroyed the value of the medallions,' that could spur other actions by the city or the state.""

Monday, November 11, 2019

Student Borrower Bankruptcy Relief Act of 2019


Congressman Wm. Lacy Clay (D) Missouri has introduced two new bills to tackle America’s student loan debt crisis.


Wednesday, November 06, 2019

The Failed or Closed Restaurant and its Lease

Continuing our blog posts about failed or closed restaurants,
when client’s contact us about a failed or closed restaurant, we
ask them to prepare and bring us an Income Statement and a Balance
Sheet for the restaurant.

The purpose of the Income Statement or Profit and Loss Statement is to
show the revenue and expenses for the restaurant for the current year and
to determine the profitability of the restaurant, if any.

The purpose of the Balance Sheet is to determine what money or property is
owed by the restaurant (liabilities), such as back rent to the Landlord,
sales tax, wages due to employees or money owed to suppliers.
We also want to know what property or assets the restaurant has to
satisfy the claims of creditors.

In our experience of representing  failed or closed restaurants, a couple of
 facts become apparent:

Restaurants have little to no inventory, the perishable goods must be used or
 thrown out.
-The accounts receivable are generally credit card based and collected by the
restaurant in 5 to 20 days
-The  used pots, pans and knives have little value
- Fixtures or property attached to the walls or the floor belong to the Landlord and
-The bar stools, tables and other property is generally auctioned off by the restaurant
owner  in a going out of business sale or sold by an auctioneer for 10 to 15 cents on the dollar.

There is however one asset that is often overlooked by restaurant owner and that is the lease. 
The lease needs to be reviewed to determine if the rent is below market, at market or above
market and how many years are left on the lease (the term).

A lease with less than three years remaining on its term, generally has little to no value.

Simerly a lease that is at market or over market generally has no value.
However an “under market” lease with 3 or more years on its term, 
may have a significant value.

The approach that we suggest for the under market lease  is that the assignment and
sublet provisions of the lease be reviewed, then the restaurant owner should contact
the landlord and indicate that they are considering closing their business and they
would like to assign or sublet the lease to a third party or have the landlord “by them out”
out their lease.

The restaurant owner with an under market lease, may want to contemplate hiring a
real estate broker to review the lease, to negotiate with the landlord and to market 
the lease to third parties.

The general standard in New York for the approval of an assignment or sublet of a
lease by a tenant is known as “not unreasonably withheld”. In plain English what
this means is that if a tenant finds a suitable party, that wants to take over the lease,
the landlord must be “reasonable” in approving or not approving /consenting to an
assignment of the lease or the Landlord can be sued.

The Landlord will want the lease to be sublet to a third party and not assigned, so that
the landlord will have recourse against the existing restaurant owner and the new
 restaurant tenant. If the restaurant lease is able to be assigned or sublet, then the 
tenant’s security deposit (which generally is two to three months of rent) will be
preserved and ultimately returned to the restaurant owner.

That money (sublet money & security deposit) can often times create a significant
amount of money, that can be used to pay creditors, such as sales tax, or monies due
the landlord that are guaranteed by the restaurant owner.

A number of issues related to failed or closed restaurants have been discussed in prior blog posts.
Clients with failed or closed restaurants, that have questions regarding the closing of the restaurant,
or a bankruptcy filing by the restaurant or restaurant owner or a sublet or assignment of the lease
should contact Jim shenwick at 212-541-6224 or at
Jim Shenwick has experience in workouts, bankruptcy filings and office leasing. 

Sunday, November 03, 2019

The Closed Restaurant and Guarantees and Good Guy Guarantee of the Restaurant Lease

In our continuing series of posts on failed or closed restaurants, many clients have asked us to review the custom 
and practice and the law regarding guarantees and  good guy guarantees for restaurant leases.

 Most restaurants in New York are owned by a limited liability company (“LLC”) or a Subchapter S corporation. 
That entity will set up and run the restaurant and the LLC  or S corporation stock will be owned by an  individual.

 In negotiating the restaurant lease, all Landlords will require that the owner of the LLC  or the S corporation 
guarantee the lease.

There are two types of lease guarantees in New York. A full or complete Guarantee for the payment of  rent or 
additional rent by the restaurant under the lease. Under this type of Guarantee, if a restaurant fails to make
lease payments for 6 months  or any period of time and owes $50,000 for  rent and additional rent  under the lease 
and these monies are not paid by the restaurant, the Landlord can demand that the guarantor pay those monies and if 
payment is not made, the Landlord can  sue the individual that owns the restaurant/guarantor for that sum of money. 
This is an example of an unconditional or unlimited guarantee by the restaurant owner to the Landlord.

 The second type of guarantee is what is known as a “Good Guy Guarantee (“GGG”)”, which is a specialized type of guarantee 
which limits the payment  of the guarantor under  the restaurant lease, if certain conditions enumerated in the GGG are met.  
If the restaurant performs those conditions, the guarantor is released from its  obligations under the Lease. 

An example is provided below. 

Example, many GGG require that the following conditions be performed by the restaurant in order for the GGG clause 
to come into effect and to limit the restaurant owners exposure to the Landlord for future rent. 1.  the restaurant  
must be current on its payment of rent and additional rent, when the GGG sends a letter to the landlord indicating that 
the restaurant is closing, 2 . written notice must be given to the Landlord (as specified in the lease) regarding the 
date of the  closing of the restaurant a certain number of days in advance of the closing date  (usually 45 to 60 days), 
3.the restaurant must be left in  “broom clean” condition and 4. keys for the restaurant must be delivered to the Landlord. 

Under this scenario, if all 4 conditions are satisfied, the guarantor is released from its guarantee under the Lease. 

However, the restaurant remains liable for the remaining rent and additional rent due under the Lease, unless the Landlord 
releases the restaurant from future rent (by the parties entering into a Lease Surrender Agreement) or the restaurant’s lease 
is subleased or assigned to a 3rd party in accordance with the terms of the Lease and  with the consent of the Landlord. 

As can be seen from the above examples, a GGG is a more limited form of guarantee. 

Under New York custom and practice, the guarantee whether it is a regular guarantee or a GGG can be incorporated into the 
terms of the lease,  but it must be signed and dated by the guarantor and the guarantor is usually required to give his or 
her social security number  and home address to the Landlord.

The guarantee or good guy guarantee can also be its own  separate document  and it is usually two to five pages long.

Before a restaurant closes, the lease and the guarantee, should be reviewed  by an experienced attorney to determine what 
conditions must be met. Any clients having questions regarding a closed or failed restaurant and lease guarantees or good guy 
guarantees should contact Jim Shenwick at 212-541-6224 or  email him at Jim Shenwick negotiates leases, 
practices bankruptcy law and represents failed or closed restaurants.