Spring 2008 • Volume IV, Issue 1
1809 Northwestern Avenue, Stillwater, Minnesota 55082 • (651) 439-2878
Construction Defects After the
Eckberg Lammers provides this The construction boom of the last decade has created an increase in the number of
newsletter as a service to its construction defect litigation problems faced by homeowners, building owners and
clients and associates
throughout the local community.
construction professionals. It is important that these parties understand the crucial time
The firm is committed to raising limitations which govern construction defect suits. The most basic of these limitations are the
awareness of timely legal issues 2-Year Statute of Limitations and the 10-Year Statute of Repose. Both act in different ways to
and sharing the knowledge of its
highly qualified attorneys.
foreclose lawsuits after the passage of time.
Legal Advantage helps you stay The 2-Year Statute of Limitations addresses the question of when a lawsuit may be brought
informed in today’s complex for a construction defect after facts sufficient to alert the property owner or user of the defect
are known to the property owner or user. Stated generally, the property owner has two years
from the date on which the property owner became aware of facts sufficient to tell the
reasonable person that a defect existed (note that this does not mean that the property owner
must know everything about the defect; for example, early discovery of water intrusion,
leakage or structural cracking can trigger the statute of limitations, even though the exact cause
of the problem is not known). In fact, under Minnesota case law, knowledge by a previous
INSIDE property owner can trigger the running of the 2-Year Statute of Limitations.
The Statute of Repose is different in that it provides a 10-year limitation period for
2 | LEGAL UPDATE bringing suit, regardless of when the defect was discovered. The ten years can be extended
• Commercial Landlords: minimally under limited circumstances, and it generally begins running from the date of
Avoid Unwanted Liability substantial completion or date of issuance of a certificate of occupancy.
for Tenant Improvement In either case, the deadlines provided by the Statutes of Limitations or Statute of Repose are
unforgiving and must be complied with strictly. If you have questions concerning land use,
• Using an LLC: Protect
construction or commercial litigation matters, contact Dave Snyder at (651) 351-2131.
the Family Business and
David K. Snyder is a partner at Eckberg Lammers who concentrates
3 | EDUCATION his practice in land use, municipal law and civil litigation. David
• Alternative Financing
advises many municipalities, businesses and individuals in state and
Methods in a Slow Real
federal courts on matters involving commercial disputes,
construction defects, eminent domain and complex litigation. David
4 | FIRM NEWS represents a broad range of clients, including Fortune 500
• New Partner to the firm companies, municipalities and small business owners.
Eckberg, Lammers, Briggs, Wolff & Vierling, pllp
Personal Injury / Wrongful Death • Estate Planning / Probate • Family Law / Divorce • Mediation
Business and Commercial Law • Criminal Law • Real Estate • Land Use Law • Municipal Law • Civil Litigation
Using an LLC:
Protect the Family Business and
Commercial Reduce Taxes
These days everyone is
Avoid Unwanted Liability for Tenant talking about Limited Limited Liability Company (LLC): a legal form
of business entity offering limited liability and tax
Improvement Projects Liability Companies
(LLC’s). However, LLC’s are opportunities to its owners.
Commercial landlords should take note of not just used for business
Minnesota Statute §514.06, which is designed to purposes or for limiting the liability of assets anymore. In recent years,
allow property owners to protect their property the LCC entity has become the most commonly used entity for family or
from being subjected to mechanics liens for closely owned real estate and income-producing property. Typically, senior
improvements made by other parties, such as family members such as parents or grandparents will place real estate or
tenants or purchasers. Generally, mechanics liens income- producing property (including rental property, vacant or farm
attach to properties to ensure payment to land, or other investments) into an LLC, which will immediately limit
contractors and engineers who performed the personal liability of the senior family members to the assets held in
improvements on the property. A tenant making the LLC. With the right planning, the LLC can do a great deal more
than simply limit liability. Today, LLC’s provide a wonderful tool for
commercial improvements may be legally
maximizing annual gifting, passing assets at death outside of probate, and
presumed to be doing so on behalf of the for many other transfer tax and non-transfer tax objectives.
landlord, thus subjecting the property to a Once the LLC is formed, the senior family members can transfer
mechanics lien for improvements authorized by membership units of the LLC to junior family members (children and
the tenant. grandchildren) and accomplish a multitude of non-transfer tax objectives.
If an owner has actual knowledge of For example, the senior family members will be able to retain control of
improvements being made to his or her property the asset, investment or business while sparking the interest and awareness
at the request of a tenant, then that owner is of the junior members. Generally, when a junior receives membership
obligated to notify the persons doing the work units of the company, that junior member will likely take an active
that such improvements are not being made at the interest and become involved the company or learn how to manage the
owner’s request. Otherwise, the owner could face
Additionally, LLC’s avoid costly and burdensome probate, provide for
potential liability for the improvements by virtue investment flexibility, increase diversity of investment by pooling assets,
of a mechanics lien attached to the property. In protect against transfers outside the family (by adding a right of first
order to prevent a mechanics lien from attaching refusal in the buy/sell agreement), and allow for easier gifting of the asset
to the property, a commercial landlord should by creating the opportunity to gift membership units of the asset, thereby
notify contractors within five days after obtaining avoiding fractionalizing the asset.
knowledge of tenant improvements that the When gifting membership units of an LLC, there is an opportunity to
improvements were not requested by the owner or maximize gifts and transfer tax incentives by taking advantage of
the owner’s agent. Notice must be provided in Minority and Lack of Marketability discounts. Pursuant to federal law,
writing or posted conspicuously on the property. an individual taxpayer cannot gift more than $12,000 a year to any one
beneficiary without tax penalty. If you make a gift of the maximum
For more information on how this statute may
annual exclusion amount of $12,000 to your child, your child receives a
apply to tenant improvements on your property, gift of $12,000. However, if you make a gift of $12,000 worth of
please contact Dave Snyder at (651) 351-2131. membership units of your LLC, the gift (for gift tax purposes) will be
considerably less than $12,000,
meaning that you can gift more
Justin D. Bonestroo is an associate with Eckberg Lammers. Justin than $12,000 in actual value
concentrates his practice in estate planning, probate and trust without any tax penalty.
Accordingly, gifts of LLC shares
administration, and real estate law. His practice involves drafting
provide donors with a wonderful
and/or administering wills, irrevocable and revocable trusts, opportunity to maximize their
beneficiary designations, powers of attorney, healthcare directives, annual exclusions. Similarly, the
same discounts will be applied in
irrevocable life insurance trusts, LLC’s, guardianships and
a testamentary devise and can
conservatorships, medical assistance planning, deeds, purchase drastically reduce applicable
agreements, CIC’s and 1031 Property Transfers. estate tax.
w w w. e c k b e r g l a m m e r s. c o m
Alternative Financing Methods in a Slow Real Estate Market
Most real estate transactions involve predetermined purchase price. The option, the seller
Contract For Deed: a
buyers financing the transaction option to purchase will typically be has the contract for the sale of real
through a combination of cash and held open for a period of one to three advantage of estate where the purchaser
conventional financing with a years. The seller continues to own the passing many of immediately takes
possession and ownership
mortgage lender. The seller receives property until the buyer exercises the the ownership responsibility in exchange
payment for the real estate purchased, option to purchase. responsibilities to for monthly or other periodic
and the buyer receives title and The advantage to the buyer in a the buyer, as well payments. Upon completion
of payments, the title to the
possession to the property at closing lease with option to purchase is that as having a buyer property is conveyed by
when conventional financing is used. the buyer has a right to purchase the who is deed from the seller to the
Periodically, market conditions property, with additional time to contractually purchaser.
cause buyers to seek alternatives to secure financing for the purchase. The obligated to
conventional financing. In the 1980’s, seller benefits from rental income and purchase the property.
alternative financing methods were in having a potential buyer for the
common because of high interest rates. property. Seller Financing. This option is less
Alternative financing is again common than a contract for deed, but
becoming popular, this time because of Contract for Deed. A contract for is another option available when a
increased restrictions on lending and a deed is a transaction where the buyer buyer cannot obtain conventional
high volume of homes on the market. makes monthly payments toward the financing. Using this option, the
Buyers who are unable to obtain purchase of the property, rather than closing will occur quickly, like a
conventional financing are finding leasing the property. This option is conventional sale. The buyer
sellers more willing to provide seller more popular than a lease with option immediately receives title to the
financing in order to sell their to purchase because it feels more like a property, but the seller continues to be
property. sale to both buyer and seller, for several involved as a lender. Like a bank in a
Unlike conventional financing, reasons. First, Minnesota law requires conventional financing situation, the
seller financing requires the seller to be the contract for deed to be recorded, seller will loan the buyer all or part of
involved in the transaction long after giving the buyer an immediate and the purchase price, and receive a note
the closing. Alternatives to public interest in the property. The and mortgage in return. The mortgage
conventional financing include: lease seller still holds record title to the secures the buyer’s interest in the
with option to purchase, contract for property, but the seller’s role is more property, giving the seller the right to
deed, and seller financing through a similar to that of a lender. Second, foreclose if payment is not received.
note and mortgage. The following is a under most contract for deed Although not as popular as a contract
brief description of these financing transactions, the buyer truly steps into for deed, seller financing may be worth
methods, as well as the impact of the an ownership role and is responsible considering under certain
financing on the buyer and seller. for maintenance, taxes and insurance circumstances.
on the property. While conventional financing is
Lease with Option to Purchase. In a Like the lease with option to generally the best option, these
lease with option to purchase, a purchase, a contract for deed can be alternative methods are available to
prospective buyer will lease the beneficial to buyers and sellers when a buyers who otherwise could not
property for a period of time, instead traditional sale is not an option. In purchase property. Before using one of
of immediately purchasing a property. this option, the buyer obtains these methods, both buyers and sellers
One of the terms of the lease will give financing in a situation where should seek advice about which option
the prospective buyer the option to conventional financing may not have makes the most sense for their
purchase the property for a been available. Unlike the lease individual transaction.
C ame ron R. Kelly is an associate with Eckberg Lammers who practices in the areas of real estate and
municipal law. His real estate practice includes counseling clients in the areas of commercial and
residential transactions, title issues, title registration, boundary disputes, commercial and residential
leases, land use and development.
New Partner to the firm: Sean P. Stokes
The law firm is pleased to announce that Sean P. Stokes has become a partner
with the firm. Sean joined the firm as an associate attorney in May of 2002
practicing in the areas of family and criminal law. He has been a practicing
attorney since 1997 when he was admitted into the Minnesota State Bar. Prior to
joining the firm Sean was an Assistant Prosecution Attorney in Sherburne County
Minnesota. Sean is a 1994 graduate of Xavier University in Cincinnati, OH and
graduated from the University Of Minnesota Law School in 1997.
Sean currently serves on the Stillwater Township Planning Commission, Family Means Board of Directors
and is past president of the 19th District Bar Association. Sean and his wife Kerri have six beautiful children
and reside in the St. Croix Valley. He and his family look forward to continued involvement in community
activities and organizations.
President-Elect for the YLD: Nicholas J. Vivian
Attorney Nicholas J. Vivian has been elected by his peers to serve as President-
Elect for the Young Lawyer’s Division (YLD) of the State Bar of Wisconsin.
Collectively, the Young Lawyers Division is comprised of more than 5,000
attorneys who are either under the age of 36 or in the first five years of practice.
The YLD serves two primary functions. It is a resource for young and new
lawyers in the practice of law providing education and advocacy within the State
Bar. It also gives young lawyers the opportunity to participate in valuable public
service projects, providing quality legal services to Wisconsin’s most vulnerable people.
In addition to his active participation in the Wisconsin State Bar, Nick is involved in the leadership of the
19th District Bar Association in Minnesota. Nick also serves on the Board for the St. Croix Economic
Development Corporation and is a member of the Hudson Daybreak Rotary Club, serving as the
organization’s Program Chair.
Eckberg, Lammers, Briggs, Wolff & Vierling, pllp Permit No. 1181
St. Paul, MN
1809 Northwestern Avenue
Stillwater, Minnesota 55082
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