LAW NOTES

WINTER 2020

LONG TERM INSTALLMENT SALES CONTRACTS BECOME MORE FORMAL

            An alternative to the traditional sale and purchase of real estate procedure is an installment sales contract. An installment sales contract is a contract or agreement for the sale and purchase of residential real estate in which the payments are made periodically and the seller retains an interest in the property until the final payment is made.  Popular belief is that an installment sale is a more informal and thus less expensive way to buy a home. However, the Illinois legislature has enacted a new law that makes installment contracts more formal by requiring them to contain more detailed terms.

            The Illinois legislature enacted the Installment Sales Contract Act (765 ILCS 67/) which provides that installment sales contracts executed after January 1, 2018, must be in writing and must contain certain provisions designated in the statute.

            The Act requires over twenty-five (25) different specific provisions or pieces of information to be included in the contract. In addition, the Act does not allow the parties to the contract to waive any of the required provisions, which means those provisions must be in the contract. The sellers must comply with several disclosure laws, including the Lead Poisoning Prevention Act, the Residential Real Property Disclosure Act, the Illinois Radon Awareness Act, and the High-Risk Home Loan Act. There are certain documents required by the disclosure laws that need to be filled out and signed by the parties. In addition to the 25 required contract provisions and disclosure law compliance and documents, the Act has mandates for recording the contract, disbursing insurance proceeds, prohibitions, and time periods for certain situations such as curing defaults.

            Until both parties have a copy of the contract signed by buyer and seller with the signatures notarized and the required provisions, the contract can be rescinded at any time by either party, and the seller has to refund all of the money the buyer paid. In addition, individuals violating the Act may be sued for damages, attorney’s fees, given a civil penalty not to exceed $50,000, and made to pay restitution. Because of the complexity of selling or buying a home using an installment sales contract, it is advisable to consult an attorney to draft the contract and provide assistance with the new legal requirements.

 CERTAIN EMPLOYERS’ PRACTICES ARE NOW PROHIBITED

            The determination of wages for an employee is among the most important decisions made by an employer. The Illinois legislature made new changes to an existing law which will affect some of those wage and benefits practices. The new provisions were added to the Equal Pay Act of 2003 (820 ILCS 112/) which became effective September 29, 2019.

            The first provision prohibits an employer from asking a job applicant, in person or on paper, about his past or current salary history throughout the hiring process. One of the exceptions to this prohibition is if the employee already works for that company and is seeking another position at that company. In that case, the employer may ask about his or her wage or salary. Applications and other hiring documents should not have questions about past wages or benefits. However, an employer may still ask about the employee’s expectations of wages and benefits. In addition, a job applicant can voluntarily give an employer his or her salary history, but the employer may not bring up the subject or ask. Even if the employee gives the employer information about his or her salary history, the law prohibits the employer from using that information to decide whether to hire that individual.

            The second provision restricts an employer from having an employee sign a document that prohibits him or her from disclosing his or her wages, salaries, benefits or other compensation. An employer can still prohibit an employee from discussing another employee’s salary without his or her consent. If an employer has a non-disclosure agreement, a provision in its employee handbook or a similar document that restricts an employee from talking about his or her wages, then that document will need to be revised to comply with the updated Equal Pay Act.

            An employer who violates the Act could be fined up to $5,000 for each violation for each employee affected in addition to other civil damages. The Act allows for an employee to sue the employer and request that the employer pay court costs and attorney’s fees. The differences between allowed and disallowed activities by employers are not clear cut as may be applied to a particular interview situation. An attorney can assist with the changes to existing employment practices to comply with the law.

UPDATE YOUR ESTATE PLANNING TO AVOID UNWANTED CONSEQUENCES

            Estate planning early in life is just as beneficial and important as having a Will or Trust later in life. No matter when you do your estate planning, it is important to remember to continue to update your estate plan through major life changes, such as a marriage, having children, getting a divorce, or losing a loved one. It is crucial that your estate plan accurately reflect your current wishes and current circumstances.

            A 2018 Illinois Appellate Court decision in a probate case dealt with disposition of a 401k plan that still listed the ex-wife as a beneficiary of the decedent. A 401k plan is considered a non-probate asset because the plan participant designates beneficiaries to whom the plan benefits pass directly after the participant passes away. However, the executor in the case believed that the beneficiary of the 401k plan should be the estate and pass according to the will instead of passing to the ex-wife. The Illinois Appellate Court concluded that the benefits from the 401k plan should be distributed according to the decedent’s Will instead of to the ex-wife because of the specific provisions in their divorce decree.

            This case involved very specific facts. The outcome of this case cannot be applied to every situation. Generally, a retirement plan will be distributed to the beneficiaries designated by the decedent. This court case highlights the importance of updating your estate planning documents, including Wills, Trusts, and Powers of Attorney, and updating the beneficiaries of non-probate assets such as life insurance policies, retirement plans, annuities, etc. If the documents are not updated, your wishes may not be carried out. In addition, updating your estate plan could prevent lengthy and costly litigation which can drain assets intended to be given to your loved ones. An attorney can help you review and update your estate plan to safeguard your current wishes.

START YOUR SUCCESSION PLANNING BEFORE IT’S TOO LATE!

 Small businesses are the economic engine of our region. Many of our local businesses are owned by people close to retirement age. Whether you are a business owner or work with a business owner, planning for the future of the business is important for your future.

            Many business owners do not have plans for succession of the business upon retirement or death. Most business owners want their businesses to continue after them and remain successful. However, unless steps are taken to start planning for the business’s next owner, the business could cease to exist or become a mess for the successors. Succession planning is an important part of any business and should be started early to avoid certain negative tax or legal issues.

            Succession planning allows for future generations to take over the family business, allows an owner to reward a deserving employee, allows the remaining partner to continue the business, or allows the owner the flexibility and opportunity to sell the business to a specific person after he or she passes away. There is no exact plan for everyone and every business. Each individual or business will have different succession plans depending on the type of business, structure and organization, business assets and the people involved. Estate planning documents, such as a will or trust, are not the only way to pass on the business after an owner’s death. Depending on the business, there are various methods by which an owner can pass on the business upon his or her retirement or death. These methods include slowly transferring ownership of the business over a period of years, which makes it more affordable for the successor and provides for a smooth transition when the successor takes over completely.

            There are tax and legal consequences with each of the different options for succession planning. You should consider the consequences, benefits, and cons to each option before making the best plan for you and your business. An attorney can help advise you on the different options for your business and the details to consider about the options. An attorney will also draft the documents necessary for your succession planning depending on the option you choose. Do not wait until it’s too late. Start your succession planning now.

SPECIFIC REQUIREMENTS TO TERMINATE FARM LEASES UNDER ILLINOIS LAW

            Leasing farmland to others to grow crops or raise livestock is a common practice in this geographic area. However, landlords and tenants should be aware of the requirements for a lease and the procedures for terminating a lease. Illinois law provides specific requirements landlords must follow if they want to terminate farm leases, which includes crop share leases, livestock shares, cash rent, or leases, and other rental types.

            The Forcible Entry and Detainer Act (735 ILCS 5/) states the requirements for taking land back from tenants, terminating leases, and recovering rent. The specific time period required for a landlord or tenant to terminate a lease depends on whether the lease is for residential property, commercial property or farmland. In order to terminate a year-to-year lease for farmland, the Forcible Entry and Detainer Act requires that the party wishing to terminate the lease must give the other written notice not less than four months prior to the end of the lease term. In the event a tenant holds over possession after expiration of a lease term that has been properly terminated, the tenant can be liable for holdover rent and other damages.

            The Illinois Appellate Court recently ruled that a landlord was properly awarded possession of farmland and ordered the tenant to pay damages because the lease was properly terminated. 2019 IL App (3d) 180040. The landlord gave the tenant written notice to terminate the lease a little over four months before the lease end date. The tenant decided to ignore the notice and farmed the land the next year without the landlord’s consent. However, since the cash rent lease was correctly terminated, the tenant was ordered to pay over $50,000 in holdover damages and rent for that year.

            It is important for landlords and tenants to understand the requirements for farm leases before entering into a binding contract. Contact an attorney if you are interested in drafting a farm lease or wish to terminate an existing lease.

DON’T GET “SWAMPBUSTERED”! 

            With 2019’s spate of rain and flooding events, there is increased concern about the potential effect of the federal Swampbuster regulations on local farmers. The Highly Erodible Land Conservation and Wetland Conservation Compliance provisions, commonly known as “Swampbuster”, were enacted in 1985 as part of the U.S. Farm Bill to encourage preservation of wetlands and stop wetlands from being converted to farmland. The enforcement of the Swampbuster regulations is controversial, but local farmers should be aware of its potential use on their farming operations.

            With all the wet weather conditions this year, landowners might be considering adding drainage tile to a field or cleaning out an old drainage ditch. However, before installing a new drainage system or improving an existing one, landowners should get a wetlands determination from the USDA Natural Resources Conservation Service (NRCS).  Landowners who do not get a determination from NRCS before starting the project could violate Swampbuster and risk losing all of their federal farm program benefits and crop insurance premium discounts.

            For a landowner to get a wetland determination, he or she should file form AD-1026 at a Farm Service Agency (FSA) office and locate the area on an aerial photo. The NRCS will then use hydric maps, topographic maps, FSA aerial photos, wetland inventory maps, observations of plants and landscape features, and other tools to decide if the area has a wetland or non-wetland classification. Obtaining a wetland determination is not a fast process and could require site visits or additional testing.

            There are exemptions for Swampbuster enforcement when a farmer is found to have converted a wetland into farmable land. Land converted from a wetland to farmland before the 1985 Farm Bill is considered prior converted cropland and is exempt from Swampbuster. For land converted after 1985, an individual can work with the USDA, conservation districts, and others to mitigate any damage caused by a conversion of a wetland. In addition, landowners can enhance existing wetlands, restore former wetlands, or create new wetlands to offset negative impact of the prior conversion. The NRCS can grant an exemption to a farmer based on a “minimal effect determination,” which means the famer’s action will have a minimal effect on the wetlands in the area. The NRCS has a list of activities that fall under this exemption. If the NRCS finds a violation but does not apply an exemption, the individual should ask the NRCS for the exemption.

            If a landowner receives a violation and believes the determination is incorrect or an exemption should be added, the landowner may decide to go through the appeal process. However, the appeal process is not easy and can take years to complete. An attorney can help landowners go through the appeal process and through the court system if appropriate. In order to avoid the lengthy and costly battle of overturning a Swampbuster violation, the landowner should get a NRCS wetland determination and find out what projects are allowed for that classification before undertaking any work.

ILLINOIS ENACTS A RED FLAG FIREARMS LAW

A controversial Act regarding firearms became effective in Illinois on January 1, 2019. The Illinois Firearms Restraining Act (430 ILCS 67/), commonly known as a “Red Flag Law,” was passed to afford family members and police officers a right to petition a court to temporarily remove firearms from an individual who poses a significant danger to him or herself or others. The Act includes the procedures for obtaining the types of restraining orders possible and the penalties for violating the Act or knowingly filing a false petition. The Act also includes specific requirements regarding partners if the situation is a domestic violence situation.

            The Act has two different firearms restraining orders: 1) a six-month restraining order and 2) an emergency restraining order. The type of restraining order sought or entered in a specific case is based on the severity and immediacy of the situation with the person who poses a danger. If the individual is likely to hurt him or herself or another very soon, an emergency petition can be filed to speed up the process of obtaining an order and warrant to remove the firearms temporarily. There are different requirements and processes for each of the orders. However, both orders require a family member or police officer to file a petition with the court. For a six-month restraining order, the burden will be on the individual who filed the petition to show there is clear and convincing evidence that the person is a danger to him or herself or others by possessing a firearm. If an order is entered, a judge can file a search warrant to have the firearms removed from that individual.

            The Act also allows an individual to recover his or her firearms after the restraining order period has ended if the order was not renewed and the individual did not lose his or her FOID card. An individual who violates the restraining order can be charged with a Class A misdemeanor, which has a maximum penalty of 364 days in jail and/or a fine up to $2,500.00. If a person knowingly files a petition with false information, he or she can be charged with perjury, which is a Class 3 Felony in Illinois. A person charged with a Class 3 felony could face 2 to 5 years imprisonment and a fine up to a maximum of $25,000.00.

            An attorney can assist with filing petitions, defending individuals against whom a petition is filed, or answering questions regarding the Act. The Act contains specific requirements and procedures that may require guidance.

ATTORNEY CHRISTINA M. WILLMAN SUPPORTS STEPHENSON COUNTY ORGANIZATIONS

Attorney Christina Willman is continuing our firm’s support of local community organizations. She is a professional member in the Stephenson County Farm Bureau. Christina is an active participant in the Young Leaders program where she represented Stephenson County in the Discussion Meet in 2019. She has also volunteered at the annual 5K and the kiddie tractor pulls. Christina attended the Young Leader Conference and the Illinois Farm Bureau Annual Meeting as a voting delegate for Stephenson County in 2019. Christina hopes to continue to be involved in Stephenson County Farm Bureau and expand her agriculture knowledge with current issues and trends.

            In addition, she joined the Stephenson County Fair Entertainment and Rest Tent Committee in 2018 to help organize and run tent events. She was at the fair in July most nights helping run the Entertainment Tent. Christina is now the Chairman of the Entertainment and Rest Tent Committee and hopes to plan an exciting schedule and activities for the Stephenson County Fair. She believes the county fair is an important part of the community, not only for the agriculture industry, but for everyone to learn about agriculture and local businesses.

            Just recently, Christina was chosen as a participant in the 2019-2020 Leadership Institute program with Highland College. The Leadership Institute program allows her to network and communicate with current local leaders and various individuals in the community. With networking and communicating with community leaders, she plays an active role in helping discover solutions for current local issues. She also gets the opportunity to learn more about the history, economics, businesses, concerns and various other aspects of Stephenson County. She also gets to tour several businesses and facilities around Stephenson County.

            In February 2019, Christina became a member of the Noon Kiwanis Club. She has volunteered at various activities with Kiwanis and wants to get more involved as time progresses. Also, Christina is a member of the Young Professionals Network and attends many Greater Freeport Partnership activities.

           Attorney Christina Willman plans to continue to get involved in other local organizations and continue supporting the organizations she is involved in. Christina also looks forward to continue developing relationships with new clients and existing clients of the firm.

OFFICE NEWS

           Bridget Trainor Servatius and her husband Pete welcomed their son Niall Servatius into this world in January 2019! Bridget, Pete, and their son Ben have been enjoying the newest addition to their family!

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            Past editions of Law Notes are available for reading online at our firm website:  http://www.etpclaw.com/. The site also contains contact and location information, attorney biographies, and information about our practice areas