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What Is a Distribution Waterfall? Imagine pouring water into a multi-tiered fountain. Each level must fill up before the overflow reaches the next. That’s exactly how a distribution waterfall works in investments—profits flow down in a structured order. Here’s the standard three-step waterfall: Return of Capital – Investors get back their initial investment before anyone profits. Preferred Return (Pref) – Investors receive a return (e.g., 8%) before profits are split. Profit Split – Remaining profits are shared, often favoring investors at first, with the sponsor earning a share like 75/25.

Clear Business Contracts Prevent Costly Disputes Business contracts aren’t just about money—they define roles, responsibilities, and decision-making authority. When these details are missing, confusion leads to conflict. I recently saw a contract dispute arise because the agreement didn’t specify the roles of the members or the process for making key decisions. When a disagreement came up, there was no clear procedure to resolve it, leading to unnecessary friction and legal costs. A well-drafted contract could have prevented the entire issue. We make sure to clearly define each party’s role and establish a decision-making framework in your contracts. Clarity today avoids disputes tomorrow.

HOW DO YOU GET RID OF THIS MESS???? In New Jersey, landlords must follow specific procedures to dispose of personal property left behind by tenants, as outlined in N.J.S.A. 2A:18-72 through 2A:18-84. Here’s what you need to know: Give Notice: Before disposing of any property, landlords must provide written notice to the tenant by certified mail, return receipt requested, or by receipted first-class mail addressed to the tenant at his or her last known address or addresses. The landlord must mark the envelope “Please Forward”. There are very specific requirements for the content of the notice. 2A:18-74. Storage Requirements: If the tenant doesn’t retrieve their property within the specified time, the landlord must store it with reasonable care. This includes non-perishable items, while perishable goods or pets may be handled differently. Disposal Options: After the notice period, landlords may sell, destroy, or otherwise dispose of the property, depending on its value. For valuable items, a public or private sale may be held, while items with little value may be discarded. Cost Recovery: Landlords are entitled to reasonable storage and sale costs, which can be deducted from the sale proceeds. Any remaining funds must be returned to the tenant, or if the tenant cannot be located, the funds must be deposited with the Superior Court. Tenant's Rights: If a landlord fails to comply with these rules, tenants can recover up to twice the damages caused by improper disposal. For landlords, following these steps ensures compliance with New Jersey law and helps avoid costly legal battles. If you're navigating this process, it's essential to do it right. Stay informed and compliant! #landlordtips #propertymanagement #NJlaw #realestate #PERLOWLAW

In New Jersey, it is illegal for business financing agreements to include a confession of judgment ("COJ"). N.J.S.A. 2A:16-9.1(a)(1). A COJ allows a lender to get a judgment against a borrower without a trial if the borrower defaults. The law defines "concern" broadly to include any profit-driven entity, such as individuals, partnerships, corporations, and more.?N.J.S.A. 2A:16-9.1(c).?? Any contract provision for a COJ that doesn't comply with this law is invalid and unenforceable. N.J.S.A. § 2A:16-9.1(b) Lenders should be careful, as the attorney general can investigate violations of this ban. Violators can face significant penalties: $5,000 for the first offense, $10,000 for the second, and $15,000 for each subsequent offense, plus court costs and attorney fees. N.J.S.A. § 2A:16-9.2

When individuals establish an LLC, the primary goal is often clear: to protect personal assets from the liabilities of the business. By design, an LLC creates a legal separation between the company and its owners, ensuring that personal finances remain shielded. However, this protection is not guaranteed—it requires the LLC to be properly structured and operated with adherence to corporate formalities. This is where the doctrine of piercing the corporate veil comes into play. If a party can demonstrate that the LLC was misused—whether as a vehicle for personal dealings or fraudulent activity—they may persuade a court to hold the individual owners personally liable. Importantly, meeting this standard is no simple task; it requires concrete evidence, not speculation or conjecture. I recently defended a client whose LLC was accused of being a mere shell company. The other side claimed that the LLC was undercapitalized and lacked proper insurance and management, which they argued justified holding the individual owner personally responsible. We showed that nothing was backed by actual evidence. After reviewing the facts and arguments, the court ruled in our favor, protecting my client’s personal assets. It is important here to recognize the strength of LLC protections when entities are properly maintained. For business owners, it underscores the importance of diligent corporate governance to preserve this shield. #LLC #BusinessLaw #PiercingTheCorporateVeil #PerlowLaw

Typical Steps In A Commercial Real Estate Transactions Here are the typical steps involved: Letter of Intent (LOI): Foundation for Negotiations: The LOI lays out the basic terms between the buyer and seller, serving as a precursor to the more binding purchase and sale agreement. It’s typically non-binding but critical for framing the negotiations. Purchase and Sale Agreement (PSA): This agreement outlines terms including the price, earnest money deposit, and specific conditions such as due diligence periods and closing conditions. An important aspect of the PSA is the Deposit. Soft Deposit: Initially, the deposit is kept as a "soft" deposit, which is refundable until the end of the due diligence period. This arrangement allows the buyer to withdraw based on findings during the due diligence without losing their deposit, providing a safeguard against unexpected property issues. Hard Deposit: After the due diligence period, the deposit becomes "hard" and is typically non-refundable. This marks the buyer’s firm commitment to proceed with the purchase, solidifying their financial engagement in the deal. Typically the PSA is prepared by the seller’s counsel, this document includes detailed schedules and exhibits that describe the property, leases, and service agreements, ensuring a transparent transaction. Due Diligence: Property Examination: The buyer inspects all aspects of the property thoroughly to ensure it fits their needs and complies with local laws. This includes reviewing the title report, survey, inspection and environmental reports and rent rolls. Closing: All key closing documents are prepared, negotiated, and reviewed to ensure accuracy and completeness. The closing process includes verifying that all legal requirements are met and that the documents are ready for recording at the local office, finalizing the transaction.

Equity: The Key to Taking On Investors When bringing on investors, the first and most important concept to understand is equity—the ownership stake that investors receive in exchange for their capital. Equity represents a portion of your business, and giving it up means sharing ownership and, potentially, decision-making authority. In corporations, ownership is structured through stocks. Investors are issued shares of stock, representing their percentage of ownership. Stockholders may have voting rights, receive dividends, or both, depending on the type of stock (e.g., common vs. preferred). In LLCs (Limited Liability Companies), ownership is defined by membership interests, which work similarly to stocks in a corporation. Membership interests outline each investor's ownership percentage and determine their share of profits, losses, and possibly decision-making authority. Equity is more than just ownership; it’s a tool to attract the right investors, align incentives, and fuel growth while ensuring you retain enough control to achieve your long-term vision. Understanding how to structure equity deals can make the difference between a successful partnership and one that limits your business's potential. #equity #investments #PERLOWLAW

Ask the Lawyer: Two Common NJ Eviction Questions Here are two of the most common questions I get asked—and the answers you need to know. 1- My tenant is a holdover. Can I evict them? If your tenant is paying rent and is not in material breach of the lease, you cannot evict them unless one of the statutory grounds under N.J.S.A. 2A:18-61.1 applies. New Jersey’s Anti-Eviction Act provides strong tenant protections, meaning you need a valid legal reason—such as non-payment of rent, lease violations, or certain other circumstances—to proceed with an eviction. 2- Can I evict a tenant if I want to live in the property? Yes, but only if the property is a three-family dwelling or less. Under N.J.S.A. 2A:18-61.1(l)(3), a landlord can evict a tenant if they intend to personally occupy the unit. However, the law requires you to provide the tenant with at least two months' written notice before filing for eviction, as stated in N.J.S.A. 2A:18-61.2(b). Have other eviction questions? Drop them in the comments or reach out. #LandlordRights #NJEvictions #RealEstateLaw #AskTheLawyer #PerlowLaw

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