LEMON LAWS AND OTHER CONSUMER PROTECTION LAWS

What can you do if the car you just bought is a real "lemon"? What if the car you purchased is in the repair shop almost as much as in your garage? To protect consumers from such situations, most states have passed some form of "lemon laws," which usually apply to new cars purchased for personal, family, or household use. These laws entitle you to a replacement car or a refund if your new car is so defective that it is beyond satisfactory repair by the dealer. You must, however, give the dealer a reasonable opportunity to repair the car.

How do you know if the law considers your car a lemon? States vary in their specifics. Your lawyer will be able to tell you about your state's laws are what you'll have to do to use them to your advantage. As a general rule, a lemon normally is a car that continues to have a defect that substantially restricts its use, safety, or value, even after reasonable efforts to repair it. This often means four repair attempts on the same problem or a directly related problem within six months or one year (the time period varies by state). Or, it might mean the car is out of commission for more than thirty nonconsecutive days during either: (1) The year after the dealer sold it; or (2) the duration of any express warranty, whichever is shorter.

Q. What must I do to make lemon laws work for me?

A. First, you must notify the manufacturer, and, in some states, the dealer about the defect. Second, you should keep a copy of every repair or service receipt you are given. This serves as your record that the required number of repair attempts has been made, and is especially important if your car's defect had to be repaired at another garage or in another city because it was physically impossible to drive the car back to the seller's repair location.

Most states require that you go through an arbitration procedure before you can get a replacement or refund. Some states sponsor arbitration programs, which may be more objective than those run by manufacturers. Arbitration is usually free, and results often are binding only on the manufacturer; if you don't like the result, you can still take the manufacturer to court. Some states require arbitration only if the manufacturer refuses to give you a satisfactory replacement or a refund. You also may have the option of bypassing arbitration and going directly to court.

If you successfully pursue a lemon law claim, you may get a refund of what you paid for the car, as well as reimbursement for things like taxes, registration fees, and finance charges. If you choose, you may get a replacement car. Be sure that it is of comparable value to the lemon it is replacing, and that it satisfies you completely.

Q. Do lemon laws cover used cars?

A. Yes, they cover used cars in a growing number of states. In some places, the law applies both to dealer and private seller purchases.

The laws may have a connection with the safety inspection sticker requirement. These sticker laws usually protect you if two conditions occur. First, the car must fail inspection within a certain period from the date of sale. Second, the repair costs must exceed a stated percentage of the purchase price. Then you are permitted to cancel the deal within a certain period. You probably will have to notify the seller in writing of your intention to cancel, including your reasons. You must return the car to the place of sale even if it requires towing. If the seller offers to make repairs, you can decide whether to accept the seller's offer or get your money back.

Q. What if the car passes the safety inspection but still turns out to be a lemon (by requiring costly repairs or repeated repair attempts for the same problem)? Is it still considered a lemon?

A. It might pass the safety inspection and still be a lemon. Some state laws define "lemon" for used cars the same way they do for new cars: by using a formula of repair attempts/time spent in the shop. These laws protect buyers of used lemons in much the same way as buyers of new lemons.

Q. May I drive the car while we are deciding whether or not it is a lemon?

A. Yes, you may drive the car (if it is drivable), but be aware that, if the car does indeed turn out to be a lemon, the law usually allows the seller to deduct a certain amount from your refund based on the miles you have driven. This applies to both new and used car sales.

Other Consumer Protection Laws

Q. What other statutes protect car buyers besides lemon laws:

A. There are a number of laws directly relating to cars:

• the federal Anti-Tampering Odometer Law prohibits acts that falsify odometer mileage readings;

• the federal Used Car Law requires that dealers post Buyers Guides on used cars;

• the federal Automobile Information Disclosure Act requires manufacturers and importers of new cars to affix a sticker, called the "Monroney label," on the windshield or side window of the car. The Monroney label lists the base price of the car, the options installed by the manufacturer, along with their suggested retail price, how much the manufacturer has charged for transportation, and the car's fuel economy (miles per gallon). Only the buyer is allowed to remove the Monroney label.

Q. What about state laws?

A. By far, the statutes providing the strongest protection are those prohibiting unfair and deceptive acts and practices. Every state has enacted such laws. Car buyers may recover from the seller (the dealer and/or the manufacturer), regardless of who might have done the deceiving.

Q. What is an unfair or deceptive practice?

A. The Federal Trade Commission (FTC) defines "unfair conduct" as that which, although not necessarily illegal,

• offends public policy as established by statute, common law, or other means;

• is immoral, unethical, troublesome, or corrupt; and

• substantially injures consumers (or competitors or other businesspeople).

"Deceptive conduct" is behavior that could have caused people to act differently than they otherwise would have acted. It does not have to involve the product's qualities, but it might include any aspect that could be an important factor in deciding whether to buy the goods. An example would be stating that the engine has six cylinders when it really has four. The quality may be fine, but the buyer may have been seeking a car with a six-cylinder engine. The FTC regulations are the basis of many states' laws.

Q. What must I do in order to use an unfair and deceptive practices statute?

A. In many states, you must make a written demand for relief before you sue. The law allows the seller one last chance to make good.

If you have to sue, many states require proof of "injury" before you may recover. Loss of money or property is enough to prove this. You should be able to show that the seller's actions actually caused the injury, as long as you based your decision to buy on what the seller told you, or if you were coerced into buying something that you didn't really want. Remember to begin the procedure before the statute of limitations expires. This time limit varies by state, but is typically three or four years.

Q. What happens if I win?

A. Many states permit you to recover double or triple damages, and lawyers' fees. The purpose of these harsh penalties is to discourage sellers from committing unfair or deceptive acts in the future.

VIOLATIONS OF UNFAIR AND DECEPTIVE PRACTIVE LAWS

Each statute differs about what actions could violate unfair and deceptive practices statutes. The most common violations include:

• hiding dangerous defects;

• failing to state that service is not readily available;

• not revealing that the dealer advertised the car at a lower price;

• odometer tampering;

• failure to reveal that the dealer is charging excessive preparation costs; and

• withholding facts about the car's previous use as, for example, a racing car.

Generally, a dealer's failure to disclose any important facts about the car, or an attempt to make such facts too hard to see, is illegal, and could lead to your recovery under your state's unfair and deceptive practices law.

NEW TAX LAW MAKES ESTATE PLANNING MORE NECESSARY

Mark Twain once responded to a premature obituary by remarking, "reports of my death have been greatly exaggerated." The same could be said of recent reports of the death of estate taxes. For one thing, the federal estate tax is still with us, and will be with us in some form until the year 2010. Then it is repealed for a year, but just a year. Unless Congress acts, it goes back into effect in 2011. Add in the many possibilities for changes in the federal law over the years, to say nothing of possible changes in the way states assess estate taxes, and it's clear that we have as much reason to plan our estates as before, if not more reason.

Your lawyer can fill you in on the implications of the new law on your estate, as well as the many other goals that estate planning can accomplish. Meanwhile, here is an early look at some of the new law's provisions.

A Quick Summary

The new law does not go into effect until Jan 1, 2002. For the rest of this year, federal estate taxes will begin on taxable estates of $675,000 or more. Beginning in 2002, the tax will apply to taxable estates of $1 million or more, and the maximum rate of taxation will drop from 55% to 50%. The estate tax floor will rise in increments (to $1.5 million in 2004 and $2 million in 2006) and the maximum estate tax rate will drop in increments from the current 55% to 45% before the tax is repealed for a year in 2010.

Other important changes affect the federal gift tax (basically, you can give away more tax free than before), the generation-skipping tax (more of an estate will be exempt from taxation), and the tax "basis" of inherited property beginning in 2009 (instead of property being inherited at its value as of date of death, beneficiaries will inherit it on the basis of its original cost, possibly leading to capital gains taxes when the property is sold.)

All of these provisions are complicated, and you'll have to discuss any tax implications for your particular estate with your lawyer. A further complication may be that down the line your state will begin to impose estate taxes. The reason for this is that states will lose from five to nine billion dollars in tax revenues each year as the federal tax is eliminated. As it stands now, federal law earmarks a portion of the federal estate taxes for states. With the federal tax bite lessened, states stand to get less - and they may make up the difference by taxing the estates of their residents directly.

Reasons to Plan

Planning to limit your tax liability is only one reason to plan your estate. Estate planning also enables you to:

• Determine what happens to your property - who, what, when and how. It enables you to coordinate gifts in your lifetime with bequests in your will or trust. You can apportion property among your family members, your friends, and charities that are important to you. If you don't have a will or trust, state law will step in and determine how to dispose of your property, in ways that you might not intend.

• Decide whether your business will be sold or stay in the family - and if so who will run it.

• Determine who will be in charge of carrying out your wishes - your executor if you have a will, and your trustee if you have a trust.

• Save money on probate and other expenses of settling an estate.

• Be in control of your own life. A living trust can provide a way to manage your property should you become disabled. A living will or health care advance directive can set up a plan for your medical care, should you no longer be able to make decisions for yourself.

• Coordinate estate planning with other kinds of financial planning. For example, the new tax law has made significant changes in incentives to save for education (see sidebar), making this an ideal time to look into planning for the education of children and grandchildren, as well as other financial issues.

TAX LAW PROMOTES SAVING FOR EDUCATION

Good news for parents - the new federal tax law (the Economic Growth and Tax Relief Reconciliation Act of 2001) contains a number of provisions designed to make saving for education more attractive. These provisions take effect at the beginning of 2002, making this an ideal time to plan.

The annual limit on contributions to education IRAs has quadrupled, from $500 to $2000, and the IRA can now be used to pay for elementary and secondary school expenses.

The new law makes it possible to gain tax benefits from private prepaid tuition programs. More taxpayers will be able to take the student loan interest deduction. The deduction for qualified higher education expenses will grow, and taxpayers with higher incomes will be able to take advantage of these deductions.

NEGOTIATING COMMERCIAL LEASES TO YOUR ADVANTAGE

When you're in business for yourself, every expense is important, and the cost of your business's space could be the difference between profit and loss. That's why you and your lawyer will want to be extra careful in negotiating the terms of the lease for your space.

The saying "Don't sweat the small stuff" does not apply to commercial leases. Leases are binding legal contracts. What you agree to today will affect you and your business where it counts most-the bottom line-for years. Your well advised to ask your lawyer to handle the negotiations, or at the very least to carefully review the lease before you sign it.

Here are some tips to keep in mind.

First, read the lease. All of it. Even the small print. Especially the small print. Now is the time to be picky. Be clear on exactly what is included in the lease. Is parking included? Who is responsible for keeping the sidewalk and parking lot cleared of ice and snow? If the phones go down, who is responsible for getting them fixed? Who pays for the cleaning crew? Elevator repairs? Security? Minor repairs? Bathroom supplies? Garbage removal? Double check the obvious: square footage, the name of the company, the length of the lease.

Most landlords will provide you with their standard lease form. This is probably a 'one size fits all' type of lease which may be inappropriate for your business. Remember, this lease was drafted for the benefit of the landlord. Just because landlords call it "standard" doesn't mean that you can't negotiate the terms.

How much leverage you'll have in the negotiations depends on the market you're considering. If there is a shortage of commercial real estate, you may have to do more compromising than if there is an abundance of space available. Nevertheless, these are the terms by which you and the landlord will abide, so if something in the lease worries you, flag it.

Second, if it isn't in the lease, it doesn't exist. Forget what the landlord promises you as you're negotiating the lease. If it isn't in writing, it isn't yours. For example, the building is patrolled by security guards hired by the landlord. If your lease does not include language that the landlord will provide security for the customers and tenants, the landlord has the right to stop providing security and there's nothing you can do about it. On the other hand, if your lease states that the landlord will provide a certain number of security guards to patrol the building during business hours, the landlord must do so.

The Basics

A basic lease will require you, the tenant, to pay the landlord a sum of money for the privilege of operating your business in the landlord's building. This will generally be referred to as base rent. Base rent is calculated by taking the square footage of the space and multiplying it by a set dollar amount (i.e. 5000 square feet x $2.25 per square foot = base rent for the year). The square footage used in the lease is not the same as the "usable" square footage, as the usable footage is always less than what you pay rent on. The rent per foot, and the way the square footage is figured, may or may not be negotiable, depending on supply and demand.

Additional Rent

Here comes the tricky part. The base rent is only part of what you have to pay the landlord. Be aware that there will be another clause to cover additional rent or excess use. This section is negotiable, and you should pay extra attention to every word. This catchall can be a blank check for the landlord's benefit if you're not careful.

Have the landlord define, in great detail, "additional rent." Find out whether the base rent includes taxes, insurance on the building and utilities, or whether this is part of the additional rent. This is where the landlord will charge you for such items as after- hour heating ventilation and air conditioning (HVAC) or improvements made to the building that may not even benefit you. These items can quickly add up to several hundreds of dollars per month. Find out if the cost is shared among all the tenants in the building. In some cases, the landlord may try to collect the full cost from each tenant. Try to negotiate the right to challenge the landlord's calculation of additional rent and operating expenses and try to add a provision requiring the landlord to submit details of its charges.

Operating Expenses

Another clause that can cost you a bundle is operating expenses. A standard landlord lease will require you to pay for all costs of owning, managing, maintaining and operating the complex. This will usually include the key phrase "without limitation."

At the very least, you will want to exclude from operating costs:

• capital costs for the building

• the costs of any debt financing

• construction costs for improvements to the space of other tenants

• costs covered by the landlord's insurance

• costs covered by warranties under the landlord's construction or equipment contracts.

Sophisticated tenants won't stop there, however. You will also want to exclude:

• costs of disputes between the landlord and other tenants

• costs connected to concessions operated by the landlord

• costs of obtaining and installing art or decor for the complex

Find out how the common area charges are calculated. If the cost is shared, find out whether it is calculated on a pro rata basis. In most shopping complexes, large retailers, often called "anchors," are given cost reductions to encourage them to lease space in the center. One concession is that the large retailer will pay a flat rate, rather than a pro rata share, toward common area costs or operating expenses. The landlord deducts this amount from the overall operating expenses and then divides up the remaining operating costs on a pro rata basis among the smaller tenants.

If your business is the smallest in the mall, you don't want to be required to pay as much or more toward operating expenses as the behemoth department store. Bargain for language that protects you from paying more due to disproportionately low contributions from the larger retailers. As with additional rent, your share of operating expenses should be based on the percentage your square footage is of the total square footage of the building. If your square footage is 5% of the building, then you should pay no more than 5%.

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

Copyright © 2003 by Bulman, Dunie, Burke & Feld, CHTD. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.