Sale of Real Estate - Capital Gains Exclusion

Final Rules on Capital Gains 

The Internal Revenue Service has issued its final rules on the capital gains tax exclusion that is available on the sale of a taxpayer's principal residence.  A taxpayer may exclude up to $250,000 from the sale of a principal residence, and the exclusion doubles to $500,000 for married taxpayers.  However, the taxpayer must have owned and used the property as a principal residence for a total of at least two of the five years before the residence is sold.
 

Tougher Penalties Enacted for DWI in a School Zone

Recent Landlord Tenant Cases Help Define "Reasonable Lease Changes" and Landlord Liability for Tenant Injury

The Appellate Division held that eviction under these circumstances must be based on a tenant's failure to comply with "reasonable changes in lease terms." The Court observed that "reasonable changes in lease terms should be analyzed with a recognition that personal affinities towards both living quarters and pets should not be required to be sacrificed on the basis of a landlords whim or caprice." The Court felt that the tenant was reasonably relying upon the cat being "grand fathered in," since she had had the cat for nine years at the time the lease changes was proposed by the landlord. The Court agreed, and the eviction did not go through.

In light of this, landlords should consider carefully the changes that they make in leases when they renew. If the tenant has been in the rental premises for a long period of time, the courts will take into consideration the tenant's reliance upon existing terms in determining whether the changes are reasonable.

Landlord Liability for Tenant Injury. One concern that Landlords have when they rent out homes to tenants is the potential for liability should one or more of the tenants in the rental property become injured due to some defective condition on the property. A recent New Jersey Appellate Division case, decided June 2, 1999, has clarified the question of when landlords can be held responsible for injuries sustained by tenants, due to a defective condition on the rental premises.

The Court, in the case of Szeles vs. Vena, stated that landlords can not be held liable for the injury of a tenant where (1) the tenant is in exclusive possession of the premises, (2) the landlord was unaware of the defect on the premises at lease inception, and (3) the tenant did not notify the landlord of the defect. The Court also observed that, although residential leases carry an implied warranty or covenant of habitability, that warranty is limited and not intended to overturn existing principles of New Jersey Tort Law in Personal Injury actions brought by tenants against landlords.

Naturally, this holding by the Appellate Division does not completely protect landlords. Landlords should still be sensitive to tenant complaints of problems on the rental premises that need repair, should make sure that there are no obvious (i.e. other than latent or hidden) defects on a rental property before renting it to a tenant, and should also be aware that the applicability of this ruling by the Appellate Division can be questioned in incidents where the tenants are not in exclusive possession of the premises (e.g. where the rental premises is an owner occupied duplex or triplex).

 

Return to top

Supreme Court Defines What is Sexual Harassment and Who Can be Held Responsible

On June 26, 1998, the United States Supreme Court spoke for the first time in twelve years about the boundaries of sexual harassment in the workplace. In Burlington Industries v. Ellereth and Faragher v. Boca Raton, the Supreme Court, by 7-2 votes, held that employers are responsible for the sexual misconduct of their supervisors, regardless of whether they knew about the behavior. Justices Clarence Thomas and Antonin Scalia dissented in both cases. Based on these two decisions, under Title VII of the 1964 Civil Rights Act, an employee who refuses unwelcome and threatening sexual advances by her supervisor, yet suffers no adverse job consequences, may now recover against her employer without showing that the employer is negligent or otherwise at fault for the supervisor's actions.

In Burlington Industries v. Ellerth, a female marketing representative was told by her boss, "I could make your job hard or very easy," and asked her to wear shorter skirts. He also touched her inappropriately. Similarly, in Faragher v. Boca Raton, a female lifeguard was subject to improper touching, including slaps on the rear, and vulgar comments by her immediate supervisor. While they were working, neither woman complained to the management about the harassment they encountered. The Supreme Court held that both cases were meritorious and could proceed.

The need for victims of sexual harassment to show that their employer knew or should have known about the harassment has been dispelled; and the requirement that employees prove adverse employment action, such as losing out on a promotion or being fired, in order to establish a cause of action for sexual harassment, has been eliminated. As long as the conduct by the supervisor was severe or pervasive, a valid claim can be established.

In cases where no tangible employment action is taken against a victim of sexual harassment, an affirmative defense is available to the employer. This defense consists of the employer proving by a preponderance of the evidence that a) the employer exercised reasonable care to prevent and correct promptly any sexually harassing behavior; and b) that the employee unreasonably failed to take advantage of any preventative or corrective opportunities provided by the employer, or to otherwise avoid the harm. The existence and effectiveness of an employer's anti-harassment policy are relevant to the employer's defense. In cases where an employee is discharged, demoted or reassigned, this affirmative defense is not available.

 

Return to top

Changes to UCC for Software Consumers

Both business and home software consumers should be very concerned with some proposed changes to the Uniform Commercial Code (UCC), a standard body of laws, adopted by each state, that deals with contracts for the purchase and sale of goods. Currently, software falls within the definition of "goods" under the UCC, and therefore all transactions for the sale of software are subject to this body of laws. However, that may soon change.

A proposed addition to the UCC, Article 2B, would change the definition of software from "goods" that are "sold", and therefore subject to state consumer protection laws, to "intangibles," that are licensed under just about any terms that the vendor comes up with. This can have sweeping effects on consumer rights. Many people think that you go to the store and "buy" a software package. This is not so. What you are actually doing is licensing the use of that software from the vendor under certain "take it or leave it" terms. With these changes to the law, software vendors could conceivably market a software product full of bugs that destroys your data and leave you with no recourse against them, other than perhaps a refund of the price you paid to license it. Naturally, this has stirred up a hue and cry among consumer groups! Should you want to read more about it, visit Ralph Nader's Consumer Project on Technology site.

 

UPDATED: Proposed Article 2B of UCC has been changed to the Uniform Computer Information Transaction Act

The National Conference of Commissioners on Uniform State Laws renamed Article 2B to the Uniform Computer Information Transaction Act (UCITA). So far only Virginia and Maryland have adopted the UCITA. Software Consumers should still be concerned with the UCITA and the ramifications if it is passed.

 

Return to top