What types of legal issues do charter schools commonly encounter? What is the function of the Board’s legal counsel? In this article, we explore the role of a charter school board attorney and the most common areas of practice that the attorney will handle in representing a charter school.

1.            Starting a Charter School

Charter schools start with an idea and legal counsel can help take this idea to the next level. Normally, a Phase I charter application is completed with a (or several) school authorizer and, if the project shows promise, a Phase II application will be requested.  In this early stage, it is critical that that the planning team for the charter school have the organizational documentation in place.  Legal counsel helps create the corporate entity (a non-profit), creating basic organization documents such as bylaws and policies, and will assist in all stages of the application process with the charter. Other areas include seeking grants, facility acquisition and lease negotiation, funding, and negotiating contracts with various vendors, especially the educational service provider (ESP) agreement.

2.            Charter Contract Reauthorization

Charter schools usually are given a 3–5-year charter contract term. After that initial term is over, they face a daunting re-authorization process to ensure of a renewal of their contract. This process includes an extensive review of the school’s performance and compliance. Counsel for the board of directors will have undergone this process many times and will know how to respond to the needs of authorizers to ensure a smooth re-authorization. 

3.            Educational Service Provider (“ESP”) Agreements

Most charter schools use educational service providers to manage their day-to-day activities. The ESP agreement (or sometimes referred to as the management agreement) is perhaps the most critical vendor contract a charter school board will enter as it will determine how the educational program will be implemented. Legal counsel plays a crucial role in the review and negotiating of the ESP agreement on behalf of the Board.  It’s important that counsel understand best practices and the common sticking points in negotiation (fees, reimbursements, and scope of services, to name a few).  The structure of the school will also dictate the needs of the school in the negotiation. For instance, self-management, full management, or hybrid approaches all require different agreements.

4.            Capital Improvement Financings

Charter schools often need to rely on financing for capital projects. Here, the school’s bond counsel will assist with the issuance of bonds and other debt instruments utilized to fund various capital projects. It’s important that counsel have deep knowledge of the federal tax law requirements of tax-exempt borrowings.  Common financings for charter schools include school building and site bonds for capital projects and refunding bonds to refinance existing debt at a better interest rate.

4.            Cash Flow Borrowings

Due to the nature of school financing in Michigan, charter schools often face a cash flow problem in the first few months of the school year. It’s common for charter schools to seek out State Aid notes (“SAN”) with the Michigan Finance Authority (“MFA”) or directly with local lenders to secure a bridge loan during these first few months. Counsel for the school will work with management to assess the cash flow needs to the academy and seek appropriate funding sources well in advance of any anticipated cash flow shortages.

5.            Real Estate & Construction

Public School Academies need to have a facility to run a successful program. The school’s attorneys will assist the Board in acquiring property, leasing, or new construction.  Common issues include shared-use agreements with landlords, certificates of occupancy, zoning issues, title and environmental problems, and property tax exemptions. Additionally, when a charter school desires to undergo new construction, they should seek guidance from an attorney who has experience with public bidding requirements under Michigan law as well as negotiating agreements with architects, general contractors, and construction managers.

6.            Freedom of Information Act and Open Meetings Act

Charter schools in Michigan are public bodies subject to the Michigan Open Meetings Act (OMA) and the Freedom of Information Act. Volunteer Board members do not often understand the complexity and implications of these statutes and legal counsel will ensure that the school, the board, and its management company are in compliance. It is critical that proper notices be given to the public and that FOIA requests are timely addressed, otherwise the school could be subject to liability and litigation.

7.            School Board Policies

Policy development and implementation is a core function of a charter school board. The attorney will guide the Board on how to comply with the latest developments and best practices in the charter world. Many schools choose to enroll in a policy development program such as the National Charter School Institute, which assists in policy management, while other schools like to develop their policies from whole cloth. In either case, the Board’s counsel should review these policies for legal compliance. Some examples of important policies include the purchasing policy, student discipline policy, and complaint policy.

8.            Organization and Governance

A charter school board should function like a well-oiled machine. From meetings to bylaws and committees, school board members should be familiar with how their organization should function. The school attorney should assist the Board and its members on how to run effective meetings, interpret bylaws, run elections, draft resolutions, and make recommendations on other important governance matters.

9.            Vendor Agreements

Charter schools rely heavily on contractual relationships to operate their schools.  Typical agreements include educational service providers, bussing services, architects, food service, and leased technology, just to name a few. A charter school attorney should be familiar with these agreements and assist the school’s management in ensuring favorable terms are negotiated on behalf of the school. 

10.          Litigation and Disputes

Legal disputes can and do occur in the education world. When the prospect of litigation is apparent, the school’s legal counsel should advise the school board on the available and recommended courses of action. Litigation can drain the resources of a school. The court system is not fast. The school’s counsel should work towards a fast resolution, if possible. Charter school litigation most often arises with management companies or other vendors that have contracts with the Board.  However, disputes can also arise from parents, employees, or other third parties. A charter school board should feel comfortable that their attorney will be a powerful advocate and will prosecute or defend them in court or other dispute resolution venue.

11.          Public School Legislation and Laws

The laws that affect public school academies are always in flux.  The Michigan legislature, the Michigan Department of Education, and the US Department of Education are always re-examining laws and re-interpreting existing laws.  The school’s attorney should regularly pay attention to these developments so that their client is aware of pending legislative or regulatory changes.  This includes having good working relationships with stakeholders in Lansing and other relevant education industry advocacy groups.

12.          Special Education

Special education is one of the most complex areas of education law.  It is crucial that the school administration and Board be aware of its obligations under the law and relevant regulations, including Section 504, IDEA, and other relevant laws and regulations.  From IEPs to student discipline, the school board will look to its counsel to provide relevant advice on handling special education matters. This often includes attending IEP sessions, providing in-service trainings, or advising and developing special education procedures. 

13.          Student Due Process, Discipline and Suspensions

When faced with the discipline of a student, the school board needs to know that it is respecting the student’s constitutional rights. An education lawyer will guide the Board on all the complexities related to student discipline policies, interactions with law enforcement, mandatory reporting, expulsions and suspensions, codes of conduct, and discipline hearings.  The attorney should be able to guide the administration from inception of student discipline incident all the way to the disciplinary hearing itself. 

14.          Educational Foundations

Charter schools are always seeking to fill gaps in their budget that traditional funding sources cannot fill. Creating foundations to seek donations from the public and other organization is one tool that many schools have used to accomplish this goal.  Schools can use foundations to support their efforts (such as construction campaigns or scholarships) while providing tax benefits to donors. Legal counsel for the school should help develop the proper organizational documents for the foundation and, ultimately, should work to obtain the appropriate tax-exempt status under the IRS Code, such as section 501(c)(3).

15.          Closure of a Public-School Academy

A charter school can close for several reasons, such as poor performance, low enrollment, or financial difficulties. While rare, authorizers and the board must exercise their oversight responsibilities carefully in making the best decisions for students. The wind-down process of a charter school can be complex. Legal counsel for the school board will advise on whether to seek a receiver or keep the board in place to oversee the dissolution. In either event, there are many timelines and reporting requirements that govern student records, disposition of property, long-term recording keeping, creditor payments just to name a few and the school’s attorney must guide the board on how to carry out the dissolution.

Here are the five most common issues we’ve seen with residential construction agreements and what contractors can do to fix them.

1. No Residential Builders License Number in the Contract

In Michigan, contractors performing work on residential properties generally have to be licensed by the State, as required by the Michigan Occupational Code. Contractors who perform work without a residential builders license when one is required can face stiff legal consequences. One little-known quirk to that rule is that the contractor must include information about their license in each residential construction contract it enters into. If the contractor is an individual, you need just the license number. If the contractor is a company, you need the company’s license number, the name of the qualifying officer (the individual in the company with a license), and the qualifying officer’s license number.

2. No clear change order process

Changes in construction projects happen all the time. Whether it’s because the owner changed his or her mind about something, ran out of money, or there were some unexpected problems that came up, changes to the project are almost inevitable. Problems happen, though, when you don’t have a clear process for putting those changes in writing or your employees don’t follow through on that process. The best way to address this is to have a clear procedure for writing any changes down, including both changes to the scope of work and price, and having both the contractor and the owner sign those changes.

3. Not Enough Description in the Scope of Work

The more detail, the better. If you can specify a model number, a specific paint color, a particular line of cabinets, anything that will better define what the owner is going to get, the clearer these items are and less open to debate later on. The same goes for construction plans and specifications. We also recommend that you have a clear timeline for milestones in the project, but make sure to leave yourself enough time so you don’t run over.

4. No Payment Terms: When, Where, and How Much?

Another often unclear item is payment from the owner. Not just the total amount of the project, but progress payments along the way and how much is each progress payment. There are numerous ways to set this up, as long as it is clear at what point the owner must pay and how much the owner needs to pay. Related to that, the contract should be clear on how the contractor will accept payment: check, cash, credit card, online, etc.

5. Not Having an Attorney Review

Last, but not least, you should always have your attorney review contracts. Your attorney will be aware of even more issues such as dispute resolution procedures, waivers of subrogation, insurance and indemnification, termination provisions, and a whole host of other common construction problems that are much easier to address up front than when there is a dispute.

Michigan has decided to tackle this issue head on, and in doing so has become the first state to introduce a “Peace of Mind Registry.” The Peace of Mind registry is a free and voluntary service where you can upload your Patient Advocate Designation to a State-maintained website, so healthcare professionals can access your documents when needed. This system is designed to give Michigan residents the ‘peace of mind’ that comes with knowing their healthcare wishes will be followed, regardless of the situation.

To take advantage of the Peace of Mind Registry, you must make a free account on https://www.mipeaceofmind.org/. Once an account is made, you can then upload your Patient Advocate Designation and a wallet sized card will be mailed to you, which contains your username. If you are ever in a situation where a doctor needs direction regarding your healthcare and you cannot provide such direction, the doctor can simply call the registry and all of the documents you uploaded will be sent to the doctor immediately.

This system is the first of its kind, and it represents a significant step forward for Michigan residents who worry about whether their healthcare wishes will be followed. That said, the system is relatively new and there are a few unresolved issues. For example, you can upload new documents to the system to change your Patient Advocate Designation, but you can only view the most recent document uploaded. The doctor, however, will receive all documents on the server on making a request, so if any of the Patient Advocate Designations are not properly executed, the doctor may end up relying on an outdated one. Also, the system does not verify requirements when you upload a document, so it will accept documents that are outside the scope of its intended purpose.

While issues still exist, the registry does function as intended, and an experienced attorney can help you navigate the system to ensure your wishes will be followed. If you would like to learn more about the Peace of Mind registry or if you would like to know more about Patient Advocate Designations, please feel free to contact the law offices of Shifman & Carlson, P.C. at 248.406.0620.

When you pass away, most people assume that their assets will be distributed according to a will or trust; however, a person’s last wishes can be thwarted if they fail to pro­perly understand the effects that certain choices in bank accounts will have on the distribution of money in that account. For example, if a widow has a will that equally distributes her assets to her two children, but she adds one of the children onto her bank account so they can pay her bills, the widow may have inadvertently created a joint bank account with the right of survivorship. If this is the case, this bank account will not be distributed equally between the children under the will because the assets transfer instantly on death to the child who is on the account as a joint owner.

This result is due to a “right of survivorship” on the bank account. When you create a joint account, the right of survivorship will be an option on the application. While an account set up with a right of survivorship is perfect for married couples or domestic partners, it is not the appropriate account for those seeking to allow another individual to access their account for certain, limited purposes. Even without a right of survivorship, Michigan law presumes that joint account holders are equal owners of the account. Thus, even with no right of survivorship on a joint account, at death, it is presumed that the joint owners hold the account equally. Under this presumption, fifty percent of the balance will be distributed according to your estate plan and the other half will be the property of the surviving joint account holder. Furthermore, a creditor of one of the joint owners is presumed to be able to garnish the entire account balance, even if the other joint account owner has no relation to the debt.

To avoid these problems, you can create a revocable living trust to handle the assets or give your family member a durable power of attorney, which allows them to access funds under certain circumstances (e.g. incapacity). Alternatively, you can request your bank to set up your account with a “convenience” signer. With these approaches, you can allow a trusted family member to access your funds during your lifetime, while ensuring that when you pass, the remaining money will be distributed according to your estate plan.

Issues like this are a common occurrence in the field of probate and estate planning. The only way to be sure that your assets will be distributed according to your desires is to seek counsel from an experienced estate planning attorney. If you would like to have one of our experienced estate planning attorneys review your estate plan or draft an estate plan, please contact the Law Offices of Shifman & Carlson, P.C. at 248.406.0620 or at www.shifmancarlsonlaw.com.

Some of the more significant changes to the Nonprofit Corporation Act include (1) allowing corporations to limit or remove director or volunteer liability in extended circumstances; (2) permitting a nonprofit to reserve corporate power for any one or more of its members, shareholders, or other persons; (3) allowing the board of directors to create nonexecutive committees and allowing traditional, executive committees to have the authority to appoint or delegate power to a subcommittee, by default; (4) allowing “foundation” to be used in the name of a corporation with a charitable purpose; (5) allowing LARA to send notices to the nonprofit’s resident agent through electronic communication; (6) allowing for the removal of nonprofit directors by court order; (7) expanding the ability of a director to rely upon the advice of others outside the corporation; (8) allowing the Attorney General to oversee the dissolution, merger, or conversion of a nonprofit corporation; (9) allowing the merger of a domestic limited liability company with a nonprofit corporation; and (10) allowing ten percent of shareholders or members to initiate an action in Court to remove a director in various circumstances.

This list, however, is not exhaustive, and due to the sheer number of legislative changes to the Act, some of the more nuanced amendments have been overlooked by many nonprofit organizations operating in this state. This is problematic because it is critical for a nonprofit entity to appreciate each and every change made to the Nonprofit Corporation Act so it can properly amend its corporate governance documents. Please stay tuned to our blog for the latest analysis of the various amendments to the Act, and if you would like to have one of our experienced attorneys review your corporate governance documents to ensure the amended Nonprofit Act does not affect the corporate governance of your organization, please do not hesitate to contact us at (248) 406-0620 or at www.shifmancarlsonlaw.com.

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