Ask An Attorney Anything About Real Estate Law
Attorney · New Haven, CT · Member since 2017 · 180 posts · 199 votes
Ask An Attorney Anything About Real Estate Law
Most Popular Reply
Bill R.Pro Member
Investor · Branford, CT · Member since 2014 · 131 posts · 67 votesMorning BP,
Just wanted to take a moment to publicly thank Ed for helping me out with a title issue that I had that cost me at a 3-4 buyers on a property in which was assigning the contract. Before Ed and I had spoken, at least 4 attorneys and at least 2 title insurance companies had looked at the issue and deemed it an interesting and unique situation that had no easy/fast/cost effective solution. Spoke to Ed by chance - he had sent me a colleague invite here on BP and I saw he was a commercial/residential real estate attorney so figured it couldn't hurt to ask him if he saw the issue before.
Ed had said he has seen similar situations, just not the same as mine. Asked me to give him a call - While on the phone he started looking up Affidavits and case laws - meanwhile this is a Sunday night around 9 p.m. Within a day and a half he had fixed the situation and had one of the original title insurance companies to change the stance on the issue and issue a title insurance policy.
Ed did all this when I was not even his client, he just met me - not even in person!!! Imagine what he does for his clients.
Thanks again Ed,
Bill
224 Replies
- Attorney · New Haven, CT · Member since 2017 · 180 posts · 199 votes8y
Originally posted by @William Joseph:
Ed, I was looking to bid at a foreclosure sale in CT. There was an appeal of a denial of a motion to open judgment. Do you think I can bid at the sale and if confirmed get clear title? I.e., can the sale only be invalidated by a successful appeal or is it invalid because the sale was conducted during an appellate stay? I am just curious your thoughts.
William Joseph, the appeals generally stays the sale with very few exceptions. For example, a party can move the court to remove the stay and allow the sale to go forward. If there is a valid appeal and the stay is in place, the Committee should not hold the auction. Is the committee still going to hold the auction? What is the docket number of the case, I can look it up.
- Attorney · New Haven, CT · Member since 2017 · 180 posts · 199 votes8y
Originally posted by @James Galla:
Hi,I'm currently attending law school and am wondering what extracurricular materials you would recommend for real estate finance and the real estate transactional process.
Thank you, James
I would recommend several things. First, call your local bar and ask them whether there have been any recent seminars on real estate law. They may have materials. Second, I would suggest going to your law library and asking for treatises on those topics (make sure they are current. Third, I would check the court for resources. Last, Bigger Pockets is a great resource :)
- Investor · Parrish, FL · Member since 2014 · 120 posts · 115 votes8y
Hey Edward, can I ask you a question about 1031 exchange, vesting title, etc... I posted the following in a different thread, but wanted to get your opinion, if you would.
I know asking a tax question in forums will get a lot of speculation and I am in the process of asking tax individuals, but has anyone dealt with a 1031 exchange that once completed, you moved it to a LLC that's in your name only? If so how many days, weeks, months did you wait to do so? I'm not concerned about the lender calling the loan due by moving a loan into a llc, I just want to know if the IRS requires you to wait any amount of time for title to vest in your name before sending to the llc.
After that question, the follow up would be, once I have it in the llc with me on the llc only, does the IRS require me to wait any amount of time before adding my wife to that llc, giving her 50% ownership?
I'm really just interested if the IRS has time frames for either of the above scenario's. Any advice would be helpful.
- Wholesaler · Simpsonville, SC · Member since 2015 · 12 posts · 1 vote8y
I having hard time finding attorney who can review my purchase sale agreement to make sure that ok to use ; so I can purchase a house
- 8yTom GimerBusiness MemberDMV · Member since 2017 · 3k+ posts · 3k+ votes
Originally posted by @Shunda Hunt:
I having hard time finding attorney who can review my purchase sale agreement to make sure that ok to use ; so I can purchase a house
If you want legal advice, you need to hire an attorney licensed in your state, or in the state where your property is located.
Gimer Law516 Reviews - Real Estate Investor · Albion, RI · Member since 2013 · 65 posts · 6 votes8y
Hi Ed,
I'm subscribed! Thanks for sharing helpful info. I have MFR and SFR in CT. Will add your tip to my leases. Also have some property in Trust.
My question is about selling land. Can I sell land, owner financed, but turn the title/deed over to buyer(holding 1st lein on property) so they can start digging/building? Or should I hold title until the buyer obtains bank loan and pays me off to transfer title. Thanks!
- Rental Property Investor · Dallas, TX · Member since 2015 · 501 posts · 504 votes8y
Is there any truth to the idea that having significant equity in a rental property increases your risk for lawsuits? In other words, all other things being equal, does being highly leveraged give you any additional asset protection?
I can imagine that a plaintiff's attorney will take a look at what you own before decided to proceed with a case, but is there any value to the tactic of showing large debt (on the assumption that mortgages would be public record)?
- Attorney · New Haven, CT · Member since 2017 · 180 posts · 199 votes8y
Originally posted by @Greg Junge:
Hey Edward, can I ask you a question about 1031 exchange, vesting title, etc... I posted the following in a different thread, but wanted to get your opinion, if you would.
I know asking a tax question in forums will get a lot of speculation and I am in the process of asking tax individuals, but has anyone dealt with a 1031 exchange that once completed, you moved it to a LLC that's in your name only? If so how many days, weeks, months did you wait to do so? I'm not concerned about the lender calling the loan due by moving a loan into a llc, I just want to know if the IRS requires you to wait any amount of time for title to vest in your name before sending to the llc.
After that question, the follow up would be, once I have it in the llc with me on the llc only, does the IRS require me to wait any amount of time before adding my wife to that llc, giving her 50% ownership?
I'm really just interested if the IRS has time frames for either of the above scenario's. Any advice would be helpful.
Greg, to be honest, I cannot help you with this one. I do not have enough experience in tax. I think this is more of a question for an accountant. Good luck.
- Attorney · New Haven, CT · Member since 2017 · 180 posts · 199 votes8y
Originally posted by @Joe Kato:
Hi Ed,
I'm subscribed! Thanks for sharing helpful info. I have MFR and SFR in CT. Will add your tip to my leases. Also have some property in Trust.
My question is about selling land. Can I sell land, owner financed, but turn the title/deed over to buyer(holding 1st lein on property) so they can start digging/building? Or should I hold title until the buyer obtains bank loan and pays me off to transfer title. Thanks!
- Attorney · New Haven, CT · Member since 2017 · 180 posts · 199 votes8y
Originally posted by @Edward Schenkel:
Originally posted by @Joe Kato:
Hi Ed,
I'm subscribed! Thanks for sharing helpful info. I have MFR and SFR in CT. Will add your tip to my leases. Also have some property in Trust.
My question is about selling land. Can I sell land, owner financed, but turn the title/deed over to buyer(holding 1st lein on property) so they can start digging/building? Or should I hold title until the buyer obtains bank loan and pays me off to transfer title. Thanks!
Hey Joe, how are you. The question is more of a business question in my opinion than a legal question but I will try to provide some value. There is no law in CT that I am aware of that will prevent you from providing owner financing to builder who wants to develop your lot. However, I think if you decide to do this, you should get some money up front combined with owner financing so you have some skin in the game so to speak. If you need to foreclose, that will take time and money, etc. so you want to have some initial equity. Also, I have done complicated owner financed deals for clients and one issue I see with this deal is that as lender, you want to make sure you have the right to review and approve what the new owner will do with the property. This will help you to make certain that your loan will secure adequate value. In other words, you do not want the new owner to build something that you think may not create enough value to satisfy your debt if you need to foreclose. There are other issues I see too, but this is a big one.
In deciding whether to do owner financing v. a traditional closing where the buyer gets a bank loan is really a business call. For example, you can make money off the interest if you do owner financing where you will not receive this benefit if you do a standard closing where the buyer uses a bank loan. However, owner financing typically involves more risk as you will need to foreclose if the new buyer defaults. Can the new buyer even do the deal unless you provide owner financing? these are things to consider when deciding whether to do owner financing v. bank loan. Does this help?
Ed
- Attorney · New Haven, CT · Member since 2017 · 180 posts · 199 votes8y
Originally posted by @Edward Schenkel:
Originally posted by @Edward Schenkel:
Originally posted by @Joe Kato:
Hi Ed,
I'm subscribed! Thanks for sharing helpful info. I have MFR and SFR in CT. Will add your tip to my leases. Also have some property in Trust.
My question is about selling land. Can I sell land, owner financed, but turn the title/deed over to buyer(holding 1st lein on property) so they can start digging/building? Or should I hold title until the buyer obtains bank loan and pays me off to transfer title. Thanks!
Hey Joe, how are you. The question is more of a business question in my opinion than a legal question but I will try to provide some value. There is no law in CT that I am aware of that will prevent you from providing owner financing to builder who wants to develop your lot. However, I think if you decide to do this, you should get some money up front combined with owner financing so you have some skin in the game so to speak. If you need to foreclose, that will take time and money, etc. so you want to have some initial equity. Also, I have done complicated owner financed deals for clients and one issue I see with this deal is that as lender, you want to make sure you have the right to review and approve what the new owner will do with the property. This will help you to make certain that your loan will secure adequate value. In other words, you do not want the new owner to build something that you think may not create enough value to satisfy your debt if you need to foreclose. There are other issues I see too, but this is a big one.
In deciding whether to do owner financing v. a traditional closing where the buyer gets a bank loan is really a business call. For example, you can make money off the interest if you do owner financing where you will not receive this benefit if you do a standard closing where the buyer uses a bank loan. However, owner financing typically involves more risk as you will need to foreclose if the new buyer defaults. Can the new buyer even do the deal unless you provide owner financing? these are things to consider when deciding whether to do owner financing v. bank loan. Does this help?
Ed
One other thought too. If you provide seller financing, make sure you are a named insured on the insurance certificate like a regular bank.
- Attorney · New Haven, CT · Member since 2017 · 180 posts · 199 votes8y
Originally posted by @Paul B.:
Is there any truth to the idea that having significant equity in a rental property increases your risk for lawsuits? In other words, all other things being equal, does being highly leveraged give you any additional asset protection?
I can imagine that a plaintiff's attorney will take a look at what you own before decided to proceed with a case, but is there any value to the tactic of showing large debt (on the assumption that mortgages would be public record)?
Hey @Paul B. The only additional risk that I see is that a plaintiff may be more inclined to file a lawsuit if the defendant has assets. The Plaintiff's attorney will see your equity as an asset it can go after if the Plaintiff gets a judgment. One of the things I always look at when a client approaches to me to file a lawsuit is what can we get if we win. If there is equity in real estate, great. If the only thing the defendant owns is real estate that is under water and he or she has no job and no other assets, I would probably advise against it because it will be difficult to get anything from the judgment unless you want to put a lien on the real estate and hope the value goes up so if you foreclose you will get something. In short, equity = an asset that a P can go after so yes, it means a plaintiff will be more likely to sue you if he or she has a claim against you. My advise - just don't get sued:) and if you do get me to defend you :P
- Attorney · New Haven, CT · Member since 2017 · 180 posts · 199 votes8y
Is anyone interested in hearing another tip on leases?
- Rental Property Investor · Stamford, CT · Member since 2017 · 153 posts · 75 votes8y
Hi Ed. I’m not clear on the proper entity structure to use in CT for the following scenario....
I’m going into a partnership with 2 others. That partnership plans to flip properties. I have several multi-family rentals completely separate from this partnership.
I’m thinking to form an S Corp for myself. Then have that S Corp own individual LLCs for each multi-family. And also have that S Corp be the partner in the flipping partnership.
Does that seem like a good approach or do you have other suggestions?
Thanks in advance.
- Attorney · New Haven, CT · Member since 2017 · 180 posts · 199 votes8y
Originally posted by @Cathie Kovacs:
Hi Ed. I’m not clear on the proper entity structure to use in CT for the following scenario....
I’m going into a partnership with 2 others. That partnership plans to flip properties. I have several multi-family rentals completely separate from this partnership.
I’m thinking to form an S Corp for myself. Then have that S Corp own individual LLCs for each multi-family. And also have that S Corp be the partner in the flipping partnership.
Does that seem like a good approach or do you have other suggestions?
Thanks in advance.
Dear Cathie,
These type of questions are always part legal and part accounting / tax. I would ask your accountant / tax professionals this question and see what they say as well.
From a legal perspective, I would suggest having separate LLCs for each business venture. Therefore, I would suggest have a separate LLC own each piece of real estate (and ask your accountant whether to register at a S Corp or other, my clients accountants typically recommend S Corp) and have a separate LLC be the partner for your house flipping venture.
For the house slipping venture, the LLC can either be a member of another LLC (we will call it House Flipping, LLC for purposes of this discussion) and your partner can be the other member of house flipping, LLC. In the alternative, you can have a partnership agreement between your LLC and your partner. It might be easiest to have the house flipping venture structured with the House Flipping LLC structure where your LLC and your partner or the two members of House Flipping LLC because then you have an entity owned 50/50 with you and your partner that can also take title to the houses you flip and you can share risk equally,
I would suggest setting it up this way from a legal perspective so that if something went wrong on the house flipping venture, someone can only sue House Flipping, LLC and not go after your other multi families. Similarly, if someone slipped and fell at one of your multi family houses, they can only go after that one multi family house and not the other homes or house flipping llc.
I would strongly suggest setting up an operating agreement for house flipping LLC if you decide to move forward that business venture. You can feel free to message me about the details of the operating agreement. Also, when you set up the LLCs, there are managed member LLCS and member managed LLCs. If you have multiple members, you want to understand the differences before you set up the LLCs. Message me or call me if you have questions. Did this answer your question?
- Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes8yEdward Schenkel Hi, generous of you to share your expertise. What are some things landlords are sued for, besides the slip and fall type lawsuits? Eg, I offered to install a couple of swings on some large oak trees in my tenants backyard but asked them to sign a hold harmless in case one if their kids fell off and broke an arm. The parents thanked us and said the kids loved the swings. But was that kind of stupid on my part?
- Attorney · New Haven, CT · Member since 2017 · 180 posts · 199 votes8y
Originally posted by @Marian Smith:
Edward Schenkel Hi, generous of you to share your expertise. What are some things landlords are sued for, besides the slip and fall type lawsuits? Eg, I offered to install a couple of swings on some large oak trees in my tenants backyard but asked them to sign a hold harmless in case one if their kids fell off and broke an arm. The parents thanked us and said the kids loved the swings. But was that kind of stupid on my part?
- Flipper/Rehabber · New Britain, CT · Member since 2017 · 80 posts · 28 votes8y
@Edward Schenkel Thanks for the input, the fact that it is a local CT legal advice makes it priceless.
I have a quick marketing question, but it is related to Real Estate. I am not sure if you deal with probate whatsoever.
I have ran into a strategy to market probate deals. The idea is not to get in touch with heirs, but to build relationship with probate attorneys that can refer heirs that in the process of inheriting a real property.
In case they are not looking to get Realtors involved and carry holding cost, they can sell it quickly for cash to investors like myself.
Now my question is how legal is that to get leads this way, does it breach fiduciary responsibility in any manner and what is the best way to build relationship with probate attorney ( be of value for them)?
Big thanks in advance!
- Property Manager · Windsor Locks, CT · Member since 2016 · 1k+ posts · 1k+ votes8y
Originally posted by @Alex Dem:
@Edward Schenkel Thanks for the input, the fact that it is a local CT legal advice makes it priceless.
I have a quick marketing question, but it is related to Real Estate. I am not sure if you deal with probate whatsoever.
I have ran into a strategy to market probate deals. The idea is not to get in touch with heirs, but to build relationship with probate attorneys that can refer heirs that in the process of inheriting a real property.
In case they are not looking to get Realtors involved and carry holding cost, they can sell it quickly for cash to investors like myself.
Now my question is how legal is that to get leads this way, does it breach fiduciary responsibility in any manner and what is the best way to build relationship with probate attorney ( be of value for them)?
Big thanks in advance!
Hey Alex, I thought I might offer my 2 cents from another agent's perspective. Unless you are being contracted by the heirs as their "listing agent" I have a hard time seeing where your fiduciary relationship with the heirs began. Always disclose that you are an agent, that is critical. If I were you I would explain first that you are an agent, and second that you understand folks don't always want to work with agents and would prefer to sell quickly - that is when you could explain that you are tied into that side of the business as well.
I have never done this myself, but I do know an agent or two that serve as both an agent and a wholesaler of off market properties here in CT. Full disclosure is always the easiest way to go about it in my opinion.
- Investor · Wimberley, TX · Member since 2017 · 3 posts · 0 votes8y
Hi Ed, I own a duplex in my name and I'm considering transferring it to an llc.
Should I be concerned with "due on sale"? What are your thoughts about this clause?
Thanks!
- Attorney · New Haven, CT · Member since 2017 · 180 posts · 199 votes8y
Originally posted by @Mitchell Westmoreland:
Hi Ed, I own a duplex in my name and I'm considering transferring it to an llc.
Should I be concerned with "due on sale"? What are your thoughts about this clause?
Thanks!
To be honest, due on sale is something that I am not familiar with. It may be something unique to your state. Is this the same thing as conveyance tax?
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes8y
Not an attorney. No legal advice given. Due on sale clause is usually lender legal language in the mortgage note that a transfer of title to another entity could be grounds for calling the whole note due with acceleration.
The reality is if the note is being paid this happens very little but I have heard of others before where it has so it is always a possibility.
A bank president told me one time that they do not usually look for transfers with DOS because they are busy working on problem loans. He did say if it was a low interest rate loan and interest rates went way up then they might focus on that more to call some loans due so they can re-lend out at higher rates.
Some attorneys say to get approval ahead of time for a title transfer or you could add specific language to the loan docs stating under what conditions you can change title to.
- 8yTom GimerBusiness MemberDMV · Member since 2017 · 3k+ posts · 3k+ votes
Originally posted by @Mitchell Westmoreland:
Hi Ed, I own a duplex in my name and I'm considering transferring it to an llc.
Should I be concerned with "due on sale"? What are your thoughts about this clause?
Thanks!
Your investor friends may have different advice, but no attorney is going to say "Don't worry about it... go ahead and breach the terms of your Deed of Trust."
Gimer Law516 Reviews - Property Manager · New York, NY · Member since 2016 · 388 posts · 90 votes8yEdward Schenkel , is that truth if I set up a land trust I can't use the my LLC as trustee? And my other LLC as beneficial? Also is it easy to place a property into a land trust in New York ? What's the best way to approaches . Thank you!
- Attorney · New Haven, CT · Member since 2017 · 180 posts · 199 votes8y
Originally posted by @Tom Gimer:
Originally posted by @Mitchell Westmoreland:
Hi Ed, I own a duplex in my name and I'm considering transferring it to an llc.
Should I be concerned with "due on sale"? What are your thoughts about this clause?
Thanks!
Your investor friends may have different advice, but no attorney is going to say "Don't worry about it... go ahead and breach the terms of your Deed of Trust."
I agree with some of the other comments here. It is not uncommon that a mortgage contain a provision providing that in order to transfer any interest in the property, (including to a real estate holding LLC) the bank must consent. If there is a similar provision in your mortgage, you technically do need the bank's consent. With that said, I have never seen a bank declare a default if an owner conveys the property to a single member llc where he or she is the owner. The bank is concerned about getting paid and its security. With that said, I would not be surprised if there are some rare cases where a bank did declare a default due to the conveyance without consent. If you want to do it by the book, you should get the bank's consent. You take a small risk that the bank could declare a default if you convey it to your LLC. You could always convey it back to you though if the bank did declare a default, but again - by the book, you should get the bank's consent.
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