Someone wants to sell me commercial "dirty" land for $1

12 Replies

I was a member of an LLC in the mid 2000's that owned and operated gas stations. The company no longer operates. We demolished the land and pulled the tanks. Did required testing and the ground is a little dirty but they are only requiring ground well monitoring.

The land is located on a busy intersection between and interstate and US highway. The majority member wants me to take the land for $1, and assume the environmental and back property taxes of $52,000.

Since this conversation, the land has not changed hands.

I did some searching and found a developer interested in the property. They made me an offer of $120,000. But I don't control the land yet. What do I do?

As long as the developer knows the land is "a little dirty".  Put it under contract and sell the contract to the developer.

Honestly, with your background you are probably in a better position to know than almost anyone you are likely to find here.  

But if you decide to do it, I would think that Sam has the right idea.  Unlike a situation where a wholesaler is just trying to evade licensing requirements, your situation strikes me as one where buy and selling an option (or assigning a contract) seems like both the right way to go about it and the safest.  With the look-backs that are out there, I wouldn't want to be anywhere in the chain of title on a property like that.

So I should do a purchase contract instead of trying to sell it as a member of the LLC? I have never done a purchase option contract, just purchased properties outright. How does this work at closing?

Nawab,

I don't think you can sign off on the managing members liability.  If someone determines there is a significant hazard, they will come after anyone in the chain of title from the moment the tanks went in.  I would consider consulting an attorney.

Mark

In order to avoid entanglements with the LLC or the majority member, I would buy it outright from the LLC for the $1 plus assumption of liability he wants. Close on that deal. Then turn around and sell it to this developer.

Downside is that if there turns out to be serious issues and the developer backs out, you could be stuck with the remediation and back taxes. A way to do it with less liability (maybe, see an attorney) would be to buy an option from the LLC to purchase it for the $1 price plus liabilities. Then do a separate contract with the developer. That way if the developer backs out, you can choose not to exercise your option.

John, I was thinking of doing it in the manner. However what I was going to do was establish an LLC. Buy the property under the new LLC, and then sell it. Dissolve the LLC.

Any flaws to my thinking? Tax issues?

Get the land under contract asap

@Andrew, I agree with you I think. I should get at least an option in contract now before the deal slips through my hands.

would a Subject To in the contract make sense? Like in this case, subject to inspections - if there are flaws in the deal, you as the buyer can back out, right?

Well, @Rafael E. it is a subject to deal, though not in the traditional sense.  No debt to be assumed, but a bunch of environmental and tax liabilities.

That said, there's a flaw in your thinking.  If you buy subject to, you have bought just as sure as if you bought with cash or a loan.  Buying subject to DOES NOT give the buyer any ability to back out.  Subject to buyers do sometimes do that, thinking "why do I care, its not me that's getting hurt by reneging".   A total scum move, IMHO.

Also keep in mind that you do not automatically shed the environmental liabilities simply by selling the land to the end buyer.  They can and do go after everyone in the chain of title for these sorts of things.

Originally posted by @Jon Holdman:

Well, @Rafael Encarnacion it is a subject to deal, though not in the traditional sense.  No debt to be assumed, but a bunch of environmental and tax liabilities.

That said, there's a flaw in your thinking.  If you buy subject to, you have bought just as sure as if you bought with cash or a loan.  Buying subject to DOES NOT give the buyer any ability to back out.  Subject to buyers do sometimes do that, thinking "why do I care, its not me that's getting hurt by reneging".   A total scum move, IMHO.

 thanks for the feedback. Being a newbie in this industry, it helps to have experts weigh in.

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