All Forum Posts by: Chris K.

@Simcha Davidman

For residential deals in Pennsylvania, most people do not use an attorney. That's especially true if a realtor or a broker is involved. PAR Standard Agreement of Sale and other related forms are good enough for most transactions. 

If you are not using the PAR forms, you may want to be more careful. Note that Pennsylvania has many statutes that require the buyer or the seller to do something. And the law often prevents the buyer and the seller from agreeing to waive such rights. If you do not realize this, you could get into trouble. 

An excellent example is the interaction between an "as is" clause and the Real Estate Seller Disclosure Law ("RESDL"). Some people incorrectly assume that including an "as is" clause in the contract means the seller need not comply with the RESDL. But that's incorrect. So if the seller fails to provide the RESDL form, they could get into trouble. 

Aside from the above, you may need an attorney for larger deals or deals where you face "unusual" issues. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Kane Warner
Since you seem like you already have the entrepreneurial spirit, I would focus on developing a skill that others find valuable. Whether that involves going to college depends on the skill you want to develop. 

If you decide to go, I think the best path is to go to a "top-level" school (e.g. Ivy League School) or a good, affordable school. And I would pick a major that the marketplace finds valuable. 

For the first option, I do think there are tangible benefits from attending a top-level school. For example, I went to what's known as a T-14 law school. Now that does not mean I'm a better lawyer than someone who didn't. But when I meet strangers, the fact that I went to such a school helps me build instant credibility. I don't really work as a lawyer anymore but it still helps (e.g. when talking in-house counsel for GCs and owners for our construction company). Think of it as a polite way for people to guestimate your IQ/skill level. 

If a top school is not an option, I would suggest going to the school that offers you to get your degree at the best price. Let's say you have the option to go to a private liberal arts school for $50k a year versus a state school for $15k. Both schools are good but not a top school. In such a scenario, I would go with the state school. That's more or less what I did for my undergrad. All said and done, I was able to graduate without any debt.

But regardless of whether you go to college, I would say the most important thing you can do is to develop a skill that others find valuable. Being in the construction world, I hire/work with guys who worked in their trade for 30 years. Even though they didn't go to college, they are indispensable to our business. Being in construction for that long in our niche field means they have seen every crazy thing that could happen. While management needs to make the final call, we rely heavily on their input to do so. For what I do, one of them is more valuable to me than a squadron of Ivy League graduates. 

TLDR version: focus on developing a skill. Skill + Entrepreneurial Spirit has been the success formula for many self-made people.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Samuel S.

Probably need to get an attorney involved. The structure you have in mind is pretty convoluted. Aside from the legal issues, it may have some convoluted tax implications depending on how you and your partner structure the deal. It's convoluted enough that if you and your partner came to me, I would suggest both sides have separate lawyers to represent them during the negotiation. 

I'm not saying you and your partner cannot work something out. The issue is that it would cost a decent amount in legal fees to get it done properly. Working on a 50/50 LLC is already complicated due to the fact that there is no one-size-fits-all model for it. Adding the proposed equity structure on top of that makes it even more complicated.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Robert Stover

It depends on the potential title issues and whether the defendants would actively contest the quiet title action. If everything is simple and no defendants show up, an attorney could probably do it within 15 to 20 billable hours. If there are complications, then the sky is the limit. 

The other factor to consider is the publication costs. When it comes to quiet-title actions, you generally need to serve all the "unknown parties" by publication. Depending on where the property is, the publication costs can cost a thousand dollars or more.

Now if the original tax sale took place more than 30 years ago, you might have a marketable title. I would ask a title company if you could get it insured. It may cost few a hundred dollars for them to do the search but it's cheaper than going with a quiet-title first. And assuming the title company did a proper search, the attorney handling the quiet-title action would find it useful. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Denise George

Last time I checked, yes. I don't have the exact language but it's something along the lines of "you need a manager if you don't live within 20 miles of the city limits." You should be able to find it on Google or the Wilkes-Barre website that has all the ordinances.  

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

Unless there is some kind of approval from the PA Department of Revenue on the exact language/method you rely on, parties at the closing are taking a gamble. That's especially true when it's a topic that the PA Department of Revenue has paid close attention to for over a decade. Now such a letter ruling or a bulletin may exist. If you have it, it would benefit the BP Community a lot if you share it. 

In general, I do think there are situations where it is worth taking a gamble on. After all, reasonable people can interpret a statute differently. And Pennsylvania Courts have held that it will read a statute in favor of the taxpayer when there is any ambiguity. With that in mind, it may make sense to take the risk of: (1) the reward is good/great; and (2) you could make a reasonable argument as to why you are right. 

I would, for example, put the option method used by wholesalers in PA as falling in this category. Yes, it's true that the PA Department of Revenue did not expressly rule on that method either. But there is enough room in the statute to make the reasonable argument that termination of an option is not a taxable event. So if wholesalers want to avoid all the headaches that can come from assignments, I would consider it to be a viable option despite the uncertainty.  

But here, I'm having a hard time seeing why anyone would take the risk. Opening a single-member LLC is a de minimis cost. Even if the deal falls apart, you could always use the same LLC for another deal. So why take the risk when the PA Department of Revenue prepared 14-page memo on the topic?

Below is what the Department had to say about this topic. I personally wouldn't take the risk based on what it says.  

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Kate Daye Ruane and @Daniel Brown

So there might be situations where you could avoid paying the realty transfer tax twice. But the PA Department of Revenue has argued for decades that that entering into a contract as an individual then assigning or transferring property to an LLC owned by the individual can be taxable. See this Bulletin for more details. Scenario 2e and 2f probably are the best examples of what can go wrong. There are examples showing when you could avoid it --- but they generally involve you opening an LLC before the sales agreement. 

The PA Department of Revenue has does periodically audit transactions. Now for smaller properties, the damage is arguably minimal. Pay the tax/fines and move on. But if you buy bigger properties in area like Scranton where the realty transfer taxes are high, the damages can be catastrophic. 

Since the cost of forming a single-member LLC is around $400 to $800, I cannot really think of any good reason why someone shouldn't just form the LLC before entering into a sales agreement. PA Department of Revenue can be a ferocious foe.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Daniel Brown

A few factors to consider: 

• You first need to ask whether you want an LLC. While it's theoretically possible, you may face additional challenges if you want to use Freddie/Fannie financing using an LLC. If you are okay with using a portfolio/commercial loan, LLCs are fine.

• If you decide to use an LLC, you'll want to form it before you enter into an agreement of sale since it could have realty transfer tax implications.

• Note that liability protection for single-member LLCs is somewhat limited by the fact that you are the only member. Most folks are aware of the corporate veil doctrine. But there's another legal theory called participation theory. It stands for the proposition that if a member makes a decision and that decision leads to liability, the plaintiff may personally sue the member. So if you have net worth to protect (say a, you may want to do some asset protection.

• Feel free to PM me for lawyer recommendations. I would say you'll need to decide what the right strategy for you is first. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Justin Sullivan

No idea what state you are in. But everything comes down to the contract. For the damage that occurred after signing the contract, take a look at what your contract says about risk of loss. As a former banking lawyer, I've done my share of draconian contract writing. But even many "heartless" banks typically agreed to bear the risk of loss until the closing. 

Sometimes you can attack an "as is" sale by pointing out any specific requirements that the seller may have agreed to. 

Squatter/former tenant wise, not sure if you have a strong case. But again, it depends on what the contract says. 

On a separate note, I would personally demolish that structure and not rebuild it. It's a terrible design and I can't imagine the amount of headache you will incur by trying to rebuild something like that. I can't imagine you getting it properly done for $20 to $30k. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Robert Stover

It depends on the title underwriter and title agent. Some companies and agents may require a quiet-title action even if five years have passed. I know a few underwriters that require 21 years to pass since the tax sale date.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.