All Forum Posts by: David Miller

I work with a lot of developers of raw land and as a general rule I find it is an incredibly risky asset that requires a lot of expertise, patience and (often) intestinal fortitude. The development and entitlement process varies considerably from municipality to municipality and state and state (as other have said). It is often time consuming and expensive - all while the land is usually producing zero cash flow. Even if you wait to purchase until the entitlement process is complete, you are out of pocket a considerable sum - again with no cash flow. Bottom line - I recommend you partner with someone who knows what they are doing and for whom you can add some value.

It is hard to imagine a scenario where purchasing the LLC (i.e. all its assets and liabilities) is a good idea in a real state transaction. If you wanted to purchase assets other than the real estate, you would need to do an asset purchase agreement where you only buy certain assets of the LLC and exclude basically all liabilities. You would also need representations and warranties from the seller related to the LLC and indemnifications (which may or may not be with much) against losses or a breach of reps & warranties. It is generally a better idea to just buy one asset (the real estate) and take title in a new entity in order to avoid getting mixed up in any liabilities of the selling entity.

Ask your attorney to include clear triggers for a buy/sell clause and a clear process for determining how to value the exiting member's interest and close on the purchase of their interest.  

A few things the agreement needs to address is: What happens if one of you die? Becomes disabled? Files for bankruptcy? What if you and your partner reach an impasse? What if one of you is married and get divorced - what interest or potential claim could the spouse have in the partnership?  How are costs and profits distributed?  Any agreement worth its salt should at a miniu address these types of issues.  I often tell clients that they have to think about the end at the beginning...it is not a popular topic and people (understandably) do not want to imagine an exciting opportunity getting sideways, but as @Jessica Zolotorofe mentions, doing it right now is the most cost effective route.  

Jake Schachle @ Ball & Minor in Fuquay Varina works with real estate investors and invests himself. He is good and would be worth a call.

Use an attorney even if you want to use a standard form for your state.  Form commercial purchase contracts - even if produced by a state's real property association - often lack some specificity or key provisions that any good commercial real estate attorney would expect to see.  Having that information is useful even if you decide to stick with a form agreement.  

I send any residential referrals I receive to Jon Anderson at City of Oaks Law.  He knows what he is doing and works with a lot of investors.

To second what has been said, LOIs are the norm in commercial deals. It is usually a bad strategic move to "show your hand" by giving the other party all your terms in a purchase contract. Remember that EVERYTHING is negotiable in commercial real estate transactions. To second Joel Owens, I appreciate his comments. I focus exclusively on commercial real estate transactions and the attorneys I work on a deal who are generalists or also litigate inevitably tend to muck up a deal. There are attorneys who are "deal killers" and those who are "deal makers". Try to find the latter.

@Chris Martin is correct that most attorneys are not going to do both closings simultaneously - it creates all sorts of potential conflicts of interest. And if both buyers are not bringing purchase monies to the closing, you run afoul of the NC Good Funds Settlement Act.  The easiest route is to do a contract assignment to your buyer and have the buyer purchase directly from the seller and pay an assignment fee to you. 

I am in Raleigh and do work all over the state but focus on commercial real estate transactions.  The buyer might reach out to Patrick Lineberry at Coltrane & Overfiled in Greensboro.