You just finished your refinance. You could not be happier. You shortened you loan term and lowered your rate. What could be better? Little did you know that the closing you completed would prevent the timely sale of your home. If you had just chosen an attorney to do your refi that knew what he or she was doing. When you refinanced you were paying off your existing loan. The loan was held by Big Bank and serviced by Mega-Servicer. The attorney that closed the loan sent your payment to Mega-Servicer and received a discharge. The discharge was then recorded at the registry of deeds. This process is completed thousands of times every day, but there are hundreds of things that could go wrong. What happened in this case was the refi-attorney that received the discharge did not check it before sending it to be recorded. The discharge was executed by Mega-Servicer but your loan was held by Big Bank. The discharge that was recorded is ineffective and the mortgage that was paid-off at your refi is still outstanding of record. You are now selling your home. The closing attorney contacts you to let you know that your mortgage has been improperly discharged and a new discharge has to be obtained and recorded. The buyer is requiring that you convey good marketable title free from all liens; your paid-off mortgage is still a lien. What are you going to do? The terms of your purchase and sale agreement may allow you to continue the sale for 30 days but now you cannot buy your new house because you were relying on the money from the sale of your old home. You may not be able to resolve your title issue within thirty days; maybe your buyer will walk. Total panic sets in. You may be defaulted under the terms of the agreement to buy your new home. You could lose your deposit. The dominoes that were supposed to be falling in such an orderly fashion are now stuck behind your improperly discharged mortgage. What if Big Bank has been merged or has been taken over by the FDIC how will you get the discharge and how long will it take. This all could have been avoided if the closing attorney that did your refi knew what he was doing. So when you are meeting with your lender let them know that you want to select the attorney to close your loan, do not let them make that decision for you, tell them you want to use Topkins & Bevans. Our years of experience dealing with real estate transactions allow us to make sure that not only is your closing conducted professionally and without incident but we will also make sure that all matters are properly taken care of. The mortgage we payoff will be discharged and the record title will be cleared properly. So when you go to sell your home you may encounter other issues but you will not encounter the improperly discharged mortgage we paid off.
The long awaited and much needed revision to the Massachusetts Homestead Law will be taking effect on March 16, 2011. It can be found at Massachusetts General Law Ch 188 §1-10. The Homestead Law has caused more debate among real estate practitioners than almost any other statute, confusion seemed to be the only consensus that was ever reached. Regarding the Old Homestead basic issues were debated such as was a mortgage a release of the homestead, did a spouse have to sign a deed even if they were a non-title holder, what effect did the filing of a subsequent homestead have on an existing homestead. The New Homestead Act was enacted to resolve all these and other issues.
There are now three types of Homesteads available. One is automatic and two must be created by the filing of a Homestead.
I “Automatic Homestead”
There is an automatic protection in the amount of $125,000.00 for an individual’s principal residence against subsequent attachment. The property must be occupied or intended to be occupied as a principal residence of the property’s owner. The protection is provided to the individual and the other family members of his or her family living at the property.
The two non-automatic Homesteads available are as follows:
II “Basic Homestead”
The protection provided to those who file a Homestead. The amount of protection is equal to $500,000.00 if the property is occupied or intended to be occupied as their principal residence.
III “Elderly\Disabled Homestead”
This protection is provided only to the person making the Elderly or Disabled filing. The protection provided is in the amount of $500,000.00. The filer must be either 62 or older or meet the definition of disabled that is included in the statute. The property must also be occupied or intended to be occupied as the filer’s principal residence.
How do you establish an Automatic Homestead?
As long as you meet the requirements nothing needs to be filed.
How do you establish a Basic Homestead?
In order to establish the Basic Homestead the requirements of Section 5 of the statute must be complied with. An outline of these requirements is as follows:
- The declaration of Homestead must be signed by each owner of the property.
- If there is a non-titled spouse they must be identified in the Declaration.
- The declaration shall state that the each person named in it occupies or intends to occupy the home as their principal residence.
- Trustees of property held in trust can now file a declaration of homestead on behalf of the beneficiaries of the trust who occupy the property as their principal residence.
The Homestead can no longer be created as part of a deed it must be a separate filing.
How do you establish an Elderly\Disabled Homestead?
- The same requirements for the Basic Homestead must be complied with and also:
- There must be a statement that the owner to be benefited is an elderly person or a disabled person and
- An original or certified copy of a disability award letter issued to the person by the United States Social Security Administration or a letter signed by a physician registered with the board of registration of medicine certifying that the person meets the disability requirements as set forth in the Act. The award letter or the physician’s letter shall be recorded with the declaration.
How can any Homestead be terminated?
- A deed signed by the owners or by the owner and the non-title holder spouse or former spouse who reside at the home as a principal residence
- If a Trustee established the Homestead then a deed signed by the trustee
- A release signed by any of the above
- A new Basic Homestead declaration being filed or
- An abandonment of the home as a principal residence
How can an Elderly\Disabled Homestead be terminated?
- Deed or release signed by the person who declared the Elderly\Disabled Homestead
- Acquisition of a new Homestead
- An abandonment of the home as a principal residence
Important Highlights:
Does the non-title spouse have to execute a mortgage?
No, only the title spouse needs to execute the mortgage and no additional language needs to be added to the mortgage for the Homestead to be subordinated to the mortgage. The requirement by the lender that the Homestead be released is now prohibited.
How do you handle a change in marital status when a document is executed?
The Act requires the identification of the non-title spouse as part of the declaration. The subsequent divorce, death or remarriage can alter the current information of those protected by the Homestead. The change in status can be resolved by including the current information in the deed, release or mortgage. The document containing the statement regarding the marital status of the grantor may be relied upon in good faith. An affidavit must be executed by the grantor, releaser or mortgagor under the penalties of perjury, stating that at the time the document was executed that the affiant had no spouse or partner entitled to claim the homestead. The affidavit may be recorded with the deed, release or mortgage containing the recital.
If the single owner marries do they need a new Homestead?
If property is purchased by a single person who later marries the new spouse is automatically protected by the declaration of homestead right. As a result of this every deed should include the marital status of the grantor and if married then the non-title spouse must also execute the deed.
What happens to existing Homesteads?
All existing homesteads in effect as of March 16, 2011, shall continue in full force and effect, and shall be governed by the New Act notwithstanding their failure to comply with the new execution requirements.
Special Note regarding closings:
The Closing attorney at each transaction must provide the mortgagor with a written notice that shall include a summary of the differences between the automatic homestead protection and those acquired by making a declaration.
This is not a complete evaluation of the new law but only a brief summary. A person that desires to create a Homestead should seek the assistance of a Massachusetts Attorney with an understanding of the New Homestead Act. We at Topkins & Bevans can provide this service to you. You can contact me at rbevans@topbev.com, my office number is 781-890-6230 ext. 241 and cell 781-858-6468.
Judge David S. Doty, ruled this week in favor of the NFLPA against the NFL. This ruling could have a significant impact on the current negotiations regarding a new Collective Bargaining Agreement (the “CBA”).
The Players had alleged that the Owners and the NFL had ignored their obligation to act in good faith and to use their best efforts to maximize the total revenues for both the NFL and the Players when they were renegotiating or negotiating the most recent broadcast contracts (“TV Deals”). These obligations were in place as part of the White Stipulation and Settlement Agreement (the “SSA”). The matter was heard in January by Stephen B. Burbank, the special master assigned to hear the action.
The SSA has been in place since 1993. It was part of a settlement in antitrust class action brought by Reggie White and other players. It is often referred to as the White Settlement or the SSA. The NFL and the NFLPA entered into a CBA at that time that mirrors the SSA. The CBA was amended and extended in 1996 and 1998 and then renegotiated in 2006 covering the period of 2006-2012. The NFL had the right in the CBA to opt out of the last two years of the CBA and on May 20, 2008, they took advantage of this provision and opted out. Based upon this opt-out the SSA and the CBA are set to expire on March 4, 2011. The NFLPA and the NFL have been negotiating in an attempt to reach an agreement for a new CBA. During these negotiations the Owners have recognized that a lockout was “Realistically possible in order to achieve a new agreement more favorable to their interests.” This perspective is crucial to embrace when reviewing Judge Doty’s decision. You must also remember that this is not a work stoppage on the part of the Players but a lockout by the Owners.
The TV Deals generate about one-half of the NFL’s total revenues. These revenues are shared by the Owners and the Players. The NFLPA does not negotiate the TV Deals the NFL does it alone. The existing TV Contracts did not require the Networks to pay the NFL if there was a lockout in 2011. The NFL was concerned about lost revenue and the possibility that certain of its loan obligations could be considered in default if the TV revenue was not being received as a result of the lockout. The NFL thought that all of these events would decrease their bargaining power with the Players.
The NFL shortly after opting out of the CBA began negotiations with the Television Networks that broadcast NFL games in the hope of modifying the existing TV Deals. It renegotiated the DirectTV deal so that the NFL was actually paid more in 2011 if they locked the Players out. DirectTv “would have considered paying more in 2009 and 2010 to have the [the work-stoppage provision] go away” but that was not part of the final agreement. The agreement was extended and the rights fees for 2009 and 2010 stayed the same. The TV Deals in place with CBS and Fox prior to the renegotiation required the NFL to pay the Networks refunds in 2011 if there was a lockout. The renegotiated deals again did not have increased fees for 2009, 2010 or 2011, but the lockout penalties were decreased. The deal with NBC also had the same work-stoppage penalty in it. Again the NFL did not seek increased rights fees for 2009, 2010 or 2011, but the new agreement had increased rights fees for 2012 and 2013. A common theme was developing the deals had been modified so that the lockout penalties were significantly diminished and later revenues increased, assumedly after the end of the lockout. ESPN had a contract in place that was to expire in 2013. The contract was not extended but “the work-stoppage provision was amended”. The new deal was directly linked to a work-stoppage. There were also the deals with Comcast and Verizon that were renegotiated. Judge Doty wrote “In total, the NFL negotiated access to over $4 Billion in rights fees in 2011 if it locks out the Players. Of that sum, it has no obligation to repay $421 million to the Broadcasters.”
The Players claimed that the owners had failed as required by the SSA to maximize total revenues for 2009 and 2010 which would benefit both the Players and the NFL. After a trial in January the special master ruled that the NFL had violated its obligations under the SSA in negotiating the TV Deals, but only partially. The special master granted the players $6.9 million in damages for the NBC contract. Judge Doty ruled that the reasoning applied by the special master was incorrect. When the NFL was negotiating these deals it could apply the principle of “Sound Business Judgment” but this does not allow the NFL to do this “at the expense of maximizing total revenues during the SSA.” The NFL had negotiated or renegotiated these TV deals “to benefit its exclusive interest at the expense of, and contrary to, the joint interests of the NFL and the Players.” In addition the NFL by failing to seek revenue modifications for 2009-2010 seasons when it modified practically every other term of the agreements did not make the required Best Efforts in these negotiations.
Judge Doty seemed to be particularly moved by the NFL’s vast market power which one television executive described as the ability to have the NFL Commissioner call you and state “we’re done, pay this or move on … [the NFL has] market power like no one else”. As a result of this market power the NFL could have gotten more revenues for the 2009 and 2010 seasons when it entered into these modified contracts, but chose to emphasis the best way to position the Owners if there was a lockout to the determent the Players. The NFL had told the networks during these negotiations that “opposition to lockout provisions to be a deal breaker and clearly a deal it would not consider.”
The Court’s has ordered a new hearing to be held to determine what relief it should grant the Players. The Court has indicated that both money damages and the possibility of injunctive relief would be considered.
The NFL has indicated that it was prepared for this ruling and that it does not effect its negotiating position. This may be the case, but it seems to fly in the face of logic. If the NFL negotiated these deals to position itself for a lockout and there is now the possibility that you may not have this revenue and if as the NFL believed the lockout could result in the default of some of its obligations there is a substantial price to pay as a result of the lockout that otherwise would not have to have been paid. We may know if this decision effected the NFL by the result of this week’s mediated negotiations. Hopefully, a fair agreement will be reached so the league can continue to function to the benefit of both the Owners and the Players and for all those people that rely on the NFL for their livelihoods.
Link to the decision http://images.nflplayers.com/mediaResources/files/Lockout%20Insurance%20Case%20Decision.pdf
More than an electronic document management system
SureClose allows all parties involved in a transaction 24/7 online access to the documents that pertain to them. Buyers, sellers, real estate professionals, escrow officers, title agents and lenders alike are able to view step-by-step transaction information from any Windows® based PC with Internet capability — providing customers a new level of service and peace of mind. With SureClose, customers are able to review and approve documents before the closing date — at a convenient time and place. Security features ensure that buyers and sellers see only the documents specific to them. SureClose operates via a password-protected Web site. And with around the-clock access, office hours and time zones are no longer factors for doing business. Customers even receive automatic notifications when critical documents post to their SureClose file, keeping customers abreast of the transaction’s progress at all times.
Move business online
• Monitor real-time progress of the transaction
• Manage, share documents
• Post and receive messages
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• Order settlement services and exchange documents
Streamline the list-to-close process
• Integrate with key electronic touch points in the real estate process
• Eliminate time-consuming status tracking and missed phone calls
• Facilitate communication among all parties
• Diminish courier and overnight mail expenses
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Provide a new level of service
• Extend office beyond brick and mortar with mobile technologies
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Key service highlights:
• Fully customized Web site, branded to your business
• Easy to implement
easy to upload documents via fax, e-mail or proprietary print driver
• Web-wide file access
24/7 from office, home or any location
• Deliver superior service with branded consumer Web site and closing CD
• Distribute documents, forms and messages by e-mail, fax or PCS phone.
• Manage workflow with task assignment and calendar views
• Auto alerts and notifications sent to e-mail, fax or PCS phone
• Real-time reports by users, branches or across enterprise
• Dissolve long-term storage costs with digital archiving
• Provide an audit trail of the transaction history
• Mission-critical security measures protect your data and clients
• Extensive online training and superior customer support
If you have any questions or would like a one-to-one presentation of our closing program please let me know. Office 781-890-6230 cell 781-858-6468 or rbevans@topbev.com.
Thank you
Bob Bevans
It was reported today by the Mortgage Bankers Association that fewer Americans are falling behind on their mortgage payments. This has nothing to do with the foreclosure “robo-signing” mess, because the number they were looking at was the first indication of a potential foreclosure, the number of borrowers that had a single payment past due. This means that less and less people are falling behind on their mortgage payments.
It was speculated that there are two reasons for this. Less people filing for unemployment, although that number did go up today; and improved underwriting of mortgages over the past few years. The improved under-writing was a direct result of a change in modus-operandi of the lenders following the mortgage melt-down.
Ok so let’s speculate and assume this is a signal of some part of a recovery. Many of the other pressures on the housing market remain with the largest being bank-owned property. The delay in foreclosures may have the biggest impact on the housing recovery. There is still a large amount of foreclosures that have to move through the system; in fact CNBC reported that the percent of loans in foreclosure is 4.63% tying the record high for that segment of the loan population. Most foreclosures once they are started continue until they are completed. The result will be more bank-owned inventory for sale to compete with. So in the short-term the pressures of the foreclosure inventory will most likely extend the current market conditions. However, with less mortgages going bad maybe that inventory will begin to diminish and we can all return to whatever normal has become. Let the Recovery begin.
Recently, I wrote a post about the problems I encountered when a client of mine had serious closing problems because, by mistake, the dwelling in question had its electricity shut down, pipes froze and there was ensuing damage. Fortunately, for all concerned I had a financially viable SELLER who was motivated. Substantially all of the repairs have been completed in three (3) days and we are closing on the purchase today.
My client will be buying a dwelling, with three brand new radiators, a bunch of state of the art piping, newly, freshly painted drywall and, generally, an upgrade in condition from the “condition the premise are at the date of the home inspection, reasonable wear and tear excepted” In a word, my client has “lucked out”. They are good people who did not deserve all this last minute anguish so “good things happened to good people”.
The comments I received form the ActiveRain community on this situation were thoughtful, and I got to thinking how ironic it is that in Massachusetts, where I practice real estate law, and which is known for frigid winters, there is no real estate association or real estate bar association standard clause in the purchase and sale Agreement dealing with this type of situation.
Henceforth, that will changes, at least for me. In my BUYER representation contracts, I intend to include the following:
“The SELLER agrees to maintain the premises from the date of this Agreement until the time that the BUYER receives the Deed and keys to the dwelling in substantially the same conditions as exist on the date of this Agreement. This not only includes maintaining the lawn and shrubbery in the usual manner, but insuring that all utilities leading to the premises are kept operational and not “shut off” under any circumstances. The parties agree that the financial and other damages to be suffered by the BUYER as a result of SELLER’s breach of this covenant will be difficult to ascertain, so in addition to the SELLER’s agreeing to bear the full expense of repair should the SELLER violate this covenant, the SELLER also agrees to pay the expenses, if any, for the BUYER to extend BUYER’s financing commitment and a “Break-up” fee of One (1%) of the Purchase Price set forth elsewhere in this Agreement”
I do not expect many SELLERS to agree to this. It would probably only happen if they, or their attorney, did not read my comments. On the other hand, I have told the SELLER, in advance that “shut-offs” are serious and not acceptable. Since I write posts frequently, I will inform you of my success here. Again, your comments were very helpful, and I would appreciate more, if you can find the time.
In a way, I am torn. I have totally “bought in” to social media, and I do not miss a day when I do not log in to Active Rain. I must admit that my ActiveRain experience would be truthfully designated as one for ”fun and profit”, because I have only been on ActiveRain since last March, and I have developed a lot of friendships on the blogging site, quite unexpectedly, I might add. I tweet once in a while and sort of keep up on Facebook and Linked-In, but not as much as I probably should. As one person aptly put it at the recent New York Rain Camp, which I attended, “There are only a certain number of hours in the day when I am awake!!!!!”
Having said all the above, I remain a traditional guy, with traditional values. My connections with the real estate industry in Massachusetts for the past forty years has taught me one thing. There are approximately TEN people in your professional life who make a difference to you, and you need to be in touch with them on a frequent basis, no less frequently than weekly, in my circumstances. These are the people who send you referrals; these are the people who are your “raving fans”. These are the people you cannot miss “connecting with” at least once a week.
My procedure for the TEN is quite simple. Every Monday morning I write their names down on a sheet of yellow legal paper. I look at my Outlook schedule and put in a contact with each of the TENsome time that week. I usually vary the approach. Sometimes it is an email just saying “hi–anything doing?”. Other times it is a call to their cell phone. Once in a while it is a handwritten note. I try to throw in impromptu visits “because I happened to be in the neighborhood” which, at times, is a small exaggeration since my intention was to drive “to then neighborhood”.
Anything to get into communication with these important people. Why, you ask? Because once the dialogue begins, good things almost always start flowing from it. “Gee, do you do that work?” “Oh, you know this person.” “Can you introduce me to Susie Jones? I really have been dying to meet her”. All of these “openings” can lead to “closings” and closings is what makes my world go around.
Like me, you will find that the membership in the TENis a shifting constituency. People who used to be sources of ideas and business are no longer as enthusiastic. Domestic problems and health issues can distract people. They may be losing interest. You can stay their friend, but they gradually shift out of the TEN. Compiling the list, and then reshuffling it from time time time, is a worthwhile exercise. If you are a record keeper like me, you will be amazed at how view these people are the twenty percent of your client who produce eighty per cent of your business. Treat them with the deference that such standing deserves.
Even in today’s distressed real estate environment, there are times where a condominium conversion makes sense. I have been working on condominium conversions for more than twenty year. There follows a short summary of the process, with the thought that condominium conversion may make the best sense for your multi-unit Sellers. My firm, Topkins & Bevans, continues to assist developers and individuals with condominium conversions. We have developed a team of engineers, financing people, accountants and marketing professionals which can take most of the anguish out of the process.
INITIAL STEPS
A Massachusetts condominium can only be created by adherence to the provisions of Massachusetts Laws, Chapter 183A. The first professional to be involved is the engineer, or in some cases, an architect. This professional needs to provide two separate documents. The first is a site plan, which shows the footprint of the building on the land. If there are parking spaces to be conveyed or parking easement, they are indicated on the site plan. Any easements or rights of way are also delineated. The professional also needs to draft condominium floor plans, which configure the units which are being created. If there are yards, decks or roof rights, these need to be shown on the condominium floor plans. Common areas , including those for exclusive unit to certain units, are marked off.
Once the plans are developed, our firm gets into the action. We draft the following two necessary documents which will accompany the plans described above:
•1. Master Deed. This document makes the property a condominium. It references the Site Plan and the Condominium Floors plans. It indicates the exact boundaries of each Unit. It provides descriptions of any exclusive easements or rights. Often, there is language in the Master Deed which makes FNMA and FHLMC able to purchase loans secured by the condominium units. The Master Deed also sets forth the percentage of ownership and actual configuration of each Unit. In effect, the Master Deed gives the purchaser necessary specific information as to what he or she is actually purchasing.
•2. Condominium Trust. This document sets forth the rules and regulations of condominium operations. Condominiums are run by a group of Trustees, elected by the unit owners. The Trustees meet periodically and make decisions concerning operations. They contract for repairs, maintenance, insurance and snow removal. They collect monthly fees, which are set, annually, and they make sure each unit owner is current in payment of necessary fees. All of the details of these items are described in the Trust document. Additionally, the Trust will control whether pets are permitted and also describe procedures which must be adhered to if you are renting your unit.. Most new Trust documents also set forth an arbitration procedure to be utilized if a unit owner takes issue with the actions of the Trustees.
FINAL STEPS
After the documents are drafted and recorded, it is time to sell the condominium units you created. There are tax ramifications which need to be addressed. An accountant thoroughly familiar with the proper steps is essential. Similarly, real estate professionals can market your units effectively and can actually be showing the units while the documentation is being completed. You as the organizer need to obtain common area insurance and prepare an initial budget which will be used to determine the condominium monthly fee. An experienced condominium attorney can help you accomplish all these steps at a pace which works for you.
There is work involved in a condominium conversion. There are also cash outlays. On the other hand, it is estimated that a two or three family dwelling converted into condominiums is still worth no less than one hundred fifty percent of its value as an apartment dwelling. With that kind of increase in value, especially in a difficult rental market, it behooves any property owner to consider condominium conversion.
It happened last evening in a bedroom community north of Boston. The tenant who had rented the home my clients are purchasing had vacated the dwelling on January 31, 2010 and informed all affected utilities,including the electric company. For reason still unknown, the electric company immediately shut off the electricity. The pipes froze, and there is rather severe damage to the interior of the dwelling including a flooded basement.
The closing was scheduled for this afternoon. It has been postponed until Thursday afternoon. The Lender’s rate commitment runs out on Friday. The more the parties look at the damage, the more certain we all are that the repairs and replacements will not be done for at least a week. My clients, the Buyers, have requested an extension of their mortgage interest rate. They are likely to receive same, but at a cost.
I protected my client from this eventuality in the purchase and sale agreement by saying that if for any reason, the Seller was not able to deliver the premises in substantially the same condition as they were in at the time of signing the purchase and sale agreement on the agreed upon closing date, and my client could not extend their interest rate at no charge, we could terminate the deal and receive our deposit back. This is not what my client wants to do. They want the house, and they are willing to pay for a thirty day extension. I had asked, in the course of the negotiations, for the Seller to agree to pay for this extension, but that request was not agreed to.
In any event, we are now at that miserable state of affairs where in the middle of winter, the house which my clients have dreamed of owning has “clay feet” What is worse, with the exception of withdrawing from the purchase, there are no real remedies under Massachusetts law which protect my Buyer.
The event was not the fault of the Seller, at least it would be hard to attribute NStar’s negligence to the Seller in a court of law. Realistically, the Seller is suffering here as well, as the Seller struggles to assess the damage and fix what went wrong, all , at least initially, out of their pockets.
When the dmage is substantially rectified, and we close, I am anticipating requesting the following from the Seller in connection with the home purchase:
1. An assignment of insurance claims which the Seller may have with respect to the damage to the extent that same have not been paid to the Seller by the time of the closing date, as well as an affirmative covenant to assist my client with any subsequent claims.
2. An assignment of any claims against NStar, if any, for shutting down the electricity without consent of the Owner and without contemplating the effect of such an action.
I would be very interested in hearing from any of you, either lawyers or other real estate professionals about any other ways I can protect my clients in this unfortunate situation. Perhaps, there is something obvious which I am missing.
Anyone who owns a business venture should be concerned with certain basic truths. It is a sad but true fact that our society is becoming more and more litigious every day, and more and more small business owners are finding themselves on the wrong side of law suits. Right or wrong, the experience of defending a legal action is extremely stressful.
I have acted as a Massachusetts real estate attorney for more than 40 years. During that period, I have never had a client who “enjoyed” being sued and experiencing the expense and disruption of a lawsuit. It makes sense to put a legal shield between yourself and the creditors of your business, whether real or contingent. The Limited Liability Company (“LLC”) is an entity completely separate from its members.
With proper planning, none of the members of the LLC should be personally liable for the debts of the LLC whether they arise in contract or tort. The LLC also offers some unique advantages for unmarried coupleswho own real estate together. This has been a subject of a recent post in which ActiveRain member showed much interest
The operating agreement of the LLC can be tailored to determine an “exit strategy” should the couple break up. More importantly, the operating agreement can be fashioned in such a way as to recognize disparate contributions of equity or disparate payments on the mortgage, so there can be no problems sorting our who owns what and who is entitled to what tax deduction. In many instances, the LLC can replace the use of joint tenancy agreements and tenancy in common agreements, which are often cumbersome and difficulty to administer and enforce.
Do you need to raise money for a real estate or venture capital project? The LLC is a perfect vehicle. Admitting new members is a simple process, and there are no limits to the number and/or character of additional investors. They can include all types of individuals, corporations, trusts, pension plans, foreign investors (both out of Massachusetts and out of the country). This is certainly not the case with the corporate structure that most closely rivals the LLC, the subchapter S corporation.
So, if your real estate transaction involves any group of people other than a married couple, I would strongly suggest an LLC. The planning, and protective, possibilities are endless, and the actuak working of the LLC easy to master. In the near future, my website, www.topkinsandbevans.com will contain examples of many different types of Operating Agreements. I am sure you will find one among that group which can be adapted to fit your unique needs.
What Does It Cost?
The cost to set up and maintain an LLC are roughly comparable to setting up a corporation, (figure between $1,500 and $2,000 including filing fee and drafting of the articles of organization and operating agreement). After the initial cost, however, the ongoing costs are minimal. There is no need to hold an annual meeting of shareholders or directors. The person designated as “manager” in the articles of organization can take actions on behalf of the entity without the approval of directors. Moreover, in a single member LLC, we at Topkins & Bevans have determined that there is no need for an operating agreement, so that the initial cost in that scenario is lower.