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Updated about 1 month ago,
Hard money lender ,borrower moved his LLC to Delaware without notification.
My Borrower moved his company to Delaware making it an LLC there which makes me a bit worried that he might try something and try to get out of the loan by splitting the llc . Would it be advisable to move my LLC from Florida to Delaware also in the event I need to go to court to recover the loan would an llc in Delaware be better? . I have to get a lawyer there anyways and talk about the implication of him doing this without notifying me and redo the loan paperwork . Does anyone know a lawyer there that is familiar with hard money loans and could update the paperwork ? thx u
Based on my experience with Hard Money Lenders, this post does not make any sense to me.
Did you not file the loan documents with the county as a lien on the property? The loan attaches to the property, not the LLC. If the loan is not getting paid, you foreclose and sell the property to get your money back.
The only other way you could get yourself in trouble is by giving the borrower cash before the work is done. My Hard Money Lenders held the money in escrow and would not release the funds until the work was done, inspected, and they knew it was properly done. That way, they knew if they foreclosed, all the cash was already in the house. All they had to do was finish the work, sell the property, and they would get all of their money back plus profit.
@Glenn N.
As mentioned this makes no sense and you as the lender would never change the name of your company because of this
The loan is still in the original entity and the loan docs should have default provisions if you used a legitimate attorney to create them
- Chris Seveney
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Quote from @Glenn N.:
My Borrower moved his company to Delaware making it an LLC there which makes me a bit worried that he might try something and try to get out of the loan by splitting the llc . Would it be advisable to move my LLC from Florida to Delaware also in the event I need to go to court to recover the loan would an llc in Delaware be better? . I have to get a lawyer there anyways and talk about the implication of him doing this without notifying me and redo the loan paperwork . Does anyone know a lawyer there that is familiar with hard money loans and could update the paperwork ? thx u
Does the loan docs have a provision requiring permission from the lender to change ownership entities? This is pretty standard and should be in there, unless you went with non-standard docs
No it does not ,lesson learned.
Quote from @Greg Scott:
Based on my experience with Hard Money Lenders, this post does not make any sense to me.
Did you not file the loan documents with the county as a lien on the property? The loan attaches to the property, not the LLC. If the loan is not getting paid, you foreclose and sell the property to get your money back.
The only other way you could get yourself in trouble is by giving the borrower cash before the work is done. My Hard Money Lenders held the money in escrow and would not release the funds until the work was done, inspected, and they knew it was properly done. That way, they knew if they foreclosed, all the cash was already in the house. All they had to do was finish the work, sell the property, and they would get all of their money back plus profit.
Yes it was , I have had this loan for 7 years now, they are growing the company from one into a RIET of 4 different businesses and the goal is going public once the company is in the right position. I think that a new partner a very large real estate development co. that the company now has a relationship wanted it there where his company is also .
Quote from @Glenn N.:
Quote from @Greg Scott:
Based on my experience with Hard Money Lenders, this post does not make any sense to me.
Did you not file the loan documents with the county as a lien on the property? The loan attaches to the property, not the LLC. If the loan is not getting paid, you foreclose and sell the property to get your money back.
The only other way you could get yourself in trouble is by giving the borrower cash before the work is done. My Hard Money Lenders held the money in escrow and would not release the funds until the work was done, inspected, and they knew it was properly done. That way, they knew if they foreclosed, all the cash was already in the house. All they had to do was finish the work, sell the property, and they would get all of their money back plus profit.
Yes it was , I have had this loan for 7 years now, they are growing the company from one into a RIET of 4 different businesses and the goal is going public once the company is in the right position. I think that a new partner a very large real estate development co. that the company now has a relationship wanted it there where his company is also .
We have very different definitions of a Hard Money Loan. The longest I've ever had a HML was 3 months. Most people want out as fast as possible. To me this sounds more like personal loan to a business.
Quote from @Glenn N.:
Quote from @Greg Scott:
Based on my experience with Hard Money Lenders, this post does not make any sense to me.
Did you not file the loan documents with the county as a lien on the property? The loan attaches to the property, not the LLC. If the loan is not getting paid, you foreclose and sell the property to get your money back.
The only other way you could get yourself in trouble is by giving the borrower cash before the work is done. My Hard Money Lenders held the money in escrow and would not release the funds until the work was done, inspected, and they knew it was properly done. That way, they knew if they foreclosed, all the cash was already in the house. All they had to do was finish the work, sell the property, and they would get all of their money back plus profit.
Yes it was , I have had this loan for 7 years now, they are growing the company from one into a RIET of 4 different businesses and the goal is going public once the company is in the right position. I think that a new partner a very large real estate development co. that the company now has a relationship wanted it there where his company is also .
are they paying?
- Chris Seveney
Yes they are Chris.
So, are you lending him to start a company or backing RE deals? If you are backing RE deals, you need to get a recorded mortgage if you want evidence. If you have a handshake/wink-wink kind of deal then you should get a Promissory note at least that outlines the terms of the loan and what happens if it default, who the loan is between, and usually in agreements like this the language is broad. This Promissory Note is between Joe Smith, Joe Smith LLC, and any new or old entity that should become the entity of record for our purposes.
Is this a close friend? Relative? I would consider this a very loose agreement for an arm's length deal.