Types of Ownership

[Robert Littke]

I have a client who owns a 10,000 sq. ft. Flex building that he developed two years ago. He occupies about 3,000 sq. ft. and has been unsuccessfully trying to rent out the other portions for over a year.
Part of the problem is it currently shell space and there is just to much on the market that's finished.
I was going to suggest making the property available for purchase. My questions are:
1) Aside from Condo and LLC, what are the other options for transferring ownership in the property?

2) Of these options, which ones provides the most control to the current owner.

3) What are the pros and cons of each.

4) There is a 90% loan on the property, is the bank going to give us any trouble if we break it up?

Thank you for your time.

[Bill Gulley]

Hi, different types of ownership will not change your situation since any title transfer will require a release from the lien holder and at 90% LTV, that just won't happen.

About the best thing I can think of is placing the entire property in his LLC. If it is not already in an entity, a lender on a commercial property will probably allow such a transfer and having the LLC kiss the note.

Then after that is arranged, sell an interest in the LLC which will provide a tenants in common arrangement as a partnership owner. This is done only through the Operating Agreement and is not a transfer of title. A good attorney can limit the Operating Agreement so that the new partner has only those rights and responsibilities needed to secure an interest in the property without being involved in other business matters.

You can also check the legal description of the property and see if there are seperate legals for each unit or units. If not, the LLC will be about the only way to share the interest.If there are, those legals could be used in the Operating Agreement, but with the bank lien on all the legals, they would likelky consider any other arrangement as a transfer and the provisions of the due on sale could apply.

Trying to do any sub=2 arrangement without seperate legal descriptions could cloud title.
Selling the entire property sub-2 might be an option, but that's not what was put forth. Good luck...