All Forum Posts by: Donald Scott

The deed each party holds an "undivided 1/2 interest" and there is no mention of a partnership or a partnership agreement I would think the ownership form is not an issue. How they massage the rents to the LLC is out of my scope of knowledge.

Any cleaver contract language that could structure the deal as I outlined in the first post?

Don Scott

Steven,

Are you saying that because the parties hold the property "as an undivided 1/2 interest" the form of ownership does not qualify?

Each side is addressed as joint tenants. (Family A and Family B) I would take that as addressing the joint tenancy of the man and wife holding the "undivided 1/2 interest".

There is no Partnership Agreement.

There is a deed which grants ownership as I described and a Co-Ownership Agreement that says they get the upstairs and we get the down stairs and defines some general obligations.

The agreement was drafted in the 80's for our respective parents.

The language is vague and poorly written for it's intended use.

With regards to FMV of the rents paid to the LLC, I have no idea how they are substantiating the claim.

I am very interested in your assertion that the existing form of ownership would not qualify for a 1031. How can I research this further.

Thanks for the insight.

I believe that on paper they (the LLC) is renting back to the parents.

Despite the fact they never use the place.......

The deed is worded as follows:

John Doe hereby grants to:

XYZ and 123, his wife as joint tenants as to an undivided 1/2 interest and ABC and 345, his wife, as joint tenants to to an undivided 1/2 interest in the following described property.

That's the language of the old deed before ABC & 345 formed an LLC with their daughter. I don't have a copy of the new deed handy.

Interesting point. I don't know the answer but I'm goong to look into it.

Thanks,

Don

Thank you to everyone who takes their time to offer advice on this valuable forum.

Background/Bullet Points:

San Diego duplex.
No debt.
Not a rental. Two vacation homes. Divided by a Co Ownership Agreement.

I want to buy out my partner’s interest.
She wants to sell her interest.
She/seller wants to do a 1031 and buy another property. (Marin County, CA)
We have looked a Structured Sale but it does not have all the advantages of the 1031.

I have cash to close.
She/seller cannot find the “right” property.

She is the manager of the LLC that holds title with her parents.
They have not set foot on the property in almost 3 years.
I live in one of the units and have managed and maintained the property for the past 6 years.
Her parents are not able to manage their affairs and she handles their $$$.

We have a number of serious deferred maintenance issues that she does not want to address.

I would much rather buy her out than go to arbitration to force her to participate in the work for the deferred maintenance and the renovations I want to do.

It could be a couple years or more until she finds the right property. She is very picky.

I want to do something now!

Questions:

What are my alternatives?

How can we structure an open ended escrow that places the funds with a third party and allows me to do the improvements and address the deferred maintenance?

Would she/seller be able to go sign her side of the closing documents once she locates the “right’ property.

Could we create language in the escrow instructions or a separate contract that relives her of all ownership burdens and allows me to proceed with renovations?

Not that I think she would try to pull a fast one, but I would want a contract that leaves the deal done with the exception of signing the closing documents and picking up the check. She can’t get out and would have no recourse to anything I do with the property short of re-selling. I

Obviously the 1031 facilitator will have a function in the deal I’m just not sure of what prior to the funds being received after close of escrow.

I realize I’m rambling but I hope ya’ll can see the problem I’m facing and can offer some advice or strategies that will get this deal of high center.

Thanks in advance.

dgsaz