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Loren
Loren, Attorney
Category: Business Law
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Experience:  30 years experience representing clients .
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My wife and I are partners in a joint real estate partnership

Customer Question

My wife and I are partners in a joint real estate partnership with sister-in-law and brother in law(Williams). The partnership is called L & W Associates.   The Williams are wanting out of this partnership and have composed several documents concerning shareholder amendent, assignment of rents and leases, promissory note, and a mortgage agreement. The williams have offered to sell us their share in both the real estate partnership and their share in a corporation called Morales Art, Inc. for a $1 each.   Plus a promissory note($150,000) for the "expenses" they have incurred during the years pertaining to both companies. I have the documents and could email them to you. Is that possible? I am wanting to know whether these documents are in order and fairly composed.?
Submitted: 5 years ago.
Category: Business Law
Expert:  Loren replied 5 years ago.
Hello,

This is not really the way you want to do your due diligence on a six figure deal.

I will tell you a few issues to address and then you are going to call a local attorney to review your documents:

1. Value. I am assuming you know the value of the assets of your partnership. If you haven't already, have your accountant or an appraiser value the property. Perhaps the Williams and you might agree to split the costs and agree to base the sale on the valuation reached by the professional. I would also want to make sure you know everything there is to know about Morales Art, Inc. Not just its assets, but its liabilities, as well.

2. It sounds as if all you are giving is a promissory note. that's fine. Are you being asked to give a guaranty to back up the note? Hopefully, not. Is the mortgage non-recourse? Hopefully, yes

3. There should be something in the documents stating the Williams are still liable for any claims arising before the sale.

4. Are there any lending banks who are holding superior mortgages? Check the documentation to make sure you are not breaching those mortgages by entering into this transaction.

5. Check with your tax professional to make sure you are not creating any tax problems by the transaction or the way it is structured.

Finally, I urge you and the Williams to engage your own local attorneys to make sure this is done right. There is a process to due diligence and failure to heed that process can lead to a great deal of aggravation and hard feelings down the road.

Good luck. I hope this turns out the way you want it to.
Customer: replied 5 years ago.

Loren,

Thanks for your reply. At the moment I do not have access to the documents I mentioned as they are on another computer. If it is alright, I will forward them to you tomorrow as word files. Then you might answer again with any suggestions? Is that ok?
Mitchell

We have own Morales Art for 24 years.. I have run the business that whole time, we live in large apartment above one of our galleries. Land is tax valued at 1.4M...so the buyout is generous on the Williams' part. Just wanting to know if there are any faux pas in documents.

Thanks

 

Expert:  Loren replied 5 years ago.
PLEASE, DO NOT SEND ME YOUR DOCUMENTS.

This forum is for general information only. There is no attorney client relationship established here.

I am happy to give you a basic overview to the process, but the assets here are too valuable to do the due diligence on line. You need to consult local counsel.

Good luck.

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