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I need to talk to a lawyer who is familiar with residential…

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I need to talk to a lawyer who is familiar with residential real estate.

Lawyer's Assistant: Because real estate law varies from place to place, can you tell me what state this is in?

CA

Lawyer's Assistant: Has anything been filed or reported?

No. This is a question about purchasing residential real estate with someone else. As tenant in common is one of the questions.

Lawyer's Assistant: Anything else you want the lawyer to know before I connect you?

I have a series of questions all surrounding the central question of helping a homebuyer to buy a home.

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Answered in 2 minutes by:
3/7/2018
Olivia Kent
Olivia Kent, Attorney
Category: CA Real Estate
Satisfied Customers: 4,010
Experience: Partner at Kent Law Group, LLC
Verified

What can I answer for you?

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Customer reply replied 4 months ago
Can we do a phone call?

There should be a phone call request button on your end.

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Customer reply replied 4 months ago
Let me try some questions first. Are there barriers that disallow a fund or partnership to invest in a home with a potential Home Buyer in which the fund would secure the home buyer’s obligation with a mortgage (or other Lien filing), or become a Tenant in Common?

I'm not sure what you mean by "are there barriers"... A business can purchase a home and then sell/lease or in some other way provide that home to a home buyer.

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Customer reply replied 4 months ago
It might be helpful for some context as I may not be asking the questions all that well.
Some other investors and I have individually helped home buyers that didn't have the down payment purchase a home by providing a down payment. The banks didn't have a problem with it as we were Tenants in Common and disclosed to them the terms of our agreement. We know have other homebuyers interested in working with us as well and thought it would be better to create a fund that could do essentially the same thing. This is where our list of questions come in. I'll attach them with the add files button. We are simply looking for some advice and guidance on some of these issues but if you have comfort with these issues I would like to get on the phone to discuss in more detail.

I see your list of questions and it is an hours long discussion that you really should hire a local attorney to give you a legal opinion on. We can only provide you with general legal/educational information but you're going to need significantly more than that in your case.

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I will opt out of your question so that if someone else feels comfortable providing this information to you they will opt in. But, you really need to be aware that this is a significant undertaking and you should have an attorney assisting you with it so that you have the appropriate agreements/liability insurance, etc. in place. This is not a simple situation - and definitely not one amenable to a simple question and answer sort of situation.

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Customer reply replied 4 months ago
OK. Thanks.
socrateaser
socrateaser, Attorney
Category: CA Real Estate
Satisfied Customers: 40,061
Experience: Attorney and Real Estate Broker
Verified

Hello,

I am a member of the State Bar of California and I am a licensed California Real Estate Broker. There are several areas of California and one area of federal law that may impact your contemplated enterprise:

Home Equity Sales Contracts [Cal. Civil Code Sections 1695 - 1695.17]

During the late 1970s and early 1980s there were a number of scams purpetrated by real estate "investors" whereby the investor would try to purchase a property from a homeowner who had equity in their property under the guise that the investor would save the home from foreclosure. The homeowner was lacking the income to pay a mortgage or property taxes, was unwilling to sell, but the home had equity value. In effect, this scheme operated as a theft of the homeowner's equity value, and the California Legislature enacted laws to prohibit this conduct without conspicuous disclosures about the effect of the proposed sale to the investor.

Mortgage Foreclosure Consultants [Cal. Civil Code Sections 2945 - 2945.11]

and Cal. SB 94 (eff. Oct. 11, 2009)

After the "great recession" of 2008 began, various persons, typically licensed real estate agents or lawyers claimed that they could help homeowners avoid foreclosure of their properties which were "underwater" due to the rapid decline in real estate prices caused by the unavailability of cost effective financing from major institutional lenders. These persons would offer to try to save the homeowner from foreclosure in exchange for large fees. In fact, there was nothing that could be done to save the vast majority of properties -- consequently, the homeowner would expend thousands of dollars in trying to save their homes, only to be foreclosed afterwards.

The California Legislature, once again, stepped in and enacted a draconian set of regulations under which no person could receive any payment from a homeowner under the above-described circumstances, until the person had done each and everything promised. Since it was effectively impossible to accomplish the promises, this stopped the practice of "fleecing" homeowners of their savings while in foreclosure.

California "Blue Sky" and federal Securities and Exchange law and regulation

I won't bother to enumerate the gargantuan number of laws that prohibit persons from creating what is in effect an "investment contract" or "security" without satisfying one of the exceptions provided for under the federal Securities and Exchange Act and related regulations. However, real estate transactions are generally not subject to these laws, due to such transactions not falling within the scope of the fundamental definition of an "investment contract": "a contract, transaction [299] or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party...." SEC v. WJ Howey Co., 328 U.S. 293, 298-299 (1946).

In short, if an investor in real estate and receives a deed to the property (in whole or in part), then the investment is not an "investment contract" or "security" because the investor's profit is not due solely to the efforts of the promoter -- as it is well known that given enough time, all real estate appreciates due to market forces without any effort other than property maintenance. And, of course, there are exceptions to the rule of appreciation where local communities change character and the properties en mass fall in value as a consequence (e.g., zoning changes, migration, lost job base, etc.) -- in the words of the most well-known real estate maxim: "The first three rules of real estate investment are: 'Location, location, location.' "

That's the broad brush. Concerning more specifics or conducting a review of your actual business plan and/or any related literature, that would constitution a bona fide legal service which cannot be conducted in this forum. We would have to take the discussion off line into an attorney-client relationship (customary legal services fees would apply). Please let me know if you're interested and I can send you an offer of direct correspondence (dont' ask about fees or anything related -- I cannot negotiate with you in a public forum).

Also, if you are presented with an offer of a phone consultation, please know that this is an automated website offer and that due to concerns with the legality of California attorney participation in the program, I do not participate.

If not,

I hope I've answered your question. Please let me know if you require further clarification. And, please provide a positive feedback rating for my answer (click 3, 4 or 5 stars) -- otherwise, Justanswer retains your entire payment, and I receive nothing for my efforts in your behalf. Note: If you cannot find the rating button on your webpage, please just type in your rating in a response to this note, and customer service will apply the rating for you.

Thanks again for using Justanswer!

socrateaser
socrateaser, Attorney
Category: CA Real Estate
Satisfied Customers: 40,061
Experience: Attorney and Real Estate Broker
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DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

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