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Sale and Leaseback Agreement Related Questions

Sale and leaseback is a financial transaction in which one person sells a fixed asset such as property, an automobile, or a train, and then leases it back from the buyer for a long period of time. Thus, the seller can continue to use the asset but no longer holds ownership of the asset.

Listed below are a few questions answered by lawyers on sale and leaseback related questions.

An investor wants to buy my house in a short sale and lease it back to me. He feels I do not need to disclose this to the bank. Is it illegal to do so?

Any interest that you retain in the property, including a leasehold, would amount to bank fraud if you decide not to reveal this to the bank in a short sale. When the bank does discover this later on, it could invalidate the debt forgiveness.

After I purchased a model home builder leaseback in an HOA development, the HOA started sending bills to the property instead of directly to me. Since there was no one there to receive the bills, I paid them only when I got notified later on. I have now been asked to pay a legal collections bill. Am I liable to pay this penalty?

In this case, it is unlikely you will need to pay the penalty as you were not notified and billed for the charges.

This is a question regarding sale/lease back. Many years ago, I lost my job and transferred my property to my uncle since I could not afford to lose it to the bank. Am I legally entitled to get the property back?

In most cases, you would probably not be able to force your uncle to transfer the property back to your name, unless you had a prior agreement in place to do so under certain conditions and all those conditions have been fulfilled. Just because you were the original owner of the property, you are not automatically entitled to force your uncle to transfer the property back. It is like a gift that has been given and cannot be taken back, and your uncle can choose to do what he wants to with it.

What is the legal process by which a buyer of a short sale can lease the property back to the seller?

The buyer can lease the property back as long as the bank allows it at the time of sale. Usually, when you close a short sale, certain lenders require the buyer and the seller to sign an Arm's Length Affidavit, which states that the seller will not lease the property back from the buyer. If the lender who approved the short sale requires this document to be signed then the seller cannot legally lease the property back.

One way around this would be for the buyer to convey to another party. They could then lease the home to the seller since the new party hasn’t signed the Arms Length Affidavit.

A sale and leaseback arrangement helps companies who need to release the cash invested in an particular asset and use it for other purposes, yet also need to use the asset to continue operations. In addition, these deals also provide the seller with tax benefits.
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