Articles Posted in Real Estate

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AdobeStock_288866301-300x200When real estate is transferred in California, it generally constitutes a change in ownership that triggers a reassessment of the taxable value of that property. There are, however, a few key exclusions that can be used to avoid this trigger and protect your business from added tax liability. If you are considering transferring any property to or from your business, be sure to consult with an attorney about the best way to do this. The investment of attorney’s fees can pay dividends in reduced legal and tax liabilities. Errors, however, can lead to costly reassessments, in addition to tax penalties and interest on the added amount due.

Protecting Property Through the Creation of a Business Entity

There are a few different ways to transfer property to a business entity without triggering a reassessment. One is the legal entity exclusion. This rule allows you to avoid a reassessment if 50 percent or less of the interest in a legal entity is transferred to another legal entity. So if real property is held by a legal entity, up to half of the interest in that legal entity can be transferred without triggering a reassessment. If 51 percent or more of the legal interest is transferred, there will be a reassessment. The strategy is often used by business owners who are creating a new legal entity without changing the ownership of their business.

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Real-Estate-Investment-1-300x200It is often said that real estate, especially in California, is a strong and smart investment. Investing in commercial real estate in California can have both long and short-term financial benefits.  One may receive passive income from renting commercial real estate, which often includes operating costs for items such as tax, insurance, and common area and general maintenance and as Silicon Valley grows, the property may well appreciate resulting in substantial profits when the decision is made to sell the property. As such, many California companies are either investing in real estate or purchasing their own commercial properties to help offset the high costs of operating in Silicon Valley.

A common and effective way of holding commercial real estate is by forming a California real estate holding company – an entity that holds title to the real estate so as to attempt to minimize the owner’s overall liability in connection with the property and particularly with respect to litigation. The experienced San Jose real estate lawyers at Structure Law Group, LLP can evaluate your real estate investments and help you form an entity to protect your interests.

Benefits of Investing in Commercial Real Estate through a Real Estate Holding Company

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An easement is a legal tool that gives someone else the right to use part of your land. Generally speaking, an easement does not give a party full ownership of that part of the property and instead, will include restrictions on how the party can use the land. Additionally, the property owner retains the right to use their land as they choose, as long as the use does not interfere with the easement holder’s rights.

One type of easement does restrict the property owner’s right to use the land – sometimes, they cannot use that part of their property at all once an easement is in place. These are called exclusive easements and, while they are rare, it is important to understand all implications of this type of easement before you ever grant one.

How an Exclusive Easement is Acquired

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Real-Estate-Investment-300x200Real estate is a major investment in Silicon Valley. The law provides many ways to protect real estate assets.  For instance, many investors choose to place real estate under the ownership of a corporation or limited liability company (“LLC”). An experienced Silicon Valley real estate attorney can help guide investors through every step in acquiring real estate. Structure Law Group will help you with all of your real estate investment needs, such as identifying potential acquisitions which are appropriate for your business, performing due diligence investigations, determining whether the investment should be made in the name of a business entity, determining which type of business entity is appropriate for your needs, and executing the transaction documents to give your new asset full legal protections.

Which Legal Entity is Right for My Real Estate Investments?

Both corporations and LLCs are separate legal entities with legal identities separate from that of their owners. However, these different types of entities are treated differently for income tax purposes. It is important to choose the right kind of entity to make sure your real estate is properly protected.  For instance, LLCs can allow for profits and losses to flow directly to their members, without being taxed on a corporate level. Corporations, on the other hand, must be taxed as a separate legal entity. Corporations also do not provide their officers and owners with the same extent of legal protection from claims and liability enjoyed by members of an LLC.  Nonetheless, every situation is unique, so a full analysis of which entity is always right for you is always necessary to make sure you are getting the most out of your investment.

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Businesses are subject to many types of liens, such as civil judgments, tax liens, and mechanic’s liens.  These liens, and many others, can impair your company’s ability to turn a profit.  Protect your business assets by being proactive and contacting a San Jose corporate attorney.

What is a Lien?

A lien is a type of security interest on real or personal property, granted to a third party, that secures a debt payment or performance of an obligation.  Until the debt represented by that interest is paid, or performance completed, the third party that owns the lien can and will prevent the property owner from enjoying the full legal rights associated with the property in question.Lien-300x225  For example, if a business does not pay its taxes, the IRS or the California Franchise and Tax Board may place a tax lien on its assets.  As mentioned earlier, the lien can affect both real and personal property, so the lien could conceivably be placed on a company’s buildings and even its bank accounts.

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Contractors, subcontractors, and suppliers deserve to be paid for the work they complete and the supplies they provide. All too often, however, they are not adequately or promptly paid and find themselves in a payment dispute. Fortunately, the law gives those in the construction industry a legal tool called a “mechanic’s lien” to use to secure their right to proper payment.

Can You File a Lien? Mechanics-Liens-300x199

The first step is to determine whether you are eligible to file a lien in California. Our state only recognizes liens filed by individuals who are in a contract directly with a property owner, a contractor, a subcontractor, or anyone who is a legal agent of those parties.

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There are many California requirements for an investor to be a holder in due course.  A holder of an instrument is entitled to enforce the instrument.  However, a “holder in due course” has greater rights under the Uniform Commercial Code (UCC) and the California Commercial Code (COM) than a holder who is not a holder in due course.  Specifically, a holder in due course takes an instrument free from many of the defenses to repayment that might have been asserted against the original obligee or against another assignee or holder not in due course.  An experienced San Jose business law firm can help business owners and investors understand their rights and requirements in order to be a holder in due course.

There are specific requirements that must be met for an investor to qualify as a holder in due course, including that:

  • The investor takes the instrument for value;
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Real estate transactions are complex and often involve valuable property and a significant sum of money. In a real estate transaction, both the buyer and seller of real estate have significant interests on the line they desire to protect; one way of doing this are escape clauses. Since many things can go wrong in a real estate transaction, real estate contracts include many different provisions and clauses that can come into play during the course of the deal or transaction. It is often wise to have an experienced California real estate attorney draft or review any contracts.

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A real estate buyer understandably wants to be aware of the condition and known risks of the property they are purchasing and to ensure the transaction will not unknowingly cost them more money than anticipated in the long run. On the other hand, if a real estate seller enters into a contract with a particular buyer and stops soliciting other buyers, they can lose out on opportunities  if that buyer suddenly backs out of the deal.

To protect buyers while also protecting the interests of sellers, many real estate contracts in California have one or more “escape clauses”. These escape clauses allow the buyer to withdraw from the transaction if certain circumstances arise and the seller has proper notice that the contract is contingent upon these clauses.

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There are many different types of businesses in which you can invest and earn profits, many of which that involve real estate. One important investment opportunity is a real estate investment trust, or REIT. This type of investment was created by Congress to give stockholders the opportunity to reap benefits from income-producing real property without having to go through the entire process of purchasing the property. There are different types of REITs and also many regulatory requirements for this potentially lucrative business endeavor.

Types of REITsFotolia_91167303_Subscription_Monthly_M-300x196

There are three main types of Real Estate Investment Trusts and the following is a brief description of each:

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Everyone knows what they say about real estate: location, location, location. This same axiom is definitely true for many businesses too. While some businesses may operate out of homes and employ their workforce remotely, many operations require a physical location to which workers and customers go on a daily basis. For example, stores, restaurants, and other locally-serving businesses always want to have a prime location with lots of foot traffic and easy access in town. Others, such as manufacturers, need large warehouses with affordable rent and room for all their equipment. While many business owners choose to own their building, many others do not have means to do so, or may not want to commit to one location long-term. For these reasons and more, many business owners lease their commercial spaces.

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For any type of lease agreement or contract, you want to be sure that all of the provisions are fair and reasonable. A proper lease will set out your rights as a tenant, and you want to be sure it does so adequately. A commercial lease will also designate your responsibilities as a business tenant, and you should be aware of any terms that require unreasonable or difficult responsibilities from you. Because each of these lease types can be complex documents with confusing legal language, you should always have any potential leases reviewed by a highly experienced business attorney prior to signing.

Of course, you will want to make sure the length of the lease and rent requirements suit your needs. The following are some additional terms your attorney will consider and review:

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