Legal Question in Real Estate Law in Arizona
Property in FL - Breach of Contract in AZ and Partition suit in FL???
In 2006 3 friends (1, 2, 3) formed Florida LLC. Agreed they would personally buy investment property & treat as if owned by LLC in books & taxes. LLC had no credit history-could not get loans. In late 2006, 1 obtained conv. financing to buy duplex in FL. Added 2 & 3 to mortgage docs & deed at closing w/ bank approval. Downpayment funded via secured credit line from Arizona LLC also owned by 1, 2 & 3. 1 wants out of property & LLC 3 months later. 2 & 3 upset, but agree verbally to buy 1 out ''subject to'' existing mortgage, unless they could find the same exact financing terms or better. For 2 years all OK. 2 & 3 collect rent, paid mortgage, taxes & bills, & did repairs & substantial renovations on property. (Never any late payments) In late 2008 friendship decays. 1 wants name off mortgage & tells 2 & 3 they have to refinance now & says he never agreed to a ''subject to'' deal. 2 & 3 agree to get much less attractive financing & pay off current mortgage if 1 pays $40K. 1 doesn't agree. 2 & 3 then tell 1 that if one part of deal is not valid, then whole deal is not valid & 1 can manage & take care of property himself. 1 hired lawyer & is threatening breach of contract in AZ & partition action in FL. Does 1 have a legitimate case?
1 Answer from Attorneys
Re: Property in FL - Breach of Contract in AZ and Partition suit in FL???
From the scarce information you have provided, the two actions would seem to be legitimate, however, the legal action may not be well advised. You have not stated if the property was conveyed to the FL LLC, nor is there any info about what the operating agreement provides.
I suggest that you get advice and counsel to determine what the facts are and then negotiate with the attorney for 1. I can't guess at what might be the basis for a breach of contract action. It sounds like 1 is in breach of contract. A person's right to obtain partition on a property, generally results in a forced sale, which in this market would probably result in no benefit to anyone. What arguments and legal rights that you may have to defeat the claims and action of 1, can not be determined without review of the whole deal. He has no right to force the others to refinance and take him out, that requires your agreement, on whatever terms you may require.
This is the type of case that should be mediated/negotiated, since there are no lawsuits yet filed.
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