Legal Question in Real Estate Law in California
Breech of Contract: Real Estate
RE Broker is the beneficiary of a promisory note that was created with his client in leui of paying his earned commission at the close of escrow. Per the agreement, the Broker receives 5% of the monthly lease income on the subject property for 25 years with an acceleration clause to pay the balance of the commssion in full upon the sale of the property. Last year the client requested a payoff and stated he was taking on partners in the ownership of the property and needed clear title. Rather than selling/granting partial ownership of the property the normal way through an escrow, the client's attorney sneakily transfered full ownership of the property to a newly formed LLC, and then sold shares in the LLC to third parties. The property is the only asset in the LLC.The client & his attorney now state that there was NO SALE, just a transfer, and the client refuses to pay the accelerated commission. Are there any cases or laws you can refer me to that can be used as an example of how the client will prove that a transfer is not a sale? And cases that will help support the Broker's claim?
3 Answers from Attorneys
Re: Breech of Contract: Real Estate
Why do you need cases or laws? This is just an old-fashioned collection case. Sue the broker for breach of promissory note. The transfer or sale or whatever they want to call it is not relevant.
If the client is in default, then sue for the commission.
On the other hand, if the client is not in default and payments are timely, then there is no need for suit.
Re: Breech of Contract: Real Estate
The kind of help you ask for requires research. Attorneys get paid for this. You may well have a good case. Spring for a few hundred on a real consultation.
Re: Breech of Contract: Real Estate
Well, as I see it, whether the note was breached or not is THE issue here, i.e., was the transfer of title to an LLC and distribution of ownership of the LLC to strangers the equivalent of a sale?
I too agree that this is an issue that would require research to develop answers that could be cited in court. I think it is, and if the question had come in on a day I had nothing else to do, I might research it as a freebie and provide some case law, but I can't do that tonight.
My hunch is that anything that would cause a reassessment for tax purposes is a sale, and the tax collector will want to reassess here. A lawyer-drafted note would define "sale" broadly, to include any alienation of title, or an interest therein, and the lawyer here may be basing his position on the notion that if no money changes hands, there is no sale, but issuance of LLC interests is very much a sale, in my opinon.
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