Legal Question in Real Estate Law in California

Re: how to structure our real estate deal together?

Well, it depends on the facts. If it is simply a matter of taking tile together, you can take at Tenants in Common and split according to your relative interests. A contract can get the job done if it is more complicated. A partnership agreement can do it, but gets more complex. I need more facts, but this is the quick and dirty. You may contact me.

Re: how to structure our real estate deal together?

this cannot be a simple deal. If the property has a value of, say, over $10,000, get a lawyer! You could obtain standard forms, but that would be, in my professional opinion, be a mistake. If you need a referral to an attorney who handles this, I would be happy to provide.

JOEL SELIK

Attorney at Law

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Re: how to structure our real estate deal together?

You should put together a DETAILED partnership or co-ownership agreement. It sounds like you are trying to fix up a house and resell for a profit. This becomes ordinary income, rather than capital gains. You may want to consider renting it for awhile before selling.

Re: how to structure our real estate deal together?

I agree that you need a comprehensive written agreement, but simple is far better than nothing at all. In partnerships, it's the ethical standards of the partners that's important.

What you're proposing to do will be considered a partnership; a "joint venture" is treated as a form of partnership for most legal and tax purposes, its distinguishing features usually being limited duration and single purpose.

A partnership should file a partnership tax return, but I believe this will not be mandatory in your situation so long as each partner reports his/her revenue, expenses and income or loss accurately and consistently (i.e. you cannot each take 100% of the deductions!).

My experience indicates the most essential items to address in an agreement covering this kind of venture would include:

1. How title is to be held;

2. Who puts up the cash, and when;

3. Who makes spending decisions;

4. Who may/must sign checks;

5. What is the timetable of events, and what happens when delays occur, as they always do;

6. What is the budget, and what happens when cost over-runs occur, as they always do;

7. What is the work plan?

8. Who decides when to sell, how to price the sale, when and how to reduce the ask price, etc.;

9. If there is a profit, what are the percentages? If there is a loss, how are the creditors paid and by whom and what percentages?

10. How are disputes resolved? Arbitration?

11. Include an attorney fee clause. Helps promote dispute resolution and reduces frivolous suits.

12. Remember that for every omitted term or provision, a court may someday be providing you and your partner with the missing language.