Whether you are a first time homebuyer, a seasoned investor or a landlord, our firm can help you meet your goals. With significant experience in the area of Real Estate, we offer a breadth of legal knowledge to our clients. Call us at 847-786-8999 for a free Consultation.
The importance of a commercial lease cannot be overstated. It is one of the most important documents either party to the document will sign, whether you are a landlord or business tenant. Unlike residential leases, a commercial lease typically applies a term of 5 years or more and involves a substantial investment. It is important that both parties understand their rights and responsibilities and consider a host of issues when entering such an agreement. Having been a part of the negotiation process on both sides, our firm understands the intricacies of such an agreement and will help your organization with negotiating, drafting, reviewing and enforcing such a lease.
A residential lease is the most important document when it comes to Landlord/Tenant rights and responsibilities.
Although, as a landlord, it may be tempting to take an approach that calls for downloading a free form online, this approach can ultimately hurt you if you do not have a detailed understanding of Real Property Law.
At our firm, we help clients by preparing customized lease agreements, which take into account and address all aspects of the landlord and tenant relationship.
Real Estate Closings
Buying a home can be an emotional process. If all goes well, it is worthwhile and fulfilling. We approach every closing with a keen eye to detail that our clients have come to expect. From the onset, we are there to guide you through the entire closing process from negotiating a contract on your behalf to the closing itself.
In this area of law, in most instances, we offer an affordable flat fee and a discount if you are both selling and buying a home.
We have experience handling evictions from both the landlord and tenant’s perspective. From a landlord’s perspective, the time that a tenant that is not paying rent occupies the property is money lost. We understand this relationship.
At our firm, we handle evictions for commercial clients with large commercial real estate as well as landlords as little as one unit. From the moment we take on an eviction matter, our goal is to ensure that the eviction process is completed as quickly as possible.
First, we will file a complaint with the appropriate court, depending on where the subject property is located. The next step is to serve summons on the defendant. In many cases, the defendant may be experienced at avoiding service and may be accustomed to avoid it. Depending on the individual case, we may have the defendant served through the Sheriff, a Special Process server or through Publication.
Eventually, a judge will manage the case through Case Management Conferences, and depending on whether or not the defendant is represented, may order discovery or a trial. Throughout this process, we open a dialogue with the Defendant or Defendant’s counsel in an attempt to expediently resolve the case while preparing for trial. At trial, we present our case to a judge or jury and seek possession for the landlord and a monetary damages award.
Investors: Tax-Deferred Exchanges Under IRC § 1031
Knowing some basic rules behind Internal Revenue Code §1031 can help investors defer paying capital gain tax on property dispositions, resulting in more money to invest in a property acquisition. Generally, any real or personal property can be exchanged, provided it is held “for productive use in a trade or business” or for “investment” and is exchanged for property of “like-kind” that will also be held for one of these same purposes.
Exchange of Property
The first requirement of a 1031 exchange is that the transaction must be structured as an exchange, rather than as a sale and purchase. In order to accomplish this, a qualified intermediary must be involved with the sale of the relinquished property (property sold) and acquisition of the replacement property (property acquired). To ensure that the transaction is considered an exchange, rather than a sale followed by a purchase, the investor must sign an exchange agreement, assignment of the purchase contract, as well as other documentation before the relinquished property sells, and the intermediary must hold the proceeds until they are used to buy the replacement property. As long as the appropriate documentation is signed, the intermediary does not need to take title to the property.
The replacement property must be considered “like-kind” to the relinquished property. The like-kind requirement is fairly broad for real property exchanges. For example, an office building can be exchanged for vacant land, an apartment building can be exchanged for a single family rental home, or a duplex can be exchanged for a retail strip center; basically any real property held for investment qualifies as “like-kind.”
Same Taxpayer Rule
In order to qualify for tax deferral treatment, the same taxpayer selling the relinquished property must purchase the replacement property. For example, if Company B sells the relinquished property, Company B must also acquire the replacement property. An exception to this requirement is entities that are considered disregarded for tax purposes, such as single member limited liability companies and revocable trusts. For example, Sue Smith may own a commercial building in her own name. She can sell that property and acquire replacement property in her own name, or she may take title in the name of a limited liability company in which she is the sole member, or she may create a revocable trust and take title in the name of the trust. In each case, Sue Smith is still considered the same taxpayer thus allowing her to complete an exchange.
Holding for Investment Purposes
Both the relinquished and replacement properties must be held for investment purposes or for use in the investor’s business. Property that is held for the purpose of appreciation or for rental income should satisfy the investment requirement. Typical exchange transactions involve an office or commercial building, a rental home or an apartment building. Personal residences, vacation homes frequently used by the owner, and property held for sale (i.e., new homes constructed by a homebuilder) would not qualify. Mixed use properties such as home offices or duplexes in which the investor lives in one unit and rents the other unit can qualify for a tax-deferred exchange for the portion of the property used for business or investment purposes.
The tax code does not clearly specify a minimum time frame that an investor must continue to hold the investment property to qualify for tax deferral treatment. However, when the IRS examines exchange transactions, the investor must be able to show that the investor intended to hold the property for investment purposes at the time it was acquired. If an investor only holds his replacement property for a few months prior to selling it, the IRS may question whether the investor actually intended to hold the property for investment purposes.
Deferring All Tax
In order to defer all tax completely, the property that the investor is purchasing must be equal or greater in value, equity, and debt (but the debt can be replaced with cash) than the relinquished property. If any of these criteria are not met, the exchange may still be valid; however the transaction will likely be at least partially taxable.
Timing and Identification
The investor has 45 days from the closing of the relinquished property to identify replacement property. Proper identification of replacement property is a requirement for a valid exchange, and the investor can only acquire property which has been properly identified during the 45-day identification period. Replacement property that is acquired (i.e., closes) within the 45-day time period is considered properly identified. For property not purchased within the 45-day time frame, the identification must unambiguously describe the property (with an address or legal description), and must be made in writing, signed by the investor and sent before midnight of the 45th day. If multiple relinquished properties are grouped together in one exchange, the 45-day time period starts to run as of the closing of the first property. At First American Exchange, we provide you with forms to help you meet the required guidelines.
If an investor wants to identify more than one replacement property, there are several options. The two most common methods to identify multiple properties are:
The “Three Property” rule: the investor may identify up to three properties without regard to their fair market value; or
The “200%” rule: the investor may identify any number of properties so long as the total fair market value of all of the listed properties does not exceed 200% of the value of the relinquished property.
Once escrow closes on the relinquished property, the investor has the lesser of 180 days from the date of closing, or the date on which the investor’s tax return for the year the relinquished property was sold is due, to close the purchase transaction and complete the exchange. For exchanges closing in the final quarter of the year, the taxpayer will need to get an extension to file his tax return to get the full 180 days.