Is this illegal? Land & Construction related

suffocate69 · Postby **suffocate69** » January 20th, 2012, 12:22 pm

I have a very close friend with 2 acres of land in central. Very nice flat land that doesn't flood and has good road access.

My friend has had a lot of financial difficulties in life (read: bitter divorce and existing mortege) and wants to develop the land. He's thinking of constructing a 28,000 sqft warehouse.

I have the permanent job etc and capabilities of taking a loan to fund this.

However, banks and most institutions do not give construction loans for long periods thus eliminating my capability to borrow over 1M.

He is thinking about "selling" me the land so that we can get the approximate 1.5M we need to construct.

Once he gets my money for the land, "he" shall use that money to build the warehouse on "my" land.

After which we split the rent 50/50.

What possible problems do you forsee with this plan? Is anything illegal with doing this?

Only thing I can think of is the TCPD application, whereby I can state I am leasing my land to him for construction.

crash dummy · Postby **crash dummy** » January 20th, 2012, 12:35 pm

This better be a real good partner! Hmmmmmm. And vice Versa
Cause land will be in your name. Building on his?
What will be the use for "your land" to you plan to tell the lending institution.
Because unless you have other interests that can service this loan (from the banks perspective) of $1.5 Mn they will basically want to know what colour draws u gonna we\ar each day to lend you that money.
Additionally remember money makes ppl do strange things. If he is already in a financial bind in other areas of life this is an EXTREMELY important consideration.
Before you reach to any other problems.

RBphoto · Postby **RBphoto** » January 20th, 2012, 12:35 pm

If he divorce once... careful he divorce you from your money. Alimony issa beyotch.

black start · Postby **black start** » January 20th, 2012, 12:47 pm

it have no friend and family in business bigman.....this is ah cut throat world eh....

ronsin1 · Postby **ronsin1** » January 20th, 2012, 12:55 pm

Bank will give you a loan if you provide a Business loan if you provide a Return on investment. your friend does not need to sell you the land all he needs to do is lease you it for the period of the loan and assign the lease to the bank until the term of the loan contact a loans officer for more information

cornfused · Postby **cornfused** » January 20th, 2012, 1:05 pm

Get an Attorney a good one , this seems legal but as can been seen from the limited responses can be filled with many pitfalls . The short story is unless you have this drawn up correctly once something goes wrong which may or inevitably occur at lease there is a prior document with due consideration that you would have both understood and are bound to.

The passe saying of no fiends in business ventures is a good as the friendship and moral you both have , While many such ventures have ruined friendships , there are also many successes . If you cannot separate the two when things go south , then its a problem.

Bareback · Postby **Bareback** » January 20th, 2012, 1:22 pm

cornfused wrote:Get an Attorney a good one , this seems legal but as can been seen from the limited responses can be filled with many pitfalls . The short story is unless you have this drawn up correctly once something goes wrong which may or inevitably occur at lease there is a prior document with due consideration that you would have both understood and are bound to.

The passe saying of no fiends in business ventures is a good as the friendship and moral you both have , While many such ventures have ruined friendships , there are also many successes . If you cannot separate the two when things go south , then its a problem.

Good luck getting a bank to finance that deal the way you are suggesting (either way). If you guys are that close, why not seek the advice of a lawyer and accountant with the possible aim of going in 50/50 as a legitimate partnership. Whatever dividend arrangements the company makes between the 2 of you, if you have the greater financial stability in the short run to service the debt, then that is outside the scope of the law, that would be an accounting issue.

But note the comments above, the world is rife with examples where these arrangements have not worked out the way you originally intended.

suffocate69 · Postby **suffocate69** » January 20th, 2012, 2:13 pm

ronsin1 wrote:Bank will give you a loan if you provide a Business loan if you provide a Return on investment. your friend does not need to sell you the land all he needs to do is lease you it for the period of the loan and assign the lease to the bank until the term of the loan contact a loans officer for more information

This is also what another lawyer friend advised.

Of course I know many of you are advising to be careful about doing business with friends.

I'm in total agreement with that, I wouldn't be considering this if I had any doubts about trust and commitment from him.

Nevertheless, we will be signing agreements when that time comes. My main concern is with obtaining the loan for this project.

Bareback · Postby **Bareback** » January 20th, 2012, 2:25 pm

suffocate69 wrote:
ronsin1 wrote:Bank will give you a loan if you provide a Business loan if you provide a Return on investment. your friend does not need to sell you the land all he needs to do is lease you it for the period of the loan and assign the lease to the bank until the term of the loan contact a loans officer for more information

This is also what another lawyer friend advised.

Of course I know many of you are advising to be careful about doing business with friends.

I'm in total agreement with that, I wouldn't be considering this if I had any doubts about trust and commitment from him.

Nevertheless, we will be signing agreements when that time comes. My main concern is with obtaining the loan for this project.

While the legal advice is correct and puts you in a better position to qualify for the financing, any bank will consider the risk of new construction and development in the current economic environment. Why not consider scaling back the size of the project so that the warehouse can be expanded later once you have full occupancy and you have proven you can service the debt?

paparazzi · Postby **paparazzi** » January 20th, 2012, 3:35 pm

^^ all the "legal" advice given in this thread is wrong.

OP, go and see an attorney experienced in commercial transactions. One attorney cannot advise you and also advise your friend based on what you're saying in the original post. You of both should have separate representation to ensure that both of your respective interests in the deal are looked after as I can see potential conflicts of interest from the basic facts you set out in the original post.

MG Man · Postby **MG Man** » January 20th, 2012, 3:38 pm

oh jeez, forst HOOK, and now papazzz
will allyuh fellas STOP MAKIN SENSE?

Chimera · Postby **Chimera** » January 20th, 2012, 7:25 pm

allyuh gonna fall out over you giving hom 50% of the rent a week late

you gonna decide not to give him any of the rent at all.

he gonna pay someone to shoot you.

SmokeyGTi · Postby **SmokeyGTi** » January 20th, 2012, 8:39 pm

what happens if you can't get the warehouse rented?
you get stuck with the mortgage payment?

sMASH · Postby **sMASH** » January 20th, 2012, 8:57 pm

u take the loan, give him the money, he fly out foreign.

(l)bass · Postby **(l)bass** » January 21st, 2012, 5:30 pm

if you both have good credit ratings register a business whith each of you as directors. where you bring the cash to the partnership and he brings the land and do a good business plan and get financing. all the while ensure that everything is agreed to in the legal documents for the company and the share split is in clear writing. might even be best to bring in a 3rd director with a very small odd % stake in the company. before it all starts you can have an attorney do an MOU (memorandum of understanding) between you guys where you state what you are going to do and what each persons role and interest is etc...

it can work but everything needs to be in writing legally. this is mainly because as humans we all interpret spoken things differently...