Once the purchase agreement is signed and purchaser applies for financing, the lender will begin its due diligence process on both the property and the purchaser.  This section covers the most important due diligence items regarding the property being acquired.  Due diligence for the lender is crucial as the property will be the most significant security for the repayment of the loan.

In this era of low interest rates and multiple financing options, most commercial property is subject to some kind of financing.  The fact that commercial property is financed means that a third party – i.e., the landlord’s lender – is affected by the lease(s) for the property and this third party must have its concerns addressed within the lease in order for all parties to have a smooth relationship.

When discussing lending in the context of commercial rental property, everyone must bear in mind the fundamental principle of what makes such property profitable; that is, the principal – if not exclusive – value of the property to the landlord/borrower is the income stream which the leases generate.  Hence, a lender’s credit underwriting decisions are often based primarily on the quality of the tenants, the amount of the rents, the duration of the terms of the leases and other pertinent terms and conditions of the leases.  In some respects, the creditworthiness of the tenants is a more important consideration for a lender than the creditworthiness of the borrowers/landlords themselves.

This section discusses various ways to manage the lender-landlord/borrower-tenant relationship through proper drafting and negotiation of commercial leases and other related documents.

“Ethical” in the context of asset protection planning, and particularly in the context of asset protection trusts, involves many issues, including (1) the morality of asset protection planning; (2) an attorney’s duty to counsel the client regarding asset protection planning; (3) fraudulent transfer issues arising out of an asset protection plan (and the risk of discipline of the attorney); (4) unauthorized practice of law issues; and (5) in select circumstances, issues concerning joint representation of a husband and wife in connection with an asset protection planning.  It is the interaction and interplay of these issues that encompass the great majority of the ethical quandaries faced by an attorney.

People who work in the areas of renting, selling, lending or insuring homes are subject to federal, state and sometimes local fair housing and other anti-discrimination laws.  These materials focus on residential landlords’ fair housing responsibilities and tenants’ rights under federal and state anti-discrimination laws.

Real estate can be acquired and owned through many different types of entities or other ownership structures.  This section discusses the following forms of ownership:  (i) partnerships; (ii) limited liability companies (LLCs); (iii) corporations; and (iv) tenancies in common.

Substantial due diligence is necessary in any real estate transaction to ensure that the property is what is bargained for.

The terms of a lease set forth duties and obligations for both the tenant and landlord. Additionally, there are statutory covenants that are written into every lease. The failure to meet those terms and covenants can cause a breach in the lease that creates a legal problem between the landlord and its tenants. Such a breach can lead to eviction actions, tenants abandoning the rented property and legal actions for damages. The statutory covenants are included in every lease and those obligations are the broadest reaching, so they will be addressed first. The breach of lease terms can vary as much as the language of a lease. However, a few of the most common breaches will be addressed along with the legal remedies.

In limited liability companies, as in partnerships and corporations, management authority brings with it certain responsibilities that come under the rubric of fiduciary duty.  The LLC approach to these duties draws upon concepts of both partnership and corporation law. 

Given that the LLC is a hybrid entity – i.e., a combination of the tax attributes of a partnership with the liability shield of a corporation – differences in treatment of fiduciary obligations in the partnership and corporation forms affect how the various LLC enabling statutes have addressed these duties.

The 2004 Minnesota Legislature enacted Minnesota Statutes Chapter 325N to combat a growing problem in Minnesota’s real estate market; namely, the practice of “equity stripping.”  A recent Minnesota Court of Appeals decision, the first such decision under Chapter 325N, now provide guidance as to key matters pertaining to the application of 325N.

The Bigelow decision is of concern to estate planners primarily because of certain language within the opinion suggesting that for an FLP arrangement to withstand a challenge from the IRS, a "pooling" of assets by all partners to the FLP must be found. As discussed below, given the structure of the FLP and the planning objectives of such a structure, this language creates concern among planners as to the effectiveness of the FLP as an estate planning vehicle. Whether the "pooling" requirement becomes an integral part of the test for inclusion of FLP assets in an estate pursuant to Section 2036 will remain an open question pending further judicial decisions.

With the bursting of the residential real estate bubble, many homeowners found themselves overextended on their mortgages, only to have "teaser" rates (such as a fixed rate under an ARM) come to an end. Unable to keep up with the increased payments in the face of stagnating and/or declining home values, many homeowners saw their homes lost in foreclosure.

Two bills were passed by the 2007 Minnesota Legislature that, together, are designed to form a comprehensive package of protection and enforcement tools to protect homeowners from so-called "predatory mortgage lending" practices.

In addition, the Legislature made substantive amendments to Minnesota's first of its kind "foreclosure reconveyance" act, Minn. Stat. Chapter 325N, enacted in 2004, in order to clarify issues raised in the first cases litigated under the statutes.

Successful business owners will be the first to tell you that behind any successful business is a team of competent advisors.  While you as the owner are the expert in your business (be it an auto body shop, a consulting firm or a restaurant), you will need professionals such as accountants, financial advisors and attorneys to advise you as to legal, tax and financial aspects of the business so that you can better focus on what you do best, which will ultimately bring positive results to your bottom line.

Choosing the attorney for your team can be the key to your business’ success.  Not only are you looking for someone knowledgeable in the areas of law pertaining to startups – choice of entity, employment agreements, lease negotiations and the like – but your limited startup funds demand a cost effective solution as well.

Too often, entrepreneurs decide to go it alone, choosing to forego seeking legal advice and instead preparing their own formation documents or having another professional (such as their CPA) assist.  The end result is usually documents which satisfy only the bare minimum requirements for a corporation or limited liability company, while missing significant documents and structure which only an attorney can provide.  More importantly, the business owner who foregoes using an attorney will have missed an opportunity to add other qualified advisors through their attorney.  Simply put, your attorney can be a gateway to other advisors, and any attorney wanting to work with new businesses should be willing to open up their rolodex and introduce his/her client(s) to other advisors in order to grow the business.