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Five top tips to starting a successful business

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Thomas J. Percy, Esq.
Percy, Tedeschi & Associates, PC
Main Office: 4 Court Street, Taunton, MA 02780
Also offices in Stoughton, Milton, Plymouth, Fall River, New Bedford, Cranston, RI
(508) 828-1900  (800) 708-6240  FAX:(508) 828-1919
Percy Tedeschi & Associates, P.C. Attorneys and Counselors at Law - personal injury

Thomas J. Percy, Esq.
Percy, Tedeschi & Associates, PC
Main Office: 4 Court Street, Taunton, MA 02780
Also offices in Stoughton, Milton, Plymouth, Fall River, New Bedford, Cranston, RI
(508) 828-1900  (800) 708-6240  FAX:(508) 828-1919

Percy Tedeschi & Associates, P.C. Attorneys and Counselors at Law - personal injury

The choice of the right business entity for your investment real estate is an important decision. It is driven by many factors and can have numerous consequences. It is extremely important to work with your legal and professional advisers to determine the correct form of entity that will be used. Things to consider when choosing how to hold title to your investment property should include; personal liability, income and estate tax ramifications, lifetime and estate planning, allocation of profits, number and type of investors, lender requirements and management considerations.

For real estate, the Limited Liability Company or LLC is often the best choice for a number of reasons:

  • The LLC provides liability protection for its members and managers, meaning that only the funds you invest in the LLC are at risk. Your other properties, your home, your retirement accounts, etc. are insulated from the risks associated with owning the real property.
  • LLC management is very flexible and single member LLCs are allowed. There are no specific meetings or minutes that are required. An annual report to the Secretary of State is required.
  •  LLCs can create an Operating Agreement to guide the management of the entity or accept the default to the statutory operating agreement.
  • There can be tax benefits. Real estate can often be transferred in and out of LLCs without income tax or property tax consequences. The flow-through income taxation means profits are only taxed once, and losses are passed through to the members’ personal tax returns, providing planning opportunities and avoiding double taxation.
  • The LLC can choose to be taxed as a general partnership or as a corporation by making the appropriate “check the box” election in IRS Form 8832 for the year that the election is made.
  • For Section 1031 tax deferred exchanges, an exchanger can hold the relinquished property as an individual or trust, but acquire the replacement property as a single member LLC. That will not violate the general rule that the exchanger must take title to the replacement property in the same manner as they held title on the relinquished property.
  • LLCs can also help with estate planning and family succession planning. LLC membership interests can be held in your trust and may be gifted to others at a discount.
  • Additionally, lenders often require that you take title to your real estate in an LLC for asset protection and bankruptcy issues.

Even if the LLC is the right choice for your real property, there are still numerous issues to consider, including, but not limited to: in which state to form your LLC, keeping any LLC fees low, combining properties in LLCs, such as a Series LLC or having multiple LLCs, specific lender requirements, the form of management that you desire,  and estate planning and Section 1031 exchange planning. Consult an attorney to help you make the right planning decisions.

 

In real estate transactions you must be keenly aware of the deadlines that are agreed to in on original Offer to Purchase.  Although those deadlines are self-imposed, they may be enforceable and not subject to change without the agreement of both parties in writing.

In a case decided by the Massachusetts Appeals Court in the spring of 2010, the Court found that one party cannot unilaterally change dates in the offer to purchase, including the mortgage commitment date.  The Court further noted that: “parties will be held to the deadlines they have imposed upon themselves when they agree in writing that time is of the essence.”  In that case, a buyer made an offer to purchase to the seller with specified time frames and a statement that “time was of the essence.”  The buyer then realized that she could not meet the time frames in the offer and attempted to extend the mortgage contingency date.  The seller refused to accept the new date.  The case then became very muddy when both sides gave different versions of a telephone call.  The Appeals Court said that there remained an open question about whether the seller really rejected a request for a change in the date or stated that since the date was attempted to be changed, the deal was off.  The Appeals Court has sent the case back to the Land Court for further testimony and a trial.  The case is entitled “Coviello v. Richardson.”

The lesson to be learned from this case is to make sure the dates that are self-imposed in an Offer to Purchase are honored.  You should check with all the necessary professionals involved in the transaction, including the lender, attorneys, appraiser and home inspector so that everyone is aware of the dates and agrees to abide by them.  If there is going to be a change in the date, get it in writing.

Thomas J. Percy, Esq.
Percy, Tedeschi & Associates, PC
Main Office: 4 Court Street, Taunton, MA 02780
Also offices in Stoughton, Milton, Plymouth, Fall River, New Bedford, Cranston, RI
(508) 828-1900  (800) 708-6240  FAX:(508) 828-1919
Percy Tedeschi & Associates, P.C. Attorneys and Counselors at Law - personal injury

Earlier this month, a Natick real estate broker was fined $41,235 by the Massachusetts Department of Environmental Protection for improper removal of asbestos.

According to the Metrowest Daily News:

The broker, David J. Oliveri, said he was not involved in the removal, though, and had been told by the contractor he hired to perform the work that they knew how to do it.

“I never saw it, touched it, nothing,” he said, adding he had no financial incentive to skirt the state’s regulations.

According to the DEP, Oliveri, who works for Prudential Lenmar Realty, arranged for a general contractor without an asbestos license to remove asbestos insulation from a Worcester home in February 2009.

To read the article in full, please visit: http://www.metrowestdailynews.com/archive/x432924500/Natick-realtor-fined-41-000-for-asbestos-violation#ixzz1b9AbIc7Z

In a recent Massachusetts case decided in November, 2011, a real estate broker’s information in a newspaper ad and on the listing sheet, incorrectly stating the zoning classification of a property, caused the real estate broker to be held liable for misrepresentation.

After operating a hair salon in the Town of Norwell for several years, a businessman began seeking a possible site to relocate his business.  After seeing a real estate listing in a local newspaper, the businessman became interested in a property on Washington Street in Norwell.  The newspaper advertisement stated that the property was “zoned Business B.”  The businessman called the broker to inquire about the property.  He then viewed the property without the broker present.

On a second visit to the property, the businessman informed the broker that he would like to purchase a property that would accommodate a 6-station hair salon.  At this second viewing, the broker provided the businessman with a copy of the multiple listing service (MLS) listing, which she had prepared at the same time she had advertised the property in the newspaper.  The listing stated that the property was zoned as “Business B.”  The businessman also testified that the broker further informed him at the second viewing that he could purchase the property as a two-family residence and later legally convert it to a hair salon due to its commercial zoning.

Unfortunately for the businessman, the zoning representation was incorrect and after purchasing the property, he submitted an application to the town to convert the use of the property to a hair salon, but his application was denied.  In the lawsuit which followed, the court found the broker responsible for damages for the misrepresentation.  Although the court noted that the broker had no affirmative duty to determine whether the property was in compliance with the zoning laws or to determine future uses, where the broker had, in fact, made a specific written representation, she was found responsible.

The court also did not relieve the broker of liability even though the businessman was represented by an attorney; reviewed a multiple listing service disclaimer (because the representation was in the newspaper); and that the purchase and sale agreement specifically discounted warranties and representations not in the agreement or previously made in writing.  The court found that there was no proof that the attorney was hired to review zoning, the newspaper article did not have a specific disclaimer for mistakes and the misrepresentation was made in writing.  Therefore, the real estate broker was found liable for damages.

The lesson to be learned for brokers and sellers is that if you are going to represent a fact in the sale of real estate, you had better make sure the fact is correct.