Intangible Tax is not owed on Refinancing Debt with your existing Bank
Posted: June 14th, 2009
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Intangible tax can be a significant cost on your closing statement for a real estate transaction. You may be able to avoid this cost when you refinance your mortgage with your existing lender. Georgia law provides that you do not have to pay intangible tax again when you refinance a property with your existing lender if the intangible tax had already been paid on the initial loan. If you borrow a higher amount than what you initially borrowed you would owe intangible tax only on the difference between the higher amount and the initial amount.
As always your trusted legal resource, Justin Daniels
1031 Funds At-risk? (guest post by Justin Daniels, Commercial Real Estate Attorney)
Posted: June 6th, 2009
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Did you know that your 1031 funds held by a 1031 exchange agent can be at risk to general creditors should the exchange agent become insolvent?
In order to safeguard your exchange funds and, hopefully, avoid such issues you should ensure that:
1) your exchange funds are deposited directly into one or more segregated accounts and never commingled with other funds of the exchange agent or the funds of other exchange clients in the general operating account or other accounts from which the 1031 exchange agent runs its business, funds other exchanges or holds other exchange funds;
2) the segregated accounts should be named “[name of 1031 agent] in trust for [name of exchange client]” (in this case the exchange client is you); and
3) the exchange agreement should contain specific language obligating the exchange agent to set up the accounts as outlined in paragraphs 1 and 2 above and clearly stating that your exchange funds are held in trust for your benefit.
If the funds are simply deposited into the exchange agent’s operating account without these safeguards and the agent becomes insolvent, your money may be at risk in any resulting bankruptcy proceeding. In a bankruptcy proceeding, there is a significant risk such funds may be held to be general funds of the exchange agent, subject to the claims of all creditors of the agent. In such circumstances, exchange clients are at risk of being treated as general creditors of the bankrupt exchange agent and may receive mere pennies on the dollar, instead of the full value of the funds held they thought were being held by the exchange agent for their benefit.
To Draft a Contract or not Draft a Contract: That is the Question (guest post by Justin Daniels, Atlanta Real Estate Attorney)
Posted: May 8th, 2009
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After multiple negotiation sessions the deal has been struck and all that is left is to draft a contract. Who should draft the contract, isn’t it easier and cheaper to let the other party’s lawyer draft the contract and just have your attorney review the draft. Answer: No.
The party who drafts a contract usually has an advantage in negotiations since they can frame the issues. Whenever I have to review another attorney’s agreement I spend most of my time figuring out what has been left out of the agreement. Its typically more cost effective for me to start with my own agreement that I already know very well. The review, process, moreover, usually results in a negotiation over the language in the contract. Many parties employ the strategy of making most contract provisions one sided with the expectation that the opposing party will just relent to the contract language as opposed to spending additional time negotiating it.
When you have a choice always readily agree to draft the contract instead of reviewing a contract drafting by the other side.
As always your trusted resource for practical legal advice.
Employee Computer Fraud and The Computer Fraud and Abuse Act (guest post by Justin Daniels, Atlanta Real Estate Attorney)
Posted: May 8th, 2009
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Does this situation sound familiar? Your employee leaves your real estate company and turns in his laptop. Your IT experts check the computer and determine the former employee made a copy of sensitive company information.
Did you know you may have a claim under the Federal law known as The Computer Fraud and Abuse Act. Courts have broadly interpreted this law to allow companies to sue former employees who engage in certain fraudulent conduct related to their company computers.
This law can be especially important in situations where the employee did not execute a confidentiality agreement or the non competition provision of the employment agreement is unenforceable under Georgia law.
As always, your trusted source for practical legal advice.
Acquiring Distressed Assets, Guest post by Justin Daniels
Posted: March 24th, 2009
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One man’s distressed assets are your opportunity. Acquiring a failing competitors customers, equipment, real estate or other assets will be a golden opportunity in the coming months. This opportunity, however, requires that you and your legal team figure out the best way to transfer the assets free of any lien or other third party claims to the assets.
Bankruptcy
Bankruptcy sales are the gold standard of troubled asset acquisitions. The simple reason is you get a bankruptcy court order that says the assets are transferred free and clear of liens. The Court order stops any person claiming a lien on the assets in their tracks. This gold standard, however, comes at a price. There is typically a bid process as the objective in bankruptcy is to get the highest price for the assets to pay creditors. This means your competitiors can show up to bid on the assets and drive up your cost to acquire them. The bankruptcy route also takes time and if your trying to acquire customers of your competitor they could flee somewhere else before you can purchase them through the bankruptcy court.
Non Bankruptcy Sales
Troubled asset acquisitions can and do take place outside bankruptcy. In this scenario dealing with the party who has the senior lien on the assets is critical. The senior secured creditor has the ability to foreclose on the assets pursuant to the Uniform Commercial Code. This senior secured creditor can then sell these assets free and clear of most liens except government taxes to a buyer in a private sale. This type sale can save time and money and preserve the value of the purchased asset. Dotting your i’s and crossing the t’s is where your legal team earns their keep giving advice on these type of transactions. If you do not structure these transactions properly you will have acquired assets with all kinds of problems. The dollars and time expended to fix these issues means the value of the transaction has likely evaporated.
Troubled assets acquisitions present many opportunities inside and outside bankruptcy. The benefits and risks on the bankruptcy or non bankruptcy route are critical in assessing which route makes the most sense for you.
As always your trusted legal resource
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