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Arizona Real Estate Journal

Arizona School of Real Estate and Business

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Considerations For Dividing Assets In A Divorce

LAYING DOWN THE LAW

By | Articles

Vacation Rentals Update:

Congress Passes New Law Regulating

Short Term Rentals

 Our state legislature and Governor have spoken, and short-term rentals are here to stay. Since the inception of online platforms like VRBO and Airbnb nearly a decade ago, short term rentals have steadily grown in popularity, in terms of demand and availability. The opportunity to rent a home or condo for a short duration provides new income opportunity to owners, and new lodging options for travelers and local residents alike. But not everyone is thrilled about short-term rentals in their neighborhoods. Stories abound about wild bachelor parties, wedding venues, and other large groups. Read More

Explaining how easements work

UNDERSTANDING EASEMENTS

By | Articles

By: Bryan Eastin, Esq.

The Court of Appeals recently issued an opinion explaining how easements can be extinguished in certain circumstances. Specifically, the Court ruled, as a matter of first impression, that common ownership of adjoining parcels might eradicate an easement even if the title owners are technically different.  Here is why this matters. Read More

Phoenix Law Firm, Provident Law, Scottsdale Law Firm

Are Nonrecourse Loans Feasible?

By | Articles

LAYING DOWN THE LAW
with
Christopher J. Charles, Esq. and David F. Kotter

Are Nonrecourse Loans Feasible?

At first blush, asking a lender for nonrecourse financing seems like someone asking for your first-born child – weird and awkward. But in today’s economic and real estate climate, under the right conditions, nonrecourse loans can make sense.

Practically speaking, most commercial loans are essentially “full recourse,” which means that because many lenders insist on personal guaranties, the guarantors are personally liable for the loan balance – meaning if the borrower defaults, the lender can sue the guarantor (and the borrower in some cases) for the unpaid balance, plus interest, and attorneys’ fees.  And the lender can pursue collection against the guarantor’s non-exempt assets, which typically includes bank accounts, wages, stocks, bonds, automobiles, and of course, real estate. Read More

Understand short-term lease is

Legal Headaches: Can Tenants Sue Their Landlord for Annoyance or Emotional Distress Concerning a Property’s Condition?

By | Articles

LAYING DOWN THE LAW
with
Christopher J. Charles, Esq. and Philip A. Overcash, Esq.

Legal Headaches: Can Tenants Sue Their Landlord for Annoyance or Emotional Distress Concerning a Property’s Condition?
The Arizona Residential Landlord and Tenant Act, A.R.S. § 33–1301 et seq., (the “Act”), provides a comprehensive framework regulating the rights and responsibilities of landlords and tenants under a lease for residential properties. Arizona courts have interpreted the Act to provide broad protections to tenants, as well as a wide array of damages which the tenant may recover when the landlord breaches the lease.

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WHY MEDIATION TRUMPS LITIGATION

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“Where there are no oxen, the manger is clean, but an abundant harvest comes through the strength of the ox.” Proverbs 14:4. Put another way, if you don’t do any work, you might have a clean stable, but you won’t have any crops. Applying this principal to business, if you are involved with enough real estate deals in this litigious culture, sooner or later, you are bound to run into a dispute. Common real estate disputes include failure to close, lack of proper disclosure, title issues, and other issues concerning the property’s condition. Resolving disputes through the courts is often costly and inefficient.   Read More

Greed Doesn’t Pay: Excessive Interest Charged by Lender May Result in No Interest

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Pigs get fat and hogs get slaughtered. That is why hard-money lenders should avoid seeking hyper aggressive interest rates. Although conventional mortgage interest rates remain historically low, interest rates on private loans, or “hard money” loans range anywhere from 5% to multiples of the principal amount. But if lenders overreach, they may end up forfeiting all interest. Indeed, the defenses of usury and unconscionability are alive and well. Read More

Judgment Liens and Homestead Properties

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COURT RULES THAT JUDGMENTS DO NOT ATTACH AS LIENS TO HOMESTEAD PROPERTIES

Most civil cases never reach the trial stage.  Instead, they are settled before trial.  However, in those smaller percentage of cases that proceed all the way to trial, the Court will award to the prevailing party a judgment.  These judgments are typically recorded with the local county recorder’s office so that the judgment can attach as a “judgment-lien” on any non-exempt property owned by the debtor. Read More

ARE USURY LAWS STILL RELEVANT?

By | Articles

One of the greatest misconceptions of Arizona law is that usury is no longer a viable cause of action. In the 1980s, Arizona amended the usury laws to remove the interest rate ceiling.  As a result, today’s usury laws essentially authorize lenders to contract for any interest rate. However, usury remains a viable defense against lenders who breach their own contracts by charging fees that aren’t allowed. Read More

Separation Agreements in Arizona

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Separation Agreements (A.R.S. § 25-317)

Sometimes married couples decide to separate, either in anticipation of divorce, giving one or both of the parties “some space,” or simply living separately for a while in hopes of sorting out their feelings and possibly reconciling.  Under Arizona law, married couples can remain married but enter into a legal contract governing their financial matters – the handling of property, debt or even support.  This is called a separation agreement and is controlled by A.R.S. § 25-317.   The Court of Appeals recently ruled that per the statute, for these separation agreements to be enforceable, the terms cannot be unfair.  Buckholtz v. Buckholtz, No. 1 CA-CV 17-0596 FC, filed January 15, 2019. Read More

Death and taxes: The Statutory Requirements for Purchasing, Redeeming and Foreclosing on Tax Liens in Arizona

By | Articles, Real Estate

Two things in life are certain: death and taxes. And if you don’t pay your taxes, there can be severe consequences. For example, if you fail to pay your property taxes, someone else can swoop in, pay the tax liability, and then ultimately claim title to your property.

Under Arizona law, a tax levied on real property is a lien on the assessed property. Read More

Election Of Remedies: Can Mortgagees Have Their Cake And Eat It Too?

By | Articles, Real Estate

Most secured creditors have multiple options if the debtor defaults on payment. That is precisely why they require borrowers to pledge security (such as real estate) for the performance of the repayment of the debt – so that if the borrower defaults, the creditor is not limited to the borrower’s promise to repay the debt – in addition, the creditor can seek reimbursement from the sale of the secured asset.

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How Long Can A Lender Wait Before Foreclosing

How Long Can A Lender Wait Before Foreclosing Or Suing On A Note?

By | Articles, Real Estate

Years ago, Justice Oliver Wendell Holmes, Jr. asked: “What is the justification for depriving a man of his rights, a pure evil as far as it goes, in consequence of the lapse of time?” Several reasons exist: [1] our laws aim to resolve just claims within a reasonable time; [2] if a claimant sits on her rights for too long, relevant evidence to disprove the claim may be lost or destroyed by the passage of time; and [3] litigation of a long-dormant claim by result in more cruelty than justice

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The definition of "Encumbrance” in the real estate world

Word of the Day: “Encumbrance”

By | Articles, Real Estate

When it comes to real estate transactions, more often than naught, the “devil” is in the details. The Arizona Court of Appeals, Division One, recently provided a roadmap to the rules concerning the specificity of an agreement required to obtain specific performance of an option to purchase real property.

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Arizona’s Limited Liability Company Act

The LLC Act Overview

By | Articles, Business

Most real estate professionals understand that a purchase-money mortgage is senior to all other liens. But that is only mostly true. One important exception for all real estate professionals to be aware is the “PACA Trust.”

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Supreme Court Rules: Claims for Wrongful Foreclosure Must Be Filed Prior to Trustee Sale

Supreme Court Rules that Claims for Wrongful Foreclosure Must Be Filed Prior to Trustee Sale

By | Articles, Real Estate

The recent Arizona Supreme Court case, Zubia v. Shapiro, 243 Ariz. 412 (2018), reminds homeowners to obtain early legal counsel when facing foreclosure, while bolstering lenders’ affirmative waiver defenses. Particularly, the Supreme Court ruled that borrowers waive claims to damages concerning the validity of a trustee’s sale when they first fail to obtain injunctive relief to prevent the trustee’s sale.

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Choosing The Correct Business Entity

By | Articles, Business

Societies have conceived new business structures since time immemorial. Fundamentally, joining together with business partners spreads the demands of capital and limits risk.

Italians made family firms, compagnia, where fathers, brothers, and sons would pool their labor and capital. Fittingly, the name compagnia derives from the Latin phrase for the act of sharing bread, cum panis. Then, companies granted by royal charter arrived, like the East India Company, an import-export business who received special privilege from the Crown to pursue a monopoly on trade between London and Asia, with offerings varying from pepper to textiles to tea. The East India Company, the mother of the modern multinational corporation, pioneered the joint stock mechanism. That innovation allowed for separation of investors and managers, broadening the pool of capital; it also spread risk and provided limited liability, and it allowed the enterprise to trade on its own account, rather than in the names of the individual owners.

Now, with a few clicks and an electronic signature, anyone can form a business entity, securing the same limited liability separation between an entity and its owners as employed by corporate giants across America.

But which form of entity is right for your business?

For many business owners, the choice-of-entity decision is driven purely by tax considerations. But the two most prevalent forms, the corporation and the limited liability company (LLC), also offer sought-after advantages of: (i) limited personal liability, (ii) easy transfer of ownership, and (iii) management separation from ownership.

Certainly, the tax benefits are relevant, like the incentive to avoid double taxation or the substantial restrictions on entities under subchapter S of the tax code — but don’t miss the legal distinctions and historical context. The LLC is structurally different than a corporation. Today, many owners form LLCs, almost by default, without considering their unique attributes, such as: (1) the primacy of the operating agreement, and (2) the application of fiduciary duties.

First, owners should consider that the LLC is as much a creature of contract as of statute. As a result, once an LLC comes into existence and has a member, the LLC necessarily has an operating agreement, whether written, oral, or implied by law. The operating agreement plays a vital role, as it establishes the fundamental rules for the relationships between the LLC, its members, and any manager.

Even so, many business owners select the LLC form but never draft an operating agreement — or perhaps worse, draft one, but neglect to sign it.

On the other hand, a corporation is not driven by private contract between individuals. Rather, there is a body of statutory and common law that, in some ways, cannot be displaced. A corporation has been judicially defined as “an artificial being, existing only in contemplation of the law; a legal entity, a fictitious person, vested by law with the capacity of taking and granting property and transacting business as an individual. It is composed of a number of individuals, authorized to act as if they were one person. The individual stockholders are the constituents or component parts, through whose intelligence, judgment, and discretion the corporation acts.”

Second, the owners should consider the obligations they intend to impress on themselves and management; for example, owners should consider whether they can limit their fiduciary duties to simultaneously pursue other ventures.

Granted, the topic of fiduciary duties raises many of the most complex questions in the law of business organizations.

For the LLC, the primary issue is to what extent the members can privately agree in the operating agreement to vary or eliminate those duties. Although a contract cannot completely transform an inherently fiduciary relationship into a merely arm’s length association, the operating agreement has substantial power to “reshape, limit, and eliminate fiduciary and other managerial duties.” For example, the classic fiduciary “duty of loyalty” means: (i) not “usurping” company opportunities or otherwise wrongly benefiting from the company’s operations or property; (ii) avoiding conflict of interests in dealing with the company (whether directly or on behalf of another); and (iii) refraining from competing with the company. Members can agree, however, to tailor those limitations and allow a member or manager to engage in other business or compete with the company. On the other hand, corporate directors and officers are not free to contract out of their duties to shareholders.

The law of business organizations has continually modernized, providing us with accessible tools to limit personal liability. But, whether your company is in real estate or technology, simply holds investments or engages in long-distance trade voyages around the Cape of Good Hope, building upon the right legal structure is critical to its long-term success. If you or someone you know has questions about how to structure their business or investments, please call our office today to schedule a consultation with Andy Anderson.

Andy Anderson is an Attorney with Provident Law®. He serves businesses and individuals, counseling them as they form, operate, and protect their companies. He is a member of the State Bar of Arizona Subcommittee tasked with revising the Arizona Limited Liability Company Act. He also serves on the Board of Directors of the Christian Legal Society and he is a graduate of the James E. Rogers College of Law at the University of Arizona and the W.P. Carey School of Business at Arizona State University. Andy can be reached at andy@newnewprovidentlawyers.mystagingwebsite.com or 480-388-3343.