Legal Issues and Complexities in Real Estate

Case : NO NEED TO INTRO AND Conclusion, Just according to case to do 2 tasks. -( can use back materials or internet- do not allow copy and paste)
As a new graduate of C University MSREP, you intend to utilize your new skills to develop a parcel of vacant land located adjacent to the Columbia Morningside Heights Campus. You expect this to be a wonderful project to start your real estate empire. Your family is behind you all the way with its resources to help you with initial expenses, but their wealth is not sufficient to avoid the need for mortgage and, maybe, other financing. Your friends from college and MSREP have cash they might invest with you.
You located a vacant site (126 West Side Highway, “126”) as you were wondering around the Upper West Side. You saw a “For Sale” sign with a telephone number for West Side Realty, a licensed broker for the Seller. As you inquired about the land you were told that the existing building on the site had been a well-known landmark with river views (“River View Apartments”) that had fallen into disrepair and occupied by homeless squatters for the last few years. Demolition leveled the building to the ground but did not result in the removal of the foundation or the oil tank buried next to it. The broker had a fact sheet regarding the size of the parcel and what might be developable, which the broker gave to you.
There is also a small walkup apartment building with 8 occupied residential rental units on the adjacent parcel, which you discovered might be for sale. The addition of this parcel would be critical for you: with it you could build a much bigger building and the project would be a “home run”.
However, the broker told you the 126 owner (“126 LLC”) was a limited liability company controlled by 2 of 6 children and grand-children of the original owners. 126 LLC owns only this property and it is having financial difficulty. 126 LLC will only entertain a sale on an “as-is” basis. The mortgage on the property is in default and there are numerous violations issued by the NYC Buildings Department from the period before demolition. You do not know the status of the mortgage payments but no litigation has been filed in New York Supreme Court.
You believe the most viable program is to build affordable housing and luxury condominiums for sale with some retail components. Because you and your family do not have sufficient liquidity to buy and develop both properties you will seek mortgage financing and also offer your best friends from college and the MSREP program the right to participate. You need to use their equity to cover any funding required above the acquisition/construction mortgage loan. You will need a 50% mortgage loan for the purchase and additional funding for construction. You are certain some form of guarantee will be needed. Although the market is soft generally now and interest rates have risen dramatically, you know affordable housing can be easily filled and believe the condominiums can be sold at a price sufficiently high to retire the construction loan and leave a permanent loan on the affordable housing and other parts of the development.
You decided the best way to handle the deal is to acquire both properties or tell both sellers you will acquire none (although that might not be the final outcome as you really reexamine it all). You met the seller of the 126 parcel and have worked out the purchase price of $5 million and are negotiating the deposit-- seller wants a 30% deposit to be given directly to it to use—but nothing else has really been discussed. You have heard rumors that the family members of 126 LLC are in court fighting over control. Since the property is owned by a limited liability company which is financially challenged, there are most likely liens as a result of failure to pay real estate taxes and cure building code violations.
The adjacent parcel can be acquired for an additional $2 million and a purchase agreement is ready to be signed. You have flexibility when to close on that deal or drop your 10% deposit.

All of these problems present opportunities for you to launch your empire….these are challenges you can overcome if you and your attorney handle the issues well.
Your task Part 1: is to identify the various legal issues and complexities you need to deal with as you pursue this deal, and the pitfalls you may find as significant roadblocks to achieving your goal. Having done that and consolidated and organized your thinking so that you minimize attorney time and keep your bills as low as possible,
Part 2: is to prepare a simple memorandum to your attorney outlining separately your instructions for two separate documents the attorney is to prepare (a) the real property purchase for the 126 parcel and (b) major terms for the proposed operating agreement with your investors. You want to be certain both will protect you and your investors, but can lead to a great deal for you as sponsor.
Following are some key terms and concepts to bear in mind as you complete the case. (choose what you think is it correct/ important to include and discuss.)
Writing
Liquidated Damages
Limited Liability
Specific Performance
Brokerage
Covenants
Confidentiality
Boundary
Possession
Local zoning
Title Insurance
Bankruptcy
Liens
Conditions or Contingencies
Access
Property description

Authority/Control
Environment
Consent
Guaranty
These are some of the “catch words” that I have used for legal issues and principles. Some of these may apply, and some not at all !!! Please note this is not an exclusive list – you may think of others (I hope you do) that do apply. As I told you in class the hardest items to find are the ones completely missing.!!!