Drafting a Land Contract Without an Attorney? Think Again.
A qualified attorney can help you avoid the costly pitfalls that come with DIY-ing Real Estate Matters. Here are two complex tools you’ll want done right.
In this current climate, it is easy to believe that some things that are traditionally done by attorneys can be done with just a bit of research – real estate is not one of those things.
No matter how many articles you read or videos you watch, DIY-ing real estate is risky, oftentimes leaving buyers and sellers searching for answers after the fact. This article will focus on two of the risks that run with DIY-ing real estate: Land installment contracts and quiet title actions.
Land Installment Contract
Land installment contracts are common in Ohio as a tool to provide an alternative path to property ownership, particularly beneficial in situations where conventional financing is not feasible or desirable. A land installment contract is defined as the following:
“An executory agreement which by its terms is not required to be fully performed by one or more of the parties to the agreement within one year of the date of the agreement and under which the vendor agrees to convey title in real property located in this state to the vendee and the vendee agrees to pay the purchase price in installment payments, while the vendor retains title to the property as security for the vendee’s obligation. Option contracts for the purchase of real property are not land installment contracts.”
For a simple breakdown, a Land Contract is a way to buy real estate through payments over time, with the seller keeping the title as security until fully paid. It can last more than a year and is different from paying for the option to buy later, which isn't included in this arrangement.
Land contracts are one of the most complex documents to draft, due to their highly specific statutory requirements. Some of those requirements involve having the following:
a contract with the full names and then current mailing addresses of all the parties, a statement of any encumbrances against the property conveyed,
a statement requiring the vendor to deliver a general warranty deed on completion of the contract, or another deed that is available when the vendor is legally unable to deliver a general warranty deed,
and many provisions that require either the vendor or the vendee to conform to specific requirements that are often unknown to a lay person. See Ohio Rev. Code § 5313.02.
With the complexity of a land installment contract, it is an easier thing to mess up than it is to get right. That is why it is important to seek the representation of attorneys who have experience in this practice. DIY-ing a land installment contract is not worth the prospect of ending up with nothing—an outcome we see far too often due to drafting errors and a failure to document payments.
Our firm routinely receives calls from prospective clients inquiring about our services related to land contract issues. If you decide to DIY a land-installment contract, it is likely that you may end up in costly and protracted litigation. The remedy for land installment contract issues is generally a quiet title action in the common pleas court of the county where the property is located.
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Quiet Title Action
A quiet title action, unlike a land installment contract, is a remedy for people who think that they own a property. Specifically, a quiet title action is:
“An action that may be brought by a person in possession of real property, by himself or tenant, against any person who claims an interest therein adverse to him, for the purpose of determining such adverse interest. Such action may be brought also by a person out of possession, having, or claiming to have, an interest in remainder or reversion in real property, against any person who claims to have an interest therein, adverse to him, for the purpose of determining the interests of the parties therein.”
Simply put, a quiet title action is a legal process used to settle disputes over property ownership. The goal is to clear up any confusion or claims against the property, basically making the owner's title "quiet" or free from disputes.
This type of remedy is a complex legal concept that is best achieved by the representation of an attorney. Quiet title action requires judicial intervention that focuses on bringing the disputed land to the court to establish proper ownership of the property in question. The outcome being sought by a quiet title action is for the clerk of the court to be able to record in the deed records a certified copy of the judgment or decree determining the interests of the parties. Ohio Rev. Code Ann. § 5303.01.
Essentially, the final judgment is meant to be the final deed on the property in question, in order to establish proper ownership. This complex remedy is a specialty of our firm, as we are able to skillfully navigate this complex legal remedy.
Conclusion
It is important to avoid the costly mistakes that may come with real estate dealings. It can be tempting to try the DIY approach to your legal matters. However, we constantly see the consequences of this decision and they are VERY EXPENSIVE. That is why it is important to be prepared and hire a qualified attorney to guide you through the process. If you need guidance in Ohio, you can book a FREE consultation with the Nalls Davis Real Estate Law practice here.
Disclaimer
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; Nalls Davis Attorneys at Law and its members do not recommend or endorse the contents of the third-party sites.
The Series LLC is Coming to Ohio
The Series LLC brings changes investors and business owners will want to know about.
Do you hold your investments in multiple LLCs to protect assets and access tax benefits? Ohio’s adoption of S.B. 276 brings exciting news to investors throughout the state.
This new legislation replaces the current Ohio LLC Act with the Ohio Revised Limited Liability Company Act (“ORLLCA”) Effective February 11, 2022. The LLC landscape as we know it will experience some interesting changes with several benefits for business owners and investors. Below, we’ll give you a jump on these changes with a simple explanation.
The Series LLC
Investors in Ohio are well aware of how complex it can be to protect assets. ORLLCA addresses this head on. Let’s talk about the Series LLC.
Series LLCs make it simple to reduce shared liability among multiple properties or other assets. They offer all the benefits of the traditional LLC, but the Series LLC starts as a “Parent” Company.
This “Parent”, or general company, is allowed to have “Children” or multiple sub-series which serve as sub-LLCs used to separate assets in silos. If one of the sub-series gets sued, the assets held by the other “Children” and the “Parent” are protected from any liability. You get the same asset protection that comes with a plan using multiple, traditional LLCs. The difference is you only opened one.
When you establish a Series LLC in Ohio, it will be registered with the Secretary of State as a legal entity. The difference will be found in your operating agreement. Special provisions will give you the authority to add a series whenever needed. Think of it as having LLCs inside your LLC. In terms of asset protection, this is a major benefit to investors.
Tax and Costs Benefits
Series LLCs also bring cost and tax benefits. Let’s say you’re using the current asset protection strategy of setting up multiple traditional LLCs. This strategy requires you to pay registration fees for each LLC.
With a Series LLC the general company is charged with registration fees, but each associated sub-series does not have a fee. This can potentially save investors thousands as portfolios grow.
Tax preparation for multiple traditional LLCs can be a costly nightmare. Try keeping up with 20 EINs. With a Series LLC there is only one EIN for the general company. Each connected sub-series is listed on a single tax return. This cuts down on the time and expenses associated with tax preparation.
The Series LLC also holds the potential to avoid filing Commercial Activity Tax (C.A.T.) in Ohio. If a sub-series reaches $150,000 in annual gross receipts it will appear as a separate taxpayer and be subject to C.A.T.
Forming a Series LLC in Ohio
The process for forming a Series LLC in Ohio is somewhat different than that of a traditional LLC. Working with your business attorney, follow these 3 steps to formation:
Enter special provisions into the operating agreement that establish:
Separate rights, powers, or duties regarding specified property or obligations of the LLC
or the profits and losses related to specified property or obligations; AND/OR
A separate purpose or investment, and at least one member associated with each
series.
A statement that the LLC may have multiple sub-series of assets in the articles of organization.
Separate record keeping for each sub-series and its assets.
It would be wise to include a separate operating agreement for each sub-series that refers to the operating agreement of the general company, identifies the member(s) of that specific sub-series, and speaks to the purpose of that sub-series.
The articles of organization must make a statement authorizing the use of one or more sub-series. Investors and business owners must be very particular about maintaining separate bookkeeping for the financials of each sub-series. Mixing funds from one sub-series to another could risk the liability protection between sub-series, and the company in general.
Want to put together an Asset Protection Plan? Schedule your FREE consultation below.
How the Series LLC is Governed
The Ohio LLC Act grants specific rights and powers to the Series LLC. According to the Act, the Series LLC is afforded the following governance:
1. Powers
Sue and be sued;
Contract;
Hold and transfer title to assets of the company and general and each sub-series; and
Grant liens and security interests in assets of the company in general and each sub-
series.
2. Distribution Rights
a. Distributions can only be made to those members (owners) associated with a particular sub-series.
3. Membership Rights
One member (owner) must be associated with every sub-series within the company in general. If the company has multiple members, a member may be associated with only one sub-series, or every sub-series (except for the member chosen to be associated with each sub-series).
The Ohio LLC Act governs the Series LLC in several other ways. This includes the liabilities, assets, and management. Click here to see all of the upcoming changes.
Conclusion
The Series LLC will be a major change for Ohio business owners and Real Estate Investors who are looking to protect their assets. With a Series LLC, the strong asset protection gained through setting up multiple traditional LLCs can be achieved through one filing with the Secretary of State. This saves time, money, and confusion that comes with the traditional method. Investors can reap tax and cost benefits and shield assets from liability by following requirements within the statute. Consult a business attorney to assure your Series LLC is properly formed and in compliance with the requirements.
Disclaimer
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; Nalls Law Group LLC and its members do not recommend or endorse the contents of the third-party sites.