Posts tagged ‘real estate’

March 29, 2012

Grandparent Rights in Arizona

Each of the 49 states in the U.S. possess their own specific statutes that address the matter of visitation rights for grandparents. In Arizona, reasonable visitation rights may be granted to grandparents if two circumstances are met.

The first thing that must be proved to the court to establish visitation rights for grandparents is that it is within the best interests of the child for the visitation to occur. In making this determination, the court will consider all factors relevant to the matter (per A.R.S. 25-409), which include:

  • The historical relationship, if any, between the child and the person seeking visitation.
  • The motivation of the requesting party in seeking visitation.
  • The motivation of the person denying visitation.
  • The quantity of visitation time requested and the potential adverse impact that visitation will have on the child’s customary activities.
  • If one or both of the child’s parents are deceased, the benefit in maintaining an extended family relationship.

In addition to proving that visitation is within the best interests of the child, one of three situations must also be true. The first is that the marriage of the parents of the child must have been dissolved for at least three months. Second, a parent of the child must be deceased OR missing for at least three months. The court will consider a parent to be missing if the location of the parent has not been determined and if the parent has been reported missing to a law enforcement agency. Finally, visitation rights can be sought if the child was born out of wedlock.

If a grandparent is able to acquire visitation, and if it is logistically possible and appropriate to do so, the court will typically allow the visitation to occur when the child is spending time with whichever parent that the grandparent used to claim the grandparent’s right of access to the child. However, the court recognizes that this sort of scenario is not always possible and will order alternate arrangements if necessary to minimize conflict and maintain a safe and stable environment for the minor child.

Though this statute applies specifically for grandparents, a provision also provides the same rights to great-grandparents if they can meet the elements listed above.

Like most actions involving custody and/or visitation of a minor child, the outcome is largely contingent upon what is in the best interests of the child. Because these matters are often hotly contested, it is usually a good idea to contact an experienced and knowledgeable attorney to help guide you through the process. To speak with an attorney regarding Grandparents’ Rights in Arizona, contact The Carroll Law Firm at (623)551-9366.

November 17, 2010

Setting up Your Business as an LLC

One question that I am often asked by individuals interested in starting a new business or making an investment in real estate is “Do I need to set up a Limited Liability Company (LLC) for my new venture or can I wait until I have the business up and running before I form the LLC?” In almost every case my answer is that the LLC should be established from the beginning as this is an important first step before you begin the operation of your new venture.

Limited Liability Companies are fairly new creations of the law, however, they are favored over corporations due in large part to the ease of establishing an entity that provides liability protection to its owners. Since most LLC’s are what are known as “disregarded entities”, the income and expenses are reported on the owner’s personal tax return and they are not taxed separately like a corporation would be. Originally, most states required that a LLC have more than one member, but that is no longer the case in most states, including Arizona.

When you embark upon a new business venture you run the risk of being sued by a variety of different sources. If you borrow money to establish your new company and it fails, you are personally responsible to the lender. If you obtain products or inventory on credit, or sign agreements with franchisors or landlords and fail to pay under the terms of the agreement, you may be sued. If someone is injured while on your business premises, or becomes sick or injured from an alleged defective product that you may have sold (such as food from a restaurant) you may be sued. If you hire employees they may sue for harassment or wrongful termination. There are literally hundreds of liability risks that any business faces, some can be insured against while others cannot. If you decide to run your business as a “sole proprietorship” or as a “partnership” you can be personally held responsible for any claims against your business. If I open a small hot dog stand and start selling hot dogs, and I get a “bad batch of dogs” that results in customers getting sick, those customers can sue me personally for their injuries. And if those customers get judgments against me, not only can they take the assets of my hot dog business, but they can go after my car, my house and my personal bank accounts. If I had only set my new business up as a LLC, the only assets my judgment creditors would be successful in grabbing would be those of my business. By setting up a new company as an LLC you only put the assets of that entity at risk. If things turn out bad (and unfortunately a large majority of new business ventures do fail), you can walk away from the investment without having risked your other assets. Many owners of rental real estate today either purchase or transfer real estate to an LLC for a variety of reasons including limitation of liability from tenant or tenant’s guests injury claims, or so as to be able to easily transfer real estate to others through an assignment or sale of the membership interests in the LLC as opposed to having to go through the formality of a Deed closing.

The key is to establish the LLC before you begin business. A client of our firm had opened a retail store and after renting space for the business, set up an LLC to conduct the business. Unfortunately, the business failed due to the slow economy, and eventually closed. After our client closed the store and surrendered the premises, the Landlord sued the owners personally for the remaining 2 ½ years of remaining rent on the lease term. Although the business owners had set up the LLC, it was not until after they had personally signed the lease, and they were held personally liable for the rent. If they had set up the LLC from the beginning, and had been able to negotiate the Lease such that the Landlord leased to the LLC without the client having to personally guarantee the lease, they could have walked away from the lease when the business failed without being personally responsible for the balance. Although landlords almost always request that the owners of the LLC personally guarantee the lease, this is an item that can be negotiated, and I have negotiated away personal guarantee provisions many times, usually by offering additional security other that the personal guarantee.

If there is more than one member of the LLC that will effectively be partners, it is vitally important that the members negotiate and sign an “Operating Agreement” that will place in writing the rights and responsibilities of each party and will help provide a framework for the management and operation of the business. Our firm has extensive experience in organizing new businesses for our clients, so give us a call if we can be of assistance. There are many additional points to consider when deciding how to best establish a new business that far exceed the limited scope of this article. Feel free to call or e-mail with any questions that you may have.

October 26, 2010

In the Wake of the Real Estate Bubble

Our nation has just experienced an historic drop in the market value of real estate. The so called “Real Estate Bubble Bust” has wiped out trillions of dollars in perceived value in real estate and has resulted in a gross devaluation of both residential and commercial real estate. The vortex of price deflation has caused an escalating number of foreclosures that is unprecedented and has cast a pall over the fundamental U.S. economy. Many of the stop-gap and band-aid “relief” measures undertaken by Federal officials have proven to be wholly ineffective. The impact has been felt at every level of real estate investment in every region. While those areas that experienced the most rapid growth in the decade prior to the “bubble bust” have been hardest hit, even those areas where there was limited growth and much more moderate price increases have suffered as buyers have disappeared from the market amidst raised borrowing standards combined with a perception that real estate no longer represents a “positive investment in one’s future.”

The Phoenix/Maricopa County real estate market represents one of the epicenters of the current real estate value crisis. By virtue of the region having benefitted from one of the fastest growth rates in population in the decade prior to the bust combined with price appreciation of up to 20% per year, the market was ripe for a fall, and when the tide turned, prices dropped like a row of dominoes. As values continued to erode speculators bailed first, followed next by financially distressed homeowners unable to keep up with their interest only and adjustable rate mortgages amid falling wages and growing unemployment. These property owners have been followed by “strategic defaulters”, those individuals that could afford to continue their payments but are opting to walk away from their investments in light of the costs of keeping the property compared to the expected time required for the asset to appreciate to its former value. The availability of Arizona’s consumer/investor friendly anti-deficiency law, which essentially makes most real estate borrowing non-recourse, has made sacrificing one’s credit rating an attractive alternative to being saddled with hundreds of thousands of dollars of negative equity in an asset whose value appears to be falling with little prospect of recovery.

In many ways, the real estate bubble was a product of its own success. Real estate prices had proven to be fairly resilient over the course of modern history and long term investment in one’s home had proven to be the single largest, and most profitable investment, that most Americans made during their lifetime. However, the advent of new loan products such as “home equity” loans that allowed borrowers to borrow amounts in excess of the value of their property for such “investments” as credit card refinancing and vacation funding turned home ownership into America’s largest casino. More and more homeowners bet that rising home prices would “cover their losses” as they continued to “eat” their home investment by tapping into perceived equity. Mortgage brokers, home builders, appraisers, bankers, real estate agents and even the federal government (via no money down home ownership programs) all joined on the bandwagon while preaching the more you owed, the richer you were! No one wanted to admit the emperor was naked since we were all too intoxicated on the liquor of easy credit with no downpayment required.

As with the bursting of any bubble, the markets tend to over-react with the acceptance of the belief that Chicken Little may very well have been right, and the sky is really falling. For many investors and homeowners the analogy is indeed true, as their financial flooring has collapsed, and they have had their homes foreclosed and have been forced into bankruptcy to seek protection from their remaining creditors. This reality is reflected in the number of bankruptcy filings in Arizona where the pace of cases exceed 40,000 per year in 2009 & 2010. Many of these debtors have left multiple properties in their wakes which are being dumped on the market in numbers far exceeding the pool of available buyers. Banks, unable or unwilling to stem the rising tide of defaulting loans are delaying foreclosures in an effort to avoid being saddled with the costs associated with maintaining their real-estate owned inventory of housing. Vulture investors with available cash for immediate purchase of distressed properties are finding banks willing to unload properties for fractions of their prior value in an effort to move these properties off of their balance sheets. Federal bailout programs and guarantee programs provide incentives for banks to take their losses now and move on, but have done little to help distressed borrowers that want to remain in their homestead.

For many of us, when, and even if, the real estate market will make a comeback is difficult to predict. However, I firmly believe that real estate will make a full recovery, and in my estimation the issue is how long will it take to fully recover. Given the extent of federal borrowing to fund the various stimulus programs, the Federal Government will continue to issue trillions of dollars in federal debt to cover these costs. Since the besieged taxpayers are unlikely to accept significant tax increases and due to the difficulty if not impossibility of government curtailing spending, the only logical way out of this mess is to stop many of the government restraints on inflation so as to let inflation come roaring back. The benefit to the government is that it will be paying off its 2008-2010 debts with inflated dollars which will come at a cheaper cost. A resurgence of inflation will inflate underlying asset valuations which should reverse the downward spiral of real estate prices. Investors will seek to invest in hard assets such as real estate in order to keep pace with inflation. In some ways this may sound like “Bizarro World” where the federal government actually is courting inflation, but inevitably I believe this scenario will begin to play out in the very near future. Just like when the dam on Tempe Lake broke, and the beautiful lake disappeared over night, we may see a new albeit, like a new dam, slowly inflated so as to bring life back to a desert land. Stay tuned! JIM CARROLL