Category Archives: Real Property

Real Property – Realistic Returns

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“ARE YOU NUTS?”

That was the response I received from the first client I spoke with a few days after moving into our new office location. The husband and wife were questioning my sanity because I was suggesting that the time was right to be investing in a product that is secured by real estate. Before you ask, yes, I have heard of the investment companies that are currently in trouble and I have noted, almost daily, the number of published articles in newspapers, magazines and on the internet that are painting a picture of doom and gloom. As a matter of fact the Calgary Herald printed an article a few days ago with the bold print headline which stated: “COMMERCIAL REAL ESTATE SUFFERS $1-BILLION DROP“. Based on that headline anyone thinking of investing in commercial real estate probably put their investment funds back under their mattress. The article was about how commercial real estate sales had decreased from 2008. What it failed to mention was that in 2008 and years preceding the number of sales were inflated because Calgary was the “hottest market for commercial real estate in North America”. That market is returning to normal which is a good thing. My point is that one should not always take media hype whether it is positive or negative at face value. If you analyze and complete due diligence before you invest you will be making informed decisions based on fact and that will provide you with lucrative ways to increase your net worth even in these embattled times. So my answer to the “are you nuts” question is a definite NO!

WHAT SHOULD WE LOOK FOR?

The investment promoter should be willing to give you their legal documents so that you can read and understand them yourselves or with the assistance of legal and/or accounting advice. When an offer is made they should provide you with access to the due diligence that they complete. That should include appraisals, engineer’s reports, environmental studies, a review of leases and title searches to ensure that there are no undisclosed liens or problems. You will want to be assured that your funds are held in a trust account and that some form of audit is completed on the account. You will also want to be assured that after you have invested that you will be informed on at least a quarterly basis , if not more frequently, as to how the building you have invested in is performing.

Real Property Partition v. Partnership Dissolution

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Unless you are a real estate attorney, you may not know whether the fight you are having with your ‘partner’ over the commercial property that you both own should be solved through a partition lawsuit or a breach of partnership contract lawsuit. Are you and your family members who jointly own an apartment building or industrial warehouse really ‘partners’ in the eyes of the law or ‘co-owners’? What is the difference and how will that affect what type of real estate lawsuit you would file?

The easiest way to understand the distinction between partners and co-owners is in the way that title to the real property is held. Co-owners or ‘tenants-in-common’ are each individually on the property’s title. In the case of an inherited property, for example, title may be held in the name of ‘John Smith, Mary Smith and Allison Smith’. Each of these three co-owners has a one-third interest in the actual property. A dispute between the co-owners in which a co-owner wants to get out of the property will be addressed through a partition lawsuit.

Partners often hold property in the name of the partnership. If, for example, the same three individuals—John Smith, Mary Smith and Allison Smith—decided to form a partnership to hold their property, the title to the property may be held by the ‘Smith Family Partnership’ or ‘150 Main St., LLC’. Under California law, none of the three individuals actually owns an interest in the property and none of the individuals is on title. Instead of a real property interest, they have a personal property interest in the partnership or the limited liability company, which owns the real property. Any dispute between the partners will be addressed through a breach of contract (partnership agreement or limited liability company operating agreement) lawsuit, a breach of fiduciary duty lawsuit, an accounting or a partnership dissolution.

Property Law – Real Property vs Personal Property

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Property law in the United Kingdom is divided into three regions – Scotland, England & Wales, and Northern Ireland. The property laws of Scotland are quite different from that of England and Wales. However the property laws of Northern Ireland and England are fairly similar. Scottish property law had originated and was derived from the Scottish feudal law system. However it has undergone extensive adaptations and changes under the modern statute. English and Welsh property law originated and were derived from the English common law and English traditions. Many people are under the false notion that the property laws of England were derived from Roman law.

Property under the English law is briefly divided into “personal property” and “real property.” This demarcation of property into personal versus real is synonymous to dividing the same into immovable property and movable property. This concept of movable property originated from the Roman era, where Roman law considered that personal belongings would essentially include goods, money, and all other movables which the owner may carry with him wherever he sees fit.

This essential demarcation between real and personal property still prevails in England and is characterized by the following:   

In real property there can only be limited ownership. Personal property cannot include estate property. Personal property can be considered to be complete ownership. Personal property cannot be subjected to the other incidents of real property – mainly lease, renting, dowers or escheat. With personal property, upon the demise of the owner, in case of him dying intestate, not having left behind a will intestate real property will descend to his legal heirs, whereas all other personal property will be distributed as per the Statute of Distributions. Real property needs to be transferred through a deed, whereas personal property does not require any such formal approach for transfer.