Development Contract W/ City
A, LLC entered into an agreement directing what can and cannot be done as part of a mall development.
A, LLC has defaulted and the trustee sale is in 3 week.
If I win the auction or buy the not, am I bound by the agreement?
Depends on the wording of the agreement. If it is with the city, most likely yes.
Chris
[ Edited by ypochris on Date 08/27/2008 ]
Usually a development agreement exchanges certain rights to use the property in one way, or contributions to the public good by the developer, for rights to build in a way that is not appropriate for the prior zoning. The agreement may be appurtanant to the property, or may be between the city and the entity.
If it is appurtanant to the property (rezoning, exemption, etc.) then the agreement goes with the land. If it is between the city and the entity, then the entire agreement may be invalid and the effective zoning would be what it was before the agreement (i.e. you lose both the benefits and the costs of the agreement).
As I said, it depends on the wording of the agreement. If the agreement binds the successors, assigns, etc. then you are stuck with it. If not, then there is no agreement.
Chris
Are you buying the LLC or the property?
If LLC, yes you are fully liable.
If the property, you may not be directly liable, but...
The city will probably give you a hard time with this property if you try do something else with it (e.g. sell it). They may not give you the transfer stamps or who knows what else. They may sue for weeds, garbage, water (if water service is available), for not complying with the building code in general.
They can try and rezone it behind your back, declare it open space or park. They may change the flood map (happened to me once ) and put the property in the 100-year flood plain. They may try to start an eminent domain proceeding. They may try to demolish it (if there is a structure).
They again, they may do none of the above.
Also, if there is an easement given to the City as part of this agreement it will "run with the land", i.e. it will stand.
Bankruptcy trustee?
Forgot another trick they do.
If public funds were extended as part of this development (e.g. a Special Service Area), they may claim those as back taxes.
But if it is a good buy, do not let all these scare you.
You may need more time and money to fight these off, but if it s a good enough deal buy it.
I am buying the land thru foreclosure.
The answer I got from an attorney.
As the successor in interest (I think that was the term) and after more digging (back to what Chris said) it turn out the agreement was recorded as part of the entitlement that run with the land.
I still have someone interested, so I hope that is works out.
they can be if you hire fly-by-night companies. Go with someone well know.
What gets me is the lack of a strict completion date (for large projects). If there are change orders or permit delays, I could understand. I rarely hear stories of people who have their jobs completed timely. The contractor shows up, does the demo, starts the job, then moves on to another job and things just drag out.
When you talk to them, they say it will be completed in 4 weeks, but if you try to hold them to a date contractually (penalty for failure to complete by a set date), they refuse (obviously I would be happy to extend the time if I have change orders or permit delays).
The only exception I can think of is the contractor that was paid a bonus for early completion. His did I-10 after the 1994 quake and the work in Oakland after a tanker fire, both in an amazingly short period of time.
Maybe a carrot an stick approach is needed.
One last thing for all serious investors to think about when dealing with a new contractor or even an old one.........there is an inexpensive vehicle that will take care of many of these problems........it is called a Performance Bond.
A performance bond is a surety bond issued by an insurance company to guarantee satisfactory completion of a project by a contractor. There are various stipulations to all such vehicles so take heed of the product that you or your contract puts forth.
If your contractor does not want to invest in such a bond then my advise is to walk away.
regards
NC_Yank
A performance bond is a surety bond issued by an insurance company to guarantee satisfactory completion of a project by a contractor. There are various stipulations to all such vehicles so take heed of the product that you or your contract puts forth.
If your contractor does not want to invest in such a bond then my advise is to walk away.
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[ Edited by JohnLocke on Date 08/20/2008 ]
Not all contractors are shady. We are contractors that have NEVER finished a job beyond the completion date whether we were getting a bonus or not. Why? Because we do not lie to our customers about how long a job will take. That means we do not get a lot of jobs we bid on but we are the ones they call when the - cheaper, "I will finish it in 2 weeks" contractors let them down.
We are told we are more expensive than the average guy but we do excellent work. My partner the guy in the filed is very demanding and myself, the quality assurance person is even more so. In 8 years we have gotten only one complaint - from a guy who claimed his roof was leaking. When we went we could see the ceiling was wet but by magic the attic and all the insulation was dry. Turns out he was in the middle of a divorce and trying not to pay his bill.
Like any biz relationship, check, recheck and check again.
References, past projects, BBB, SOS registrations, Trade registrations (e.g. electrical certification) and certificates, insurance certificates, workers comp insurance, warranties in writing.
Make sure you get lien waivers after each payment.
The good ones are not necessarily cheap, but in the longer run they are worth the money.
There were really contractors who have that kind of thoughts. Be sure that you have a writing agreement wherein full details of the work are listed. You have to know the contractor’s company, have a careful and comprehensive research about the feedbacks and work done by the said contractors.