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Do I need to disclose short-term rental activity in my neighborhood when I sell my house in California?: My neighbor used to rent her whole house out as an airbnb-type rental. I never had problems with noise or anything, but I was annoyed at the transient nature of the guests, so I reported her to the city code enforcement. We came to an agreement and she agreed to rent it out for 30 days or longer to comply with my town's residential zoning laws. I haven't had problems since, but I don't entirely trust her. Do I need to disclose this when listing my home for sale? California has such strict disclosure laws. I do not want to scare off buyers, but I don't want to be liable for a lawsuit either!

Asked 10 months ago in Real Estate

Robert’s answer: The fact that you are asking the question suggests an answer, since you see the neighbor’s behavior as a potential problem. As a seller you are obligated to disclose to a buyer anything you know (or have reason to inquire about) which may reasonably be of concern to the buyer.

Of course you should pay close attention to the disclosure forms you are asked to sign and make sure that any situation covered by those questions is clearly disclosed. However, even if this is not strictly within the disclosure language, you still have the general disclosure obligation I have described. Rather than treading in grey areas, I generally recommend that sellers disclose anything in the margins.

Do not rely on vague broad statements, or on the attempts in brokers’ forms to shift the responsibility for investigation to the buyer. If you know of something specific, you should disclose it specifically. I would not rely upon a broker or agent for this, as in my experience they tend to draft veiled disclosures which do not hold up to later scrutiny. A skilled real estate attorney should be able to help you prepare a succinct statement which discloses the situation without making it seem worse than it is.

You do not want to set yourself up for a lawsuit. On a more practical level, failing to be candid with the buyer is a great way to undermine the relationship and invite conflict. On the other hand, a relationship of trust will often carry you over unexpected bumps in the road which could otherwise kill the deal.

All of that said, my initial impression of what you described leads me to think that many prospective buyers would think you were being extraordinarily open about a minor concern. Disclosing it clearly and wisely may give them more faith in you and in the deal.

Answered 10 months ago.

Change Corporate Ownership in California: My wife created a California corporation but we need to transfer ownership to me. Any ideas how to do this?

Asked 10 months ago in Corporate

Robert’s answer: The process required is simple, transferring your wife’s shares of stock to you through some sort of assignment document, as a gift or a sale. (You could also have new stock issued to you for some consideration and have the corporation redeem your wife’s stock, though in most cases direct transfer makes more sense.) It is essentially a private transaction–with the possible exception noted below.

As Michael Doland suggests, though, often with small privately held corporations the initial documentation needed for issuance of the shares–or even deciding how many shares were to be issued and for what consideration–has been neglected. James D’Esposito’s comment suggests the possibility that the corporation was formed recently; if your wife merely acted as incorporator but has not received any shares, it may indeed make sense just to have the shares issued to you. You may need legal counsel to evaluate where the corporate documentation stands and then take it from there.

Please be aware of this trap for the unwary: if the corporation owns real property and a majority of ownership is changed, a change of ownership may occur for property tax assessment purposes. Form BOE-100-B must be filed with California within 90 days after the change of control, or else a substantial penalty is imposed. This is among several property and income and gift & estate tax issues which should be considered.

Answered 10 months ago.

Which type of legal entity would be best to set up for the situation described? LLC, S-Corp, something different?: I want to start a company, register it properly and all legal-like. The company will invest funds, primarily, but not limited to real estate ownership-based ventures. Capital will be raised through investor deposits, and continue with revenues derived from offerings of consulting and other services. Company should legally be able to receive cash contributions from persons or corporations, either directly or through acts of 3rd party companies participating in fund transfers, roll-overs and other legal vehicles or from the sale of consultancy or other services.

Asked 11 months ago in Business

Robert’s answer: The choice of entity is nearly the last question with which you should be concerned. The venture you describe would require compliance with a multitude of federal and state statutes and regulations on which you will need legal counsel, not the least of which are the securities laws. Before you start spending money (and a lot of it) on lawyers, you need to educate yourself on the industries you seek to enter.

More fundamentally, why should investors believe that you can keep their money safe and earn a good return? Unless and until you can answer that question convincingly in the length of an elevator ride, you are not ready to move forward.

Answered 11 months ago.