crazy complicated situation

[eliot2]

Ok here it goes guys, I've talked to 2 attys so far no one has a solution.

I have;
2) Commercial Building
a.) Building 1, is great and make money on it, and I operate a business out of it.
b.) Building 2, Nothing but a problem, and I dont own the land, as I am trapped
in a land lease for 80 more years at 4k a month.
and 6) Duplex/single family homes, no problems I am making money all fully rented
owe about 50% LTV on them all, and would like to keep them.

My only major problem is this Building #2, the land lease people ignore me and dont allow me to buy them out, i cant keep it rented and this cycle keeps repeating where I get ahead and then BOOM i lose a tenant they file bankruptcy and I deplete all my reserves again, 4 times I've been thru this and at 4k a month and 24k property tax a year it adds up fast.

Now all my debt and problems is Building #2, if there was a way to cut this limb off it be awesome, does anyone have any ideas, it is in a separate LLC all by its self, but I unfortunately personal guaranteed the assumable land lease from the last sucker.

Anyone Please help! I am in Wisconsin.

[Drazil65]

Have you tried selling the lease, can you sell it under the contract? If you can, even at a loss up front it would stop the bleeding in the long run. I would offer it up and see what happens, may take a while but if its possible I would try. Also, can you take on a partner to share in the costs? Read the lease contract there are usually some type of opting out clauses somewhere, maybe hire an attorney to find a loop hole in the contract somewhere, might be worth the money to hire him. Good luck.

[HHM]

I am with Draz, no obvious answer here...it might be time to learn if the lease is even legally valid, or if there are some parts that can be carved out (for example, a personal guarantee on an 80 year for the ENTIRE balance seems awfully usurious)

Some of it depends on some other facts, how are the other assets and debt held. What are the total value of assets minus liabilities. What are the default provisions of the lease.

What resources do you have, financially to fight this.

It is not uncommon for a tenant to break a lease, and then fight the landlord in court when the landlord sues. At least on the commercial side, you can raise defenses such as failure to mitigate damage, etc...drag it out and then reach a settlement that you might be able to live with.

[JackBondLove]

An 80 year lease with a personal guarantee? Is that normal in this situation? I would find a forum for real estate rentiers, and ask around. If such long, personally guaranteed leases are common, I'm sure that *someone* like you has gone through a BK and detailed what happened. I have a friend that sells paper, and he's always dealing with printers that are set up as an LLC, but he only gives credit if there is a personal guarantee (and the person has a good credit history!)

Chapter 7 is always an option, but it could be quite painful, as you would wind up broke. Do you have more non-exempt assets & equity (i.e., in BK) than the total buyout of this lease? What did the attorneys say were options? You may not like the options, but it seems like they are your only options.

This brings up another interesting question. If someone files for Chapter 7, does the landlord owed the outstanding payments due in the lease considered as unsecured debt? If so, and it is an asset case, such that some of the BK estate would be distributed to that landlord, would the filer have legal use of that rented property in as much as the landlord was given a recoupment? (E.G., in this case, the landlord is due $384K, so if the landlord were to get a 25% recoupment, the filer would essentially have use of that property of 25%, or 20 years here, if that property - i.e., to rent out and keep that income, etc.)

[LadyInTheRed]

What are the default provisions of the lease.

That's the first thing I would look at. A strategic default may be a good option if you can afford the consequences. If nothing else, it may get the lessor's attention. Unless the property will be easy to re-lease, they don't have much incentive to discuss a buy out if you are making the lease payments.

Have a real estate lawyer review the lease and see if there is a way out.

[eliot2]

Well the attys have said that I have indemnified the previous guys, so he and and everyone else comes after me if I default? If he defaults the previous guy (Tenant before me), then the guys before him will file suit against all of us. There is
a long chain since 1978 of people that leased this land, and bought the building on it then passed it along. I am stuck now and unless someone really good comes by to take it off my hands, otherwise if I sell it to just Joe Blow and he defaults it comes back
to me, is the way i understand it. Now the land has a option to buy it, but these people are crazy its worth like 3-400k but they want 900k!

[LadyInTheRed]

I have seen options to buy in different types of contracts and the option is usually exercisable at fair market value or some designated percentage of fair market value. If the buyer and seller can't agree on the fair market value, the contract usually states how the disagreement would be resolved. Is there any guidance in the lease on how the price is set if you exercise the option to buy? Do you have the ability to buy at any price?

[bcohen]

Around here (Tucson, AZ) there are so many vacant commercial properties that many commercial landlords are agreeing to re-negotiate leases with existing tenants, rather than have to wait for years while the building sits empty and costs them money. I am sure that where you live, the market is just as bad, and if it is no longer feasible to keep paying $4k a month plus property taxes, insurance, and marketing expenses, it may be time to tell the owner very bluntly that due to the harsh economic conditions, you cannot rent this building out anymore, and unless he/they will agree to re-negotiate the lease, you will be forced to default.

Document your good-faith efforts to re-negotiate the lease, as this information will be useful if/when you are sued for breach of contract. Then, if the owner won't lower the rent to an amount that you can afford, agree to accept a percentage of your proceeds as rent until the market improves, or agree to cancel the lease, then I suggest you quit paying and see what happens. Quit paying the property taxes and insurance too. Most likely, you will be able to settle this for a LOT less than what this will cost you if you keep on paying. You can also mention the possibility of filing for Chapter 11 (which many companies do in order to get out of unprofitable leases) during your negotiations and/or settlement efforts.

[eliot2]

can we not edit posts in this forum?

[LadyInTheRed]

can we not edit posts in this forum?

You have a limited time to edit your post. If you want to correct something in a post that can't be edited, reply to your post using "reply with quote" and explain what you need to correct.