Contracts for Deed and the Oklahoma Weather

Last Updated on Sunday, 27 August 2023 03:13 Written by Chris Griswold Thursday, 6 October 2016 01:20

Contracts for deed.  We’ve heard about them, perhaps you’ve even done one before.  Are they a good vehicle to use to acquire property if conventional financing is difficult to obtain?  Read below, this is good stuff for everyone to know… (and don’t forget to click on my Facebook, Linked In or YouTube links below to also see my short video on this material).

Contracts for Deed and the Oklahoma Weather

Lots of people talk about doing contracts for deed (COD’s).  Some people have even done them successfully.  What do you need to remember when using COD’s?

First, even though some sellers claim that using COD’s can make life a lot easier for selling a difficult property, they are often unaware of the fact that, in the event the buyer doesn’t make timely payments, the seller will still have to foreclose upon the property to regain legal, marketable title of the property – even if the deed to buyer isn’t recorded in the local land records office.

Second, the seller in a COD needs to remember the “due on sale” clause in their own mortgage; the violation of which is triggered by doing COD’s on yet mortgaged property.  Lenders don’t like financing property for additional persons other than the official borrower.  So, the longer out the financing arrangement is (along with the balloon at the end), the more time a lender has to discover this issue.

Third, from my experience, most parties to COD’s usually don’t think too much about the problems/pitfalls associated with using COD’s and, usually, go ahead any use COD’s to accomplish their transactions.  However, there’s usually something that unravels their well laid plans.  What is it?  The Oklahoma weather.  Huh??

We get crazy weather in Oklahoma, including hail.  So?  Well, after a hail storm, there’s usually roof repair work to consider.  This means an insurance adjuster will get involved to pay out roof replacement proceeds.  The proceeds will be paid to the named insured, which is seller; not the buyer.  Somewhere in the middle of this insurance adjuster’s inspection/evaluation of the roof, they’ll learn that the seller has “sold” the property using a COD.  Even if not, what if the seller doesn’t just simply hand over the roof replacement check to the buyer?  What keeps the lender from then quickly finding out what is going on?  See the problem here?

The information presented within this article is of a general nature and is not intended to be relied upon as legal advice in any particular matter without first consulting qualified counsel.

What My Clients Are Saying

 “Chris Griswold is a good business attorney whom I’ve used often and much through the years, for both my business and personal needs, and whom I’d gladly refer to anyone.  He’s creative, prompt, eager to help and very competent.  He’s good at what he does, he has fun doing it, and it shows up in his work through his good problem solving skills.  I look forward to a continued relationship with Chris.”
Edward F. Wells / President, Wells Nelson & Associates / Oklahoma City, Oklahoma

Maintaining LLC’s

Last Updated on Sunday, 27 August 2023 03:13 Written by Chris Griswold Tuesday, 9 August 2016 01:06

We all use LLC’s.  However, too many show up on my desk that are “not in good standing.”  Why?  How do you keep it from happening?  Read below, this is good stuff for everyone to know… (and don’t forget to click on my Facebook, Linked In or YouTube links below to also see my short video on this material).  Also, don’t forget to occasionally glance online at the Journal Record, you might spot one of my occasional contributions to the Lot Lines column.

Maintaining LLC’s

LLC’s are how real estate transactions occur; most of which are not in good standing or even dissolved to the surprise of their members/managers come time to sell or re-finance.  What do you need to remember when using LLC’s?

First, remember your LLC was filed with the Secretary of State on a certain day; upon the anniversary of which the Secretary of State will E-mail (not snail mail) the registered agent something called an “annual certificate.”  The annual certificate will ask the registered agent to confirm: 1) that the business is still active, and 2) that any new place of business be disclosed on the form – along with a payment of $25.00 being mailed to the Secretary of State.  The certificate is due on the anniversary filing date of the domestic LLC with the Secretary of State (or the anniversary date of registration of any duly registered foreign limited liability company with the Secretary of State).

Second, if you fail to do the foregoing (i.e., fail to mail in the completed annual certificate along with your remittance of the $25.00 to the Secretary of State) within 60 days after such anniversary filing (or registration) date, your LLC shall cease to be in good standing with the State.  So what?

Upon losing its status of good standing, the LLC:

• Cannot bring any suit against any person or entity in any court in the State (which makes it hard for the LLC to collect monies due it, or
• Will be dissolved automatically (as a matter of law, 3 years after such anniversary filing (or registration) date. This might mean the LLC will have to later change its name, if, years later, its previous name has since become unavailable.

If this happens, it’s not the end of the world (as the LLC can be re-instated and the managers/members themselves will not be held personally liable for any unperformed duties or obligations of such LLC simply due to such unfiled annual certificates), but it will slow up your closing, as your banker/escrow officer will tell you.

So, set an annually re-occurring reminder on the calendar starting about 45 days prior to such anniversary filing (or registration) date, and then diligently be on the lookout for these annual certificates that now only come to you via E-mail (and don’t forget to check your junk e-mail folder too during that time period).  Failing everything else, around the time of the anniversary date, call the Secretary of State and inquire about getting your annual certificate filed.

The information presented within this article is of a general nature and is not intended to be relied upon as legal advice in any particular matter without first consulting qualified counsel.

What My Clients Are Saying

“Chris Griswold has been a tremendous asset in making my dream a reality! His legal advice, strong business acumen and initiative in helping me find the answers got me started on the right track. His honesty, common sense and strong interest in helping me succeed was a welcome addition in finding the right partner for legal advice and direction. I look forward to working with him again in the future.” Margaret Holloway / Partner, Café 501 and Boulevard Steakhouse; President, Senior Care Network / Oklahoma City, Oklahoma

Big Picture on Personal Guaranties and Bankruptcy Laws

Last Updated on Sunday, 27 August 2023 03:13 Written by Chris Griswold Tuesday, 14 June 2016 12:59

At some point along the way, we’ve all signed personal guaranties and, likewise, we have also asked others to sign them for us.  Why?  It’s time to clear the air on what is accomplished when a personal guaranty is secured in a business transaction (whether it’s a loan, a lease or some other form of contract) and, conversely, how bankruptcy laws enter into the picture with their own set of mandates.  This is good stuff for everyone to know… (and don’t forget to click on my Facebook, Linked In or YouTube links below to also see my short video on this material).

Big Picture on Personal Guaranties and Bankruptcy Laws

Personal guaranties ensure that, regardless of whether the person with whom we’re dealing uses an incorporated entity (e.g., a corporation or an LLC) to conduct their business with us, we can always go find that person (referred to as a “natural person” under the eyes of the law) to collect our money.  In other words, if the natural person later on: a) defaults on their contractual obligations, b) dissolves their incorporated entity, and c) then goes down the street, and resumes their business operations under the name of a newly formed, incorporated entity, we can always go find the natural person and collect the debt.  Having a personal guaranty of a debt is a very good thing to help you collect your debt and is strongly encouraged….

Against this backdrop are the bankruptcy laws which, among other things, declare that any payments received by a creditor from a debtor within ninety (90) days of such debtor personally filing a petition for bankruptcy may be avoidable by a bankruptcy trustee for the benefit of other creditors.  What this means is that if the debtor works out a payment arrangement (or a settlement arrangement) with you and starts making payments, then, if within ninety (90) days later, they personally file a petition for bankruptcy, then the payments made to you during the ninety (90) day period are likely avoidable in a bankruptcy.  However, the golden rule still is to always take the money now and worry about preference liability in a bankruptcy later. 

Accordingly, if you’ve got a personal guaranty and go get cash from the debtor, that’s great….  However, keep your “eyes open” as to whether your debtor later files bankruptcy within 90 days of your receiving the money.  In certain situations, you may be better off to avoid all trouble by taking a lump sum settlement early on before the debtor’s financial picture further deteriorates and decides to personally file for bankruptcy.

The information presented within this article is of a general nature and is not intended to be relied upon as legal advice in any particular matter without first consulting qualified counsel.

What My Clients Are Saying

“Chris is a competent, hardworking attorney.  Chris is always there when you need him and you don’t have to wait a day to get a returned phone call.  He does what he says he is going to do in a timely manner.  He has the expertise to make problems simpler which makes them easier to solve.  He is honest, consistent and reliable.  He loves what he does and is active in the community.”
David Ostrowe / Owner, O & M Restaurant Group, Inc. / Oklahoma City, Oklahoma