What are the legal issues we have to know a group of 9 people to buy a house?
Mrk M asked:
We are at the moment 9 people living in northern california, we are planning to buy properties, we will all contribute equal shares for what ever the property is worth. Is there any guidance on how we would go about buying property between us? How should we handle the situation of one person moving out or others moving in? Are there any legal issues we need to be aware of?
We are at the moment 9 people living in northern california, we are planning to buy properties, we will all contribute equal shares for what ever the property is worth. Is there any guidance on how we would go about buying property between us? How should we handle the situation of one person moving out or others moving in? Are there any legal issues we need to be aware of?
If everyone is sharing equally then the main issue is how to take title, which determines what happens to a share if someone dies. Other than that there are common-sense partnership issues like what happens if someone doesn’t kick in their share of expenses if needed, etc. See an attorney.
Form a corporation - best would be an LLC in your case - with each owning 9% of the company.
That would leave 19% open - which you can take that share of dividends to re-invest.
Recommend you form a board of directors with one of you as Chairman. Chairman only votes to cast any tie breakers.
the corporation is then the holder of the title, and if one of your perishes, their heirs will take over that share of the company, or you can take a vote and make it part of the corporate by laws that the deceased shares are split evenly between remaining shareholders, with any remaining shares put under the investment.
AKA - each owns 9 percent, with reserve owning 19%. One dies, leaving 8 living shareholders. Each gets 1% to make their shares now 10%, leaving a spare 1%. That goes into the reserve - making it 20%.
Next person passes - leaving seven. Each would get another 1%, bringing it up to 11% each, the spare 3% going to reserve.
Next person passes - leaving six. Each person gets another 1%, bringing it up to 12% each. Will leave 5% to go to reserve, making the reserve now 28%.
Next person passes - leaving five original owners. That person’s 12% is split 2% each to the remaining 5, bringing their share to 14% each, and the remainder added to reserve to make it 30%. At this time, the remaining owners could vote to transfer 10 points from reserve to split evenly between the remaining owners - bringing their shares to 16% and the reserve at 20%.
At this point - it could get rather dog eat dog - I would just sell the company - with everyone splitting the sale price evenly and walking away.
have a legal document drawn up for all to read though and sign. business with friends, family or partners can go bad quickly.
I’m sure your mortgage broker ill give you the information.
9 ppl buying a house together…..do yall not plan on starting a future with other ppl or something. whats gonna happen when you and others find love with someone, and want to move out and live alone with your loved one…how is that gonna work out with a 30yr contract over your head. i don’t know, i don’t think its a good idea. 9 ppl in a house, that’s worse than MTVs real world. you may say that all yall are friends and things, but as time goes on, you gonna want some privacy. you should think long and hard about this. i know you have watched several court shows about multiple ppl living in houses together and things not working out. maybe you need to go to another site and ask this question, or go to a lawyer and ask them.
You need to form a company - parnership, Sub S, Sub C, LLC, or REIT. Then you need articles of incorporation (or what have you). This is critical because 9 people will bring 9 personalities, so the document has to address all the likely possibilities. It should address adding new partners, how to force partners out, when the partners are automatically out (or in). What happens when they get divorsed, or sued and loose, or are incapacitated, or sell their shares (or can they?), what impact do children have, how are loses allocated, what is time spent and effort worth? Who gets what when the thing disolves, or is sold. How are intangible assets and liabilities handled (unrealized gains and losses).
Plan a few weeks hammerring that out. Then you’ll need an annual meeeting, and officers, and tax matter partners.
Next you need a bank that will work with you (checking accounts as well as mortgages - it would diversify your risk if you used some borrowed funds as well as your pooled funds).