Buy TimeShare with an LLC

[waynewalter]

When you buy a timeshare is it possible purchase in the name of my business instead of my personal name? That would eliminate any personal liability in the event of a foreclosure. - Wayne

 

[waynewalter]

If that's possible then you can get an LLC for very little money and almost zero paperwork. LLC costs $100 first year in Virginia and $50 thereafter just to hold title, it requires only a 1 page form to create it and zero paperwork to keep it going--just mail in the annual fee. That's done very often with non-timeshare real estate to keep the title out of a personal name. It difficult to do if you're getting a mortgage because banks want at least 30% or more down payment to allow the buyer to use an LLC instead of a personal name due to the ability to walk away from the deal.

But if you buy a time share from a seller free and clear, it seems a simple matter to put your LLC name on the title instead of personal name. Then, who cares if the resort forecloses.

Sincerely,
Wayne

 

[ttt]

When you buy a timeshare is it possible purchase in the name of my business instead of my personal name? That would eliminate any personal liability in the event of a foreclosure. - Wayne

Yes, as long as the LLC has the power to buy/sell real estate.

 

[T_R_Oglodyte]

If that's possible then you can get an LLC for very little money and almost zero paperwork. LLC costs $100 first year in Virginia and $50 thereafter just to hold title, it requires only a 1 page form to create it and zero paperwork to keep it going--just mail in the annual fee. That's done very often with non-timeshare real estate to keep the title out of a personal name. It difficult to do if you're getting a mortgage because banks want at least 30% or more down payment to allow the buyer to use an LLC instead of a personal name due to the ability to walk away from the deal.

But if you buy a time share from a seller free and clear, it seems a simple matter to put your LLC name on the title instead of personal name. Then, who cares if the resort forecloses.

Sincerely,
Wayne

I don't see an issue here. Of course a limitation on any corporate arrangement is that the action cannot have been undertaken for the sole purpose of avoiding a debt or judgment. If a creditor can show that the LLC was created and the property donated as part of a scheme to avoid personal liability, the owners liability limitations can be waived by a court.

 

[Talent312]

While the LLC may have the power to acquire and disposed of TS's, you may find that some TS-managers know well that there are sham corporations and trusts, set up for no other purpose than avoiding personal liability if things go South. They likely have a gaggle of attorneys who are well-versed in piercing corporate veils, and may require that officers accept personal liability before accepting a transfer.

 

[Pit]

So, are you saying that a resort manager has legal authority to refuse a real estate transfer that has been properly recorded and recognized by the state?

In that case, who do they expect will pay the m/fs?

 

[e.bram]

If not to avoid personal liability, why are corporations set up at all? Maybe the concept should be abandoned.
Also, it probably cost $20,000.00 in legal fees to get $700.00 in MFs. Not a wise venture foe an HOA.

 

[T_R_Oglodyte]

If not to avoid personal liability, why are corporations set up at all?

How many times have we been through this already?

Corporations are set up to create a legal entity to conduct a business activity. The law essentially recognizes them as independent, self-sustaining operations, capable of taking on debt, buying property, and conducting operations.

Because a corporation is a self-sustaining, independent operation, the liabilities it incurs are it's liabilities alone, not those of the owners.

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If the corporation is not set up for the purpose of being an independent, self-sustaining operation then the field changes. At that point the corporation is simply an alter ego for the owners, and if a company is really just an alter ego, there are no assurances of limitation of liability for the owner. When a corporation operates essentially as an extension of an individual, the courts will often tend towards treating the individual and the corporation as a single integrated entity. This is even more likely if the business operation is organized as an LLC, which is really not a corporation at all.

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Further if a corporation is set up and toxic assets are transferred to the corporation for the primary purpose of enabling the owners of those assets to evade liabilities associated with those assets, a court can find that either the transfer of assets is fraudulent or perhaps the entire corporation itself is fraudulent.

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The corporate structure has been created because it is a more efficient way for people to get together to conduct commerce. One part of that is limitation of liability, but that is far from the only reason. The concept of limitation of liability when people partner together in an enterprise could have been accomplished in ways other than creating corporations (for example by allowing partnerships to be formed without incurring joint and several liability among the partners).

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I'm not a lawyer. I only play one on a BBS. My understanding of these matters is derived from courses on business law that I took in college, along with advice that I have received from attorneys in my 30 years of being involved as an owner and operator of both Subchapter S corporations and my own LLC.

 

[Talent312]

So, are you saying that a resort manager has legal authority to refuse a real estate transfer that has been properly recorded and recognized by the state?

Permit me to expand...
When properly excuted and recorded deeds are presented to TS-management for the transfer on its books, sometimes new owners find this process more dicey than expected. The managers may point out that there are certain conditions precedent, such as additional forms and rules which must be complied with, the most basic of which is the payment of a transfer fee.

Proof of a copropations' capacity to do business in the state and an agents authority to act for it could be just the beginning. Just as important as the TS's organizing documents is how management applies their own internal procedures. Just about every TS deed says that it is subject to 'x,' 'y' and 'z' declarations, bylaws, covenants and such of the TS... Does anyone actually read them?

This is how, for example, HGVC gets away with telling folks who present deeds in which a Trust is named that they will not accept a "Trust" as an owner, unless the deed identifies an individual as the trustee. Whether a particular TS could impose personal liability on the officers or directors of a corporation would likely depend how management interprets their own authority.

 

[Talent312]

[duplicate]

 

[heathpack]

When you buy a timeshare is it possible purchase in the name of my business instead of my personal name? That would eliminate any personal liability in the event of a foreclosure. - Wayne

I am not sure what liability you are trying to avoid. Is it continuing to pay on a timeshare that you have financed or simply not continuing to pay MF on the timeshare?

Our LLC owns our charter sailboat. The LLC was set up in part for the purpose of limiting liability in case of injury to a charterer. Our other option was to purchase a very large insurance policy, but the LLC is less expensive to set-up and maintain. Our legal liability is limited to the assets of the LLC.

The LLC also holds a loan on the boat. This does not absolve DH & I from legal responsibilty for the loan, however, as it is our personal income and assets (not the LLC's) that qualified for the loan. This might be different if we already had the LLC with other business income & assets when the loan app was processed. So our LLC does not mean we get out of paying the loan, even if we go bankrupt.

I have no idea, however, what would happen with an LLC-owned timeshare's on-going MF obligations.

H

 

[Dave H]

While the LLC may have the power to acquire and disposed of TS's, you may find that some TS-managers know well that there are sham corporations and trusts, set up for no other purpose than avoiding personal liability if things go South. They likely have a gaggle of attorneys who are well-versed in piercing corporate veils, and may require that officers accept personal liability before accepting a transfer.

Or depending on the state or country, you will be required to file as a foreign corporation or LLC to transact business in that state.

I know several that are that way. I ran into one not long ago, a company trying to buy at Atlantis. In the Bahamas, you have to set up your company there as well at fees of about $1500 a year.

Many states will require a foreign llc or corporation registration to transact business, that would require additional fees to set up as well as paying a registered agent every year. The register agent has to have an address in the state the llc is being formed or registered.... Could get pricey....

 

[waynewalter]

Thanks for the questions.

My plan is to purchase a T/S outright with free and clear title using an LLC.

So the liabilities to potentially avoid will be:
1. MFs
2. Any large fees beyond the MFs. ( I read about a special large free for replacing a roof on the resort that hit some owners.)
3. Anything else that might unexpectedly arise in the future.

With normal real estate, the owner can transfer the title to whomever she pleases with or without the consent of the recipient. Transferring a deed requires only the signature(s) of the current owner(s).

I did just purchase a T/S myself at a presentation but then exercised Florida's 10 day right to cancel by sending a certified cancellation letter. So I have those documents to study looking for covenants and rights related to an LLC. I will do so this afternoon. Plus I have emailed an attorney specializing in T/S closings.

The head sales manager in Florida said they could even sell the T/S to me in an LLC but that requires having the documents to prove it's existence like the state #id number, certificate of good standing, and operating agreement showing I have the authority to sign for the LLC to buy real estate. But I didn't have that stuff with me so I didn't in my own name and, of course, canceled it later.

Now I don't know if he was lying or mistaken but that sounded knowledgeable because I have bought and sold non-T/S real estate with an LLC and those documents are standard to prove the LLC is legit for a valid deed transfer to/from an LLC.

By the way, in Virginia LLC law, it's impossible to "pierce the corporate veil" unless the members of an LLC get convicted of crimes related to running the LLC such as fraud. The state changed it years ago to eliminate all the "pierce corporate veil" cases clogging the courts and, frankly, to sell more LLCs to other states due to the tougher statutes better even than Delaware.

You don't have to worry about all that other fraudulent uses of an LLC if you purchase the property with it from the beginning.

NOTE: I'm not an attorney either but have run a real estate investment business in Virginia for years so I'm very familiar with, at least Virginia, real estate law, LLCs etc.

Sincerely,
Wayne

 

[T_R_Oglodyte]

With normal real estate, the owner can transfer the title to whomever she pleases with or without the consent of the recipient. Transferring a deed requires only the signature(s) of the current owner(s).

I don't believe this statement is true. You can't simply dump something on someone else without their permission. They have every right to decline the transfer, and if they do decline you are still the owner even if you've signed, executed, and recorded a deed transferring it to someone else.

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BTW - a deed of sale is really a contract, and requires that the seller describe the consideration received for selling the property. If the buyer didn't give the seller anything for the property, the seller can't say that consideration was received. And that would flag to the world that there's a good chance the deed you've just recorded is invalid.

That's why in a lot of deals that are gifts the recipient will still give the seller some nominal amount, such as $1, so that the deed can show consideration received and establish that there truly was a transfer of interest.

 

[waynewalter]

I don't believe this statement is true. You can't simply dump something on someone else without their permission. They have every right to decline the transfer, and if they do decline you are still the owner even if you've signed, executed, and recorded a deed transferring it to someone else.

I understand how you feel. And I felt the same way. But when I actually sold many properties and dealt with attorneys in several states (which you obviously have not) it was clearly a fact that executing a deed to transfer title only requires the signature of the owner.

Ordinarily that is done with consideration which gets listed on the deed and owners will never transfer without a buyer paying money.

However, there is such a thing as a "deed of gift" and a "quitclaim deed" which require ZERO compensation.

Plus the owner can file an ordinary "warrenty deed" stating compensation of $1.00 even if it never really changed hands.

Of course, the recipient could, I suppose, file paperwork to transfer it back. But that requires paying fees.

In normal, ordinary real estate, it has value. Rarely do people execute deeds of gift except to charities or relatives prior to death.

But if a piece of real estate (i.e. T/S) is worthless or has a negative value (rents for less then the MFs) then why not transfer it back to the resort?

Talk to an attorney and I'm certain they could even add language with a covenant preventing the recipient from giving it back so that they would be forced to either keep it or give/sell it to someone else.

You would be amazed what you can do with the law if you take the time to study law, like I did. I'm not a member of the bar, of course, but several times I've had licensed attorneys ask my advice on real estate deals just because I am far more "studious" at the law books than they are in my specific area of real estate experience.

Obviosly. I'm blank on T/S related law, but learning fast. I might just go to the law library and read up and study some past court cases, etc. So I know my stuff on this before signing anything.

Sincerely,
Wayne

 

[e.bram]

take a paralegal course at your local community college and you can use Westlaw(and other legal research resources) at no addition charge.

 

[waynewalter]

By the way, your idea of the recipient of the title also having to sign might be due to your own experience of purchasing a house where you had to sign dozens of documents.

Do you know that all those documents are, exactly, that you signed? I have done enough deals and read all of them that I know all of them on sight.

Essentially, everything you were signing was related to your promise to pay back the money loaned to you to compensate the previous owner for transferring the deed to you.

However, only the seller actually signed the deed.

NOTE: After you bought your house and the deed got recorded, the courthouse normally mails the original deed back to you. Do you have it? Look at it. It has only the signature of the seller.

Now, when you sell or buy real estate for cash, like I have done many times, then the number of documents drops drastically to only 2 or three.

Like the HUD1, fictitious name, and the deed (only signed by the seller).

But I have transferred a property via warranty deed with nothing else signed but the deed itself and zero compensation.

I, the owner, was the only one even present at the closing simply to sign the deed.

Wayne

 

[waynewalter]

take a paralegal course at your local community college and you can use Westlaw(and other legal research resources) at no addition charge.

You don't even need a paralegal course. It's free if you use the legal library/westlaw of your local courthouse system. At least in my state, Virginia, they're free. That's what I to do legal research.

When I lived in Maryland near D.C. I used the Catholic University law library including Westlaw and they never asked for any I.D. or paralegal course.

I think to check out actual books I had to be a student or faculty.

A person can learn how to do legal research as well as any paralegal just by asking question of the very friendly librarians. They have always been most helpful at every law library I visited.

Sincerely,
Wayne

 

[waynewalter]

Yes, as long as the LLC has the power to buy/sell real estate.

Thanks, an attorney just confirmed via email that this is true. She said you need (as I mentioned earlier) a certificate of good standing from the State.

So why anybody would buy one resale (free and clear) in their own name and take on the personal liability of MF's, etc is beyond me except perhaps to save the annual $50.00 LLC fee.

It seems if enough owners at a resort switched their title to an LLC it might them more leverage on the management since a threat to walk away and let their T/S foreclose would have more weight with the HOA or resort management.

Anyway, my 2 cents worth.

Sincerely,
Wayne

 

[e.bram]

Welcome to TUG. I hope you stay> I need some allies.
Regards
Paul

 

[T_R_Oglodyte]

But if a piece of real estate (i.e. T/S) is worthless or has a negative value (rents for less then the MFs) then why not transfer it back to the resort?

Talk to an attorney and I'm certain they could even add language with a covenant preventing the recipient from giving it back so that they would be forced to either keep it or give/sell it to someone else.

You would be amazed what you can do with the law if you take the time to study law, like I did. I'm not a member of the bar, of course, but several times I've had licensed attorneys ask my advice on real estate deals just because I am far more "studious" at the law books than they are in my specific area of real estate experience.

Obviosly. I'm blank on T/S related law, but learning fast. I might just go to the law library and read up and study some past court cases, etc. So I know my stuff on this before signing anything.

Sincerely,
Wayne

Eureka! The next time I have a client who owns a dry cleaners with contaminated soil, I'm going to tell the client to deed the property over to you, with a covenant prohibiting you from giving it back to them.

What a way to make my client's problems go away!!!

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If you've been talking to attorneys who agree with you that you can simply give something you don't want to anyone you choose, and they have no recourse but to accept, you really ought to find yourself a better class of attorney to hang out with.

Rest assured that no individual can force you to take anything against your will. Even in probate, if something is willed to you and you don't want it you don't have to take it. That includes timeshares.

And do you actually believe that you can force something on someone that they don't want while simultaneously attaching conditions to that item proscribing what they can do with that item??? You really believe that you might be able to do that??????

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In reality, if it were possible for you simply quit claim the deed back to the resort, leaving them obligated to accept it, what would prohibit the resort from simply quit claiming it back to you?

 

[Pit]

Welcome to TUG. I hope you stay> I need some allies.
Regards
Paul

:hysterical: :hysterical: :hysterical:

 

[Pit]

So why anybody would buy one resale (free and clear) in their own name and take on the personal liability of MF's, etc is beyond me except perhaps to save the annual $50.00 LLC fee.

I have a hard time accepting what you say as true regarding unwanted transfers of unwanted property.

But if you yourself believe it, why would you bother to set up an LLC to purchase a timeshare? If the $h!t hits the fan, and you want to walk away, all you would have to do is deed it to someone else or deed it back to the resort. Problem solved. No LLC needed, right?

 

[ecwinch]

Just want to make sure I understand this.

Set up a LLC.

Have the LLC buy a timeshare.

You would pay the m/f, I am guessing from your personal funds.

You would use the timeshare.

LLC has no other business interests, income, or owners.

Then if you ever want to walk away, you can do so, and the LLC takes the hit.

Sounds like it would work barring any tax consequences, an IRS audit, or legal challenge from the resort when you walk away (which would be unlikely if it is just 1 unit). And the hassle of the annual filing or the potential that the state will increase LLC fees.

I do see a problem in terms of using the timeshare for exchanges. Would you not have to get a guest certificate for any exchanges?

 

[T_R_Oglodyte]

I have a hard time accepting what you say as true regarding unwanted transfers of unwanted property.

But if you yourself believe it, why would you bother to set up an LLC to purchase a timeshare? If the $h!t hits the fan, and you want to walk away, all you would have to do is deed it to someone else or deed it back to the resort. Problem solved. No LLC needed, right?

True dat. If we believe what other posters are professing that's a simple solution.

Don't want your timeshare anymore? Just deed it back to the resort, and be sure to include language keeping them from deeding it back to you.

Record the deed and you're done. Free and clear.

As you point out, if the information provided by others is as valid as they claim, setting up an LLC is a complete waste of money.