It is a common play in real estate to create a separate operating entity to serve as a tenant and execute a lease between the owner of the property and himself. Typically, this happens in assets which serve as a real estate-based business, such as a retail property. The structured enables the operator to reduce the taxable income of the business and also provide a liability shield for the property owner.
This arrangement can lead to some ethical issues, should the property owner become distressed. For example, is the lease amount above market and therefore being used to inflate the property valuation? Is rent actually being paid? Is there a proper lease in place or just an internal handshake? Attorneys need to understand the set-up in order to know what is in bounds and what is outside the lines.
David Levy is Vice President of Business Development for NRC Realty & Capital Advisors. NRC conducts structured sales, sealed bid sales, and auctions of all types of real estate and… Read More
Jonathan E. Aberman leads the Chicago Bankruptcy, Insolvency & Creditors' Rights practice and is a member of the Business Services, Corporate Finance and Financial Industries Groups. Mr. Aberman's national practice… Read More
Matt Christensen joined Angstman Johnson in 2008 as an associate attorney. Now a member of the firm, Matt has a civil litigation practice involving commercial law (finance and secured transactions),… Read More