In this article, Adam Stein-Sapir of Pioneer Funding, LLC, provides insights into the strategic use of bankruptcy filings in real estate transactions.
Article Link: https://commercialobserver.com/2017/07/1567-york-llc-david-smith-chapter-11-filing-1567-york-avenue-1571-york-avenue/
Summary
The prospective buyer of two Yorkville residential buildings, 1567 York LLC, has filed for Chapter 11 bankruptcy protection to gain more time to close a $16.6 million deal after encountering delays and alleged misrepresentations by the seller, JGD Papoutsis. The bankruptcy filing, which cites inaccuracies in the seller’s representations and seeks to preserve the buyer’s rights under the contract, could provide an additional 60 days to finalize the sale. Adam Stein-Sapir comments on the tactical use of an “arcane section” of the bankruptcy code in such real estate transactions, noting its rarity and specificity to purchase contracts.
- The Chapter 11 filing by 1567 York LLC is a strategic move to extend the closing date of a real estate deal.
- The buyer alleges misrepresentation of facts by the seller, including the number of residential units and market-rate designations.
- Adam Stein-Sapir notes that this type of bankruptcy filing is uncommon and typically used in real estate deals to gain additional time.
Q&A
What is Chapter 11 bankruptcy, and how can it be used strategically in real estate transactions?
Chapter 11 bankruptcy is a legal process that allows a business to reorganize its debts and assets under court supervision. In real estate transactions, it can be used strategically to delay a closing, preserve contractual rights, or renegotiate terms. For more information on bankruptcy, visit Pioneer Funding LLC.
What are some potential consequences for a seller when a buyer files for Chapter 11 in the midst of a real estate deal?
When a buyer files for Chapter 11, the seller may face delays in closing the deal, potential legal disputes over contract terms, and the possibility of having to renegotiate the sale. The seller might also incur additional legal fees and experience a loss of bargaining power.
How does filing for bankruptcy affect the rights of a buyer in a real estate contract?
Filing for bankruptcy can protect a buyer’s rights under a real estate contract by providing a stay against certain actions by the seller, such as enforcing a closing date or terminating the contract. It can also give the buyer additional time to address issues or secure financing. For insights on selling bankruptcy claims, refer to Pioneer Funding LLC’s guide.
