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  #1  
Old 10-01-2011, 04:56 PM
bmazerolle bmazerolle is offline
 
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Default Arm's Length or Not

Husband and wife co-own biz which leases bld also co-owned by same. After divorce, husband keeps biz, wife keeps bld, so now husband leases from ex-wife. With nothing further known, would you consider this an arm's length lease?
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Old 10-01-2011, 05:08 PM
Howard Klahr's Avatar
Howard Klahr Howard Klahr is offline
 
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Nope 123456789
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Old 10-01-2011, 05:22 PM
leelansford leelansford is offline
 
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No, of course not.
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Old 10-01-2011, 06:48 PM
PL1957 PL1957 is offline
 
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It may not have started as arm's length, but I think it is a valid encumbrance on the property through it's term. I don't think you can blow it off because it sounds like it would survive the sale of the building.
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Old 10-01-2011, 09:09 PM
jimmyfrank jimmyfrank is offline
 
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Quote:
Originally Posted by bmazerolle View Post
Husband and wife co-own biz which leases bld also co-owned by same. After divorce, husband keeps biz, wife keeps bld, so now husband leases from ex-wife. With nothing further known, would you consider this an arm's length lease?
I bet the rent increased to above market rent, I would not trust it as being arms length.
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Old 10-02-2011, 07:13 PM
MAIorBust MAIorBust is offline
 
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Are the parties unrelated? Not really, they have known each other for years. If the rent was in line with my other rent comps I might use it for support and disclaim the relationship in the comp write up.
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Old 10-03-2011, 02:08 PM
Michael S Michael S is online now
 
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Quote:
Originally Posted by bmazerolle View Post
Husband and wife co-own biz which leases bld also co-owned by same. After divorce, husband keeps biz, wife keeps bld, so now husband leases from ex-wife. With nothing further known, would you consider this an arm's length lease?
Perhaps if the lease was renegotiated after the divorce. If not, it's definitely not arm's length. I've seen plenty of pocket-to-pocket leases like this with owner-user properties, they are rarely at market rent and we usually do nothing more than acknowledge a lease exists but give it no value because the landlord and tenant are related entities.
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