Tenant Landlord relationship

[The Warrior Monk]

How ridiculous an analogy .

A contract of a person with an institution, such as a bank for a mortgage or a driver license from a State, has no comparison to a negotiation of a contract of sale between two INDIVIDUALS .

First, there was no mention of individuals in the OP.

Second, landlord/tenant contracts don't have to between individuals. In fact, many nonresidential contracts aren't between individuals, but corporations. The same is true with many residential contracts. Corporations own rental properties, notably apartment buildings, but can also own residential properties, especially multifamily, but also single-family. There are also situations, like where I work, where many homes are owned by corporate entities for various reasons.

Third, whether or not a transaction is arm's length is not determined by whether the parties are individuals or not. That is not in the definition, nor is it the standard utilized in legal cases.

 

[glenn walker]

NO unless they're related, or there is something like a special reduced price , or a gift of equity. We have sold many too tenants over the years and there was never any large concessions, and we dont adjust the subject anyway, The Lender has the borrower sign an-affidavit under Federal Loan Law where they state if they are a related party to the seller so the appraiser is covered even if-they lie. In my area we have so many immigrants with the same last names that without doing DNA tests nobody really knows for sure anyway, so they sign the form and its a done deal : )

 

[J Grant]

First, there was no mention of individuals in the OP.

Second, landlord/tenant contracts don't have to between individuals. In fact, many nonresidential contracts aren't between individuals, but corporations. The same is true with many residential contracts. Corporations own rental properties, notably apartment buildings, but can also own residential properties, especially multifamily, but also single-family. There are also situations, like where I work, where many homes are owned by corporate entities for various reasons.

Third, whether or not a transaction is arm's length is not determined by whether the parties are individuals or not. That is not in the definition, nor is it the standard utilized in legal cases.

A contract to buy negotiated with a corporation who manages might be an AL transaction

We don't' see many contracts from a corporation though in Res RE though, since individuals tend to own a res property that is rented and it is the individual owner as landlord who typically sells/negotiates.

who cares about other legal cases and you are not a lawyer , AL or non AL in RE appraising has a set of definitions and meanings to address it as a market price or terms indicator, not addressing it as a legal transfer.

 

[The Warrior Monk]

A contract to buy negotiated with a corporation who manages might be an AL transaction

We don't' see many contracts from a corporation though in Res RE though, since individuals tend to own a res property that is rented and it is the individual owner as landlord who typically sells/negotiates.

who cares about other legal cases and you are not a lawyer , AL or non AL in RE appraising has a set of definitions and meanings to address it as a market price or terms indicator, not addressing it as a legal transfer.

It's true I'm not a lawyer, but my principal broker is, and is an expert in real estate (obviously). What you are stating is solely your own personal opinion, neither supported by definition or well established law.

 

[Nick1985]

How ridiculous an analogy .

A contract of a person with an institution, such as a bank for a mortgage or a driver license from a State, has no comparison to a negotiation of a contract of sale between two INDIVIDUALS .

I actually think that is a decent analogy. Like I said, I haven't ever thought just the premise of landlord/tenant created a related party. Also, there is nothing in the definition of arms length transaction or non arms length saying that the parties in question have to be individuals. Nothing in any definition I have seen specifically mention a contract of any type automatically creating a related party. Perhaps the situation is better suited by the analogy that I would not consider you a related party to Nissan Motors, the dealership, or the salesman if you go lease a new car from the dealership? You are quite literally doing the exact same thing here, signing a lease agreement for use of property over a set amount of time. If you are currently leasing a vehicle from the dealership, and then you buy a piece of vacant land from the dealership that they are not using... would you consider that a non arms length transaction?

From my perspective, related parties must have the ability to pressure the sale into something other than a fair market value arrangement. This potential may or may not be used. The key is that the buyer and seller are acting independently in an arms length transaction. Nearly all broad definitions of arms length transaction used in multiple fields of business simply refers to a business deal in which buyers and sellers act independently without one party influencing the other. The landlord is free to re-rent the after the tenant leaves, just as the tenant is free to rent somewhere else. They don't have to buy. There is no additional pressure for the sale of the property to the tenant, just the same as any other potential buyer. I don't consider the existence of a lease the be an actual business relationship.

It would be a different ballgame if we were talking about a home repair business leasing a property for an office. That business may do significant repair work for other rentals owned by the landlord, and the landlord threatens to cease doing business entirely if they don't buy the current property for a price that is something other that fair market value. That would be what I would define as influence by a related party. However, it is the business relationship doing repairs on all properties that creates the related party, not just the existence of the lease.

 

[CGinMN]

JG you were on the money when you answered it here.

"A landlord to tenant is a grey area that can be arms length or non arms length..if they are not blood relatives or friends... it can be an arms length transaction."

 

[J Grant]

It's true I'm not a lawyer, but my principal broker is, and is an expert in real estate (obviously). What you are stating is solely your own personal opinion, neither supported by definition or well established law.

It's true I'm not a lawyer, but my principal broker is, and is an expert in real estate (obviously). What you are stating is solely your own personal opinion, neither supported by definition or well established law.

It is there in the definition, and what does your "principal broker mean, a RE sales broker- you have a dual license r ?

Appraising to arrive at market value considers legal in HBU but the entire appraisal is not driven by legal concepts but rather market reactions, -that is why it is called MARKET value . The legal profession has its own terminology and sets of definitions.. Appraisal use of AL or non AL is a market concept, a way to analyze a transaction. It is not used as a strictly legal test.

I will say that a landlord tenant sale can be seen as AL or non AL depending if it was negotiated between a corporation or an individual landlord. Explain either way .

However, even if a corporate lease becomes a sale, the people in corporation in charge of the property, decided not to market the property on open market , thus saving time/repair and RE commission which (might) be baked into price - buyer may or may not have been well informed about alternate properties -unknown if any incentives offered if assumption is made it is AL

A corporation selling to a tenant in place, though might be called AL is still not the same as the corporation putting a property on open market, which , might have a different price outcome -if put the property on the open market it then competes with other properties to draw a buyer from that market.

 

[The Warrior Monk]

It is there in the definition, and what does your "principal broker mean, a RE sales broker- you have a dual license r ?

My principal broker is a real estate attorney that specializes in real estate, as well as bankruptcy related matters. He also runs a real estate franchise, and holds my sales license. I have this habit in life to associate myself with people that are better and more knowledgeable than myself.

Appraising to arrive at market value considers legal in HBU but the entire appraisal is not driven by legal concepts but rather market reactions, -that is why it is called MARKET value . The legal profession has its own terminology and sets of definitions.. Appraisal use of AL or non AL is a market concept, a way to analyze a transaction. It is not used as a strictly legal test.

Appraisers appraise property rights. The definition used by the legal system are, in fact, the only definitions that matter when enforcing property rights.

I will say that a landlord tenant sale can be seen as AL or non AL depending if it was negotiated between a corporation or an individual landlord.

Your expanding the well established definition(s) to include elements that are not part of the definition.

And even if a corporate lease becomes a sale, the people in corporation in charge of the property decided not to market the property on open market , saving time/repair and save a RE commission which (might) be passed on as price to buyer-

That's not an issue of whether or not this is an arm's length transaction, but each party negotiating to their own benefit. These factors would be taken into account when analyzing a sale (market price vs. market value).

Selling to a tenant in place though might be called AL, is still not the same as the corporation put the property on the open market , compete with other properties to draw a buyer from that market.

Once again, this is your own personal opinion, distinct and separate from the definition. Being an individual has less than nothing to do with either the definition or valuation of real property.

 

[Ariba]

How cares? Does Arm's length versus Non-Arm's length have any impact on your opinion of value?

 

[J Grant]

How cares? Does Arm's length versus Non-Arm's length have any impact on your opinion of value?

It should not impact our market value opinion. It can explain why there is a price difference from our OMV when that happens and the sale is non AL,

i've seen non AL sale prices higher than" market value" because the seller to family was gifting equity and expected the mortgage to cover it lol