N/Seller's Security in Partial Sale

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Posted by Kevin O'Connor on June 30, 2001 at 18:05:52:

Hoping to get some experienced professional advice ...

I am involved in the final stages of brokering a partial contract for deed to a large institutional investor. The investor has approved the file and is prepared to close & fund.

At the last minute my n/seller sought his attorney's counsel. 'Long story short'... the attorney has a problem with the investor's 'Partial Purchase Agreement'(PPA). He does not believe his n/seller's remainder interest in 'tail end' (part of balloon) is adequately secured. Obviously the investor requires full assignment of the contract for deed. The PPA
outlines the terms of reassignment, remedies in the event of default, etc. I won't bore you with the details of the numerous conversations between myself,
investor's attorney & n/seller's attorney but suffice it to say that the 2 attorneys have both dug in their heels.

Maybe there is no solution but I have always taken the approach "Don't just tell me ... that won't work ...but rather let's work together to come up with a viable
SOLUTION for the client!" (Obviously, problem solving & creative thinking are not courses taught in law schools - disclaimer: both my father & brother are attorneys so I speak with partial immunity)

The bottom line ... the n/seller WANTS to sell but he won't close without his attorney's blessing. Investor
is prepared the to close & fund. The remaining challenge is this security issue.

I have suggested several options to the n/seller's attorney e.g. record a 'Memorandum of Interest' ...
'Remainder Interest' ... 'Addendum to the Assignment'
even recommended recording the actual PPA.

The n/seller's attorney's solution is to have language
included in the recorded Assignment referring to the
PPA and conversely have the PPA recorded with language cross-referencing the Assignment. The investor objects to this because they don't want to be 'partners' with the noteseller.
The last idea I have, but I don't even know if the investor's attorney will consider it, is to have a 3rd party trustee serve as the agent to hold
the assignment in escrow during the period of time the investor is entitled to his payments and portion of balloon.

Sorry for long query but I was hoping someone might have a mutually beneficial solution.

Any & all comments and ideas are appreciated!

Thanks in advance!

Kevin O'Connor
Pine Mountain Investment Co.
Charlottesville, VA

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