Next Event: “Recent Developments in Banking and Lending Law”
Tuesday, October 23, 2012

Mark your calendars for Tuesday, October 23, 2012, as I will be the moderator of a seminar sponsored by the Orange County Bar Association Banking and Lending Section entitled “Recent Developments in Banking and Lending Law”.  The event will be held at Whittier Law School, with check-in and reception beginning at 4:30.

We are now offering low-cost assessments in the following areas:  Review of an intellectual property portfolio and a review of current estate planning documents.  Please contact me if you, or one of your customers, needs this service.

I recently participated in a National Business Institutes webinar last August 9 on “Negotiating and Drafting Buy-Sell Agreements.”  The program discussed limited liability company operating agreements. Please don’t hesitate to contact me should you have questions regarding the webinar.

Law Alert

Why Should Commercial Lenders Care About Intellectual Property Assets?

July, 2012 , No. 2

By: Harriet B. Alexson
(714.384.6578)
halexson@bohmmatsen.com
©2012. All Rights Reserved.

Intellectual property (“IP Assets”), including, but not limited to, patents, trademarks, trade secrets and copyrights may generate profits to their owners, creating more value than other asset classes.  Profitable aspects of IP Assets include the ability to grant non-exclusive licensees, short-term assignments and use as collateral in a loan transaction, as further discussed below. Each IP Asset has a “range of value” associated with it.

Individual IP Assets with appropriate value may include:

1. Internal use in support of product/service manufacture or sales;
2. Sale of the IP Assets;
3. Licensing-out and/or cross-licensing of the IP Assets to various companies, for various applications, within a single industry or across multiple industries, and in one or many geographical areas;
4. Enforcement/litigation against potential infringers;
5. Use as collateral for financing transactions; and
6. Defensive uses (i.e., to preclude or at least discourage competition).

By way of example, a certain payment application patent can be used by the patent owner in the financial services industry to support a customer’s payment system.  The same patent can concurrently be licensed to unrelated manufacturers for use in their products providing the patent owner with additional revenue streams.  At the same time, the patent owner could evaluate the possibility of engaging in litigation with its competitors for patent infringement to the extent they may be using the subject patent without a license.  The collection of any relevant litigation damages or settlement revenues can be added to (1) revenues from internal use of the patent and (2) revenues from licensing the patent to companies in non-payment-processing industries.  The range of value is unique to IP Assets as most tangible assets such as equipment are not as versatile (e.g., a machine on the production line can normally only produce one type of product at a time).

The IP Asset groups should be audited to identify those that are most valuable and which can be further enhanced.  The goal of this assessment is not to compute a dollar value for the relevant IP Assets, but to identify which groups of IP Assets are more valuable and more likely to merit the use of a company’s financial resources. The assessment process should include enough analysis to indicate the potential revenue opportunity for the IP owner while evaluating the many potential risks that could cause the profitability efforts to fail.  If you were evaluating a patent, a patentable technology, or certain technology-based trade secrets, the questions might include, but are not limited to:

Profitability

1. Is the IP owner willing to license the rights on a limited basis?

Business/Financial

1. How are the patents used by the owner today?
2. Which other applications inside or outside of the company could benefit from the use of the technology?
3. Which potentially relevant applications/uses for the patents are particularly valuable?

Legal

1. Is the patent potentially infringed?
2. Do any “chain of title” issues exist?
3. Have maintenance fees been paid?
4. What is the remaining useful life of the patent?
5. Are the patents subject to limitations related to standards organizations, other license agreements, etc.

Technical

1. 1. Is the patent “space” crowded?
2. Which patents exhibit a degree of interdependency with other entities or applications?

As an example of a successful due diligence effort, we assisted a client in evaluating the purchase of a manufacturer and distributor of food flavors (the “Flavors Company”) that was in bankruptcy.  In addition to its manufacturing facilities, the Flavors Company had significant IP Assets, including in-process research and development, trademarks and patents.  We reviewed the value of the Flavors Company’s patent portfolio and the supporting legal documents to help determine the value of the assets to the acquiring company.

Given the importance of IP Assets to many companies, it is prudent for private equity, venture capital firms and lenders to consider ways to incorporate IP issues into profitability, uses as loan collateral and to understand the legal aspects of such IP Assets.

For further information about this interesting topic or for an IP Asset assessment, please contact:

Harriet B. Alexson
Chair Financial Services Client Advisory Group
Bohm Matsen, LLP
695 Town Center Drive, Suite 700
Costa Mesa, CA 92626

Tel: 714.384.6578
Fax: 714.384.6501
Cel: 714.675.0033

halexson@bohmmatsen.com
www.alexsonlaw.com

Actual resolution of legal issues depends upon many factors, including variations of fact and state laws. This article is not intended to provide legal advice on specific subjects, but rather to provide insight into legal developments and issues. The reader should always consult with legal counsel before taking action on matters covered by this article.

Law Alert

What’s New? – Rule 506 and General Solicitation Raising Equity For a Real Estate Fund

July, 2012, No. 1

By: Harriet B. Alexson
(714.384.6578)
halexson@bohmmatsen.com

© 2012. All Rights Reserved.
Title II of the JOBS Act directs the SEC to permit general solicitation and general advertising for offerings conducted under Rule 506 of Regulation D of the Securities Act, provided that Rule 506 sales are made only to investors who are “accredited” as such term is defined under the federal securities laws. Title II also provides that general solicitation and general advertising will not cause a Rule 506 offering to be deemed a “public offering.” This Law Alert will discuss the JOBS Act as it affects the Regulation D – Rule 506.

Rule 506 is the most sensible means for conducting a private offering, because it permits issuers to raise an unlimited amount of money and pre-empts state securities laws. Generating interest in a Rule 506 offering is sometimes difficult for companies, due in part to a long-standing prohibition against general solicitation and general advertising. This prohibition has meant that issuers can offer securities only to investors with whom there is a pre-existing relationship, and that they cannot advertise the offering in order to reach a broad group of potential investors. Some companies undertaking private capital-raising activities are able to access a larger group of potential investors by engaging a registered broker-dealer who has preexisting relationships with such persons. This alternative may not be available, however, if the company is too early in its development to interest a broker-dealer to expend the effort to undertake an offering.

The amendments to Rule 506 contemplated by the JOBS Act remain subject to SEC rulemaking.  The revised rules will permit broader communications by issuers allowing notice of accredited offerings in any manner, including through unrestricted issuer or intermediary websites and social media sites, as well as print, radio, and television advertising.  These rules will also make it easier for real estate promoters and funds to raise equity for development and acquisition of commercial real estate projects.  Until the rules are amended, however, clients should continue to comply with the existing rules and follow customary procedures with respect to these offerings.

The JOBS Act directs the SEC to revise Rule 506 to provide that the prohibition against general solicitation or general advertising in Rule 502(c) shall not apply to offers and sales of securities made pursuant to Rule 506, provided that all purchasers of the securities are accredited investors. Under the SEC’s existing definition, an accredited investor is a person who falls within one of the categories specified in the definition, or a person whom the issuer reasonably believes falls within one of those categories. The revised rules must further require that issuers utilizing general solicitation or general advertising in connection with Rule 506 offerings take reasonable steps to verify that purchasers of securities are accredited investors, using methods to be determined by the SEC.

The JOBS Act also provides certain intermediaries with greater latitude to assist with Rule 506 offerings, without requiring registration of those intermediaries as broker-dealers. Specifically, such third-parties will not be required to register as broker-dealers solely because they operate websites or other platforms that facilitate the offer, sale, purchase, or negotiation of or with respect to securities, or that permit general solicitation or general advertising in connection with Rule 506 offerings, or that provide ancillary services such as due diligence or standardized documentation, provided that such third-parties: (1) receive no compensation in connection with the purchase or sale of the securities; (2) do not hold investor funds or securities in connection with the transaction; and (3) are not subject to statutory “bad actor” disqualification provisions.

Once the SEC’s rules are in place, it may become more common for issuers to use third-party matching and marketing platforms in order to facilitate these offerings. Until the new rules are effective, issuers and intermediaries must continue to comply with current regulations.

 
For further information about this interesting topic please contact:

 
Harriet B. Alexson
Chair Financial Services Client Advisory Group
Bohm Matsen, LLP
695 Town Center Drive, Suite 700Costa Mesa, CA 92626
Tel: 714.384.6578Fax: 714.384.6501Cel:  714.675.0033
halexson@bohmmatsen.comwww.alexsonlaw.com

Actual resolution of legal issues depends upon many factors, including variations of fact and state laws. This article is not intended to provide legal advice on specific subjects, but rather to provide insight into legal developments and issues. The reader should always consult with legal counsel before taking action on matters covered by this article.

Law Alert

FDIC & SBA ANNOUNCES NEW RESOURCES FOR SMALL BUSINESSES
May, 2012 No. 3

By: Harriet B. Alexson
(714.384.6578)
halexson@bmkalaw.com
©2012. All Rights Reserved.

FDIC and SBA Team Up to Offer Financial Education Support for New and Aspiring Entrepreneurs The Federal Deposit Insurance Corporation (FDIC) and U.S. Small Business Administration (SBA) recently announced new resources to support small businesses across the nation.  FDIC Director for Depositor and Consumer Protection Mark Pearce and SBA’s Deputy Associate Administrator for Entrepreneurial Development Michael Chodos released Money Smart for Small Business, a training curriculum for new and aspiring business owners.  Developed in partnership between both agencies, this curriculum is the latest offering in the FDIC’s 10 year old Money Smart program.

Money Smart for Small Business provides an introduction to day-to-day business organization and planning and is written for entrepreneurs with limited or no prior formal business training.  It offers practical information that can be applied immediately, while also preparing participants for more advanced training. The curriculum is designed to be delivered to new and aspiring business owners by financial institutions, small business development centers (SBDCs), among others.

Director Pearce and SBA Associate Administrator Chodos were joined by Training Alliance partners at the launch of Money Smart for Small Business, hosted by the District of Columbia’s Affinity Lab, a small business incubator.

Each of the ten instructor-led modules in Money Smart for Small Business provides financial and business management for business owners and includes a scripted instructor guide, participant guide and overhead slides.  Organizations that use the curriculum to support small businesses through training, technical assistance or mentoring are invited to join the FDIC and SBA’s Training Alliance. The FDIC will host an online “town hall” for potential Training Alliance partners in the months ahead.

More than ten years after the original release of the award-winning Money Smart adult curriculum, Money Smart for Small Business builds on the proven results in financial management for those who complete the curriculum.The curriculum is free of charge and available by visiting http://www.fdic.gov/consumers/consumer/moneysmart/index.html.Media

Contacts:

FDIC LaJuan Williams-Young
(202) 898-3876
lwilliams-young@fdic.gov

SBA Cecelia Taylor
(202) 401-3059
Cecelia.taylor@sba.gov

For further information about this interesting topic please contact:

Harriet B. Alexson

Chair Financial Services Client Advisory Group
Bohm, Matsen, Kegel & Aguilera, LLP
695 Town Center Drive, Suite 700
Costa Mesa, CA 92626
Tel: 714.384.6578Fax: 714.384.6501
halexson@bmkalaw.com
www.bmkalaw.comwww.alexsonlaw.com*****
Actual resolution of legal issues depends upon many factors, including variations of fact and state laws. This article is not intended to provide legal advice on specific subjects, but rather to provide insight into legal developments and issues. The reader should always consult with legal counsel before taking action on matters covered by this article.

Law Alert

JOBS ACT – PRIVATE PLACEMENTS

May, 2012 No. 2

By: Harriet B. Alexson
(714.384.6578)
halexson@bmkalaw.com
©2012. All Rights Reserved.

On March 27, 2012, the U.S. House of Representatives passed the Jumpstart Our Business Startups Act (“JOBS Act”), as previously amended by the U.S. Senate.  While certain provisions of the JOBS Act would be immediately effective upon enactment, other provisions would not be effective until the SEC promulgates rules implementing the provisions. This Business Alert summarizes key provisions of the JOBS Act.

The JOBS Act would amend the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”) to create a new category of public company known as an “emerging growth company”. The IPO measures would be effective immediately and would not be dependent upon SEC rulemaking delays.

“Emerging growth company” defined. An “emerging growth company” would include any company with less than $1 billion of annual gross revenues during the most recently completed fiscal year. The $1 billion revenue threshold would cover most companies seeking to go public, not merely small or emerging companies. In Companies that completed an IPO on or before December 8, 2011 would not qualify as an emerging growth company.  These new provisions are beyond the scope of this Business Alert (see No. 6).

AdvertisingThe JOBS Act would mandate that the SEC relax existing restrictions on the use of general solicitation and general advertising in connection with private securities offerings pursuant to Securities Act Rule 506 of Regulation D if all of the purchasers are accredited investors and the company takes reasonable steps to verify the purchaser’s accredited investor status (using methods to be determined by the SEC). In addition, online and other platforms that permit the offer or sale of securities, general solicitations or general advertisements for Rule 506 offerings would be exempt from broker/dealer registration requirements under the Exchange Act so long as certain conditions are met.

Crowdfunding Exemption

The JOBS Act would permit eligible companies to raise capital pursuant to crowdfunding efforts (i.e., allow a large group of people to make limited investments in a company, usually via the Internet) without registration under federal or state securities laws if:

• the aggregate amount of all securities sold to investors in reliance on the crowdfunding exemption during any 12-month period does not exceed $1 million;
• the aggregate amount sold to any investor in reliance on the crowdfunding exemption during any 12-month period does not exceed (1) the greater of $2,000 or five percent of the investor’s annual income or net worth (for investors with either an annual income or net worth of less than $100,000) or (2) ten percent of the investor’s annual income or net worth with a cap of $100,000 (for investors with either an annual income or net worth of $100,000 or more);
• the securities are sold through a broker or funding portal that complies with certain requirements, including registering with the SEC as a broker or funding portal and registering with any applicable self-regulatory organization; and
• the company satisfies numerous other investor protection requirements, including (1) filing with the SEC and providing to potential investors and the relevant broker or funding portal information that includes the company’s anticipated business plan, financial condition, financial statements and ownership and capital structure, (2) a prohibition on advertising the terms of the offering except for notices that direct investors to the broker or funding portal and (3) filing with the SEC and providing to investors at least annually reports of the company’s results of operations and financial statements as determined by SEC rulemaking.

The JOBS Act would:

• prohibit reliance on the crowdfunding exemption by (1) non-US companies, (2) companies subject to public company reporting requirements, (3) investment companies and companies excluded from the definition of investment company by Sections 3(b) or 3(c) of the Investment Company Act of 1940 and (4) any other company that the SEC determines appropriate;
• impose liability for material misstatements and omissions on the company and any director, partner, principal executive officers, principal financial officer and controller or principal accounting officer of the company or any other person that offers or sells the company’s securities pursuant to the crowdfunding exemption;
• restrict the transfer of securities by investors in a crowdfunding offering for one year, unless the securities are transferred (1) back to the company, (2) to an accredited investor, (3) as part of an SEC-registered offering or (4) in the SEC’s discretion, to a family member of the investor or in connection with the investor’s death or divorce;
• subject securities acquired in a crowdfunding offering to other limitations as the SEC deems necessary; and
• require the SEC to adopt rules that exempt a registered funding portal from the requirement to register with the SEC as a broker or dealer under the Exchange Act under certain circumstances.

While crowdfunding offerings would be exempt from registration with state securities commissions, the state securities commissions would retain the authority to investigate and take enforcement action against any company or intermediary for fraud, deceit or other unlawful conduct. In addition, the state of the company’s principal place of business and any state in which purchasers of fifty percent or more of the aggregate amount of the crowdfunding offering are residents would be permitted to require a notice filing and an associated fee in connection with the offering.

For purposes of Regulation D, Rule 506, the ability to “publicly advertise” will ease the restriction on capital to energizing growth companies.  We will keep you updated on the SEC rulemaking process.

Harriet B. AlexsonChair Financial Services Practice Group
Bohm, Matsen, Kegel & Aguilera, LLP
695 Town Center Drive, Suite 700Costa Mesa, CA 92626
Tel:714.384.6578
halexson@bmkalaw.com
info@alexsonlaw.comwww.alexsonlaw.com
Actual resolution of legal issues depends upon many factors, including variations of fact and state laws. This article is not intended to provide legal advice on specific subjects, but rather to provide insight into legal developments and issues. The reader should always consult with legal counsel before taking action on matters covered by this article.

Law Alert

Enforcement of Guaranties – Non Update for 2012

May, 2012
No. 1

By: Harriet B. Alexson
(714.384.6578)
halexson@bmkalaw.com
©2012. All Rights Reserved.

Over the past few years, there has been increased litigation over the enforcement of commercial guaranties by lenders.  As more borrowers default on their loan obligations, lenders have more frequently taken action against guarantors to recover damages due to a borrower’s default.  In response, guarantors have raised a variety of defenses.

A guaranty is an agreement made by a third party, whether a person, trust or a business entity, to pay and/or perform the obligations of a debtor for the satisfaction of a debt owned to a creditor upon the occurrence of an event, typically a default by the debtor, under the original loan agreement.  A guaranty, like any contract, requires mutual assent, adequate consideration, definiteness and a meeting of the minds.

In the context of a loan transaction, a guaranty serves as a form of collateral to support the debt obligation between the debtor and the creditor.  But, the guaranty and the loan agreement evidence separate obligations, and their independence is not affected by the fact that both agreements are written on the same instrument or are contemporaneously executed.  The guaranty cannot exist without a primary debt obligation.  Thus, if the primary debt obligation has been fully satisfied, is void or is illegal, a guaranty of the debt obligation can also be deemed unenforceable.

A party’s enforcement of a commercial guaranty, like any other contract, requires the analysis of basic contract principles.  What sets a commercial guaranty apart from other contracts is that a commercial guaranty may lie dormant and unattended to by the parties until the occurrence of some subsequent, triggering event.  At that time, which may be months or years after the commercial guaranty and the underlying debt documents were originally executed, the party seeking to enforce the guaranty then has to examine the terms of the guaranty, the status and condition of the guarantor and other facts and circumstances existing at the time of enforcement.

A guarantor of a debt obligation is liable upon a default, and the person to whom the guaranty is made is not required to first resort to recover from the primary obligor.  A guarantor of a promissory note may be held jointly and severally liable with the primary obligor, although the extent of the guarantor’s liability depends upon the terms of the guaranty agreement.

When two or more persons guarantee the debt of another, they simultaneously enter into an implied promise on the part of each to contribute his or her share if necessary to meet the common obligation between the co-guarantors.  The discharge of one co-guarantor’s direct liability to the creditor does not relieve him or her from liability to contribute to the other co-guarantors.  In addition, the fact that a creditor sues only some of the co-guarantors, or recovers a judgment against fewer than all of them, does not excuse those not sued or not included in the judgment from paying their part of the joint debt.  Accordingly, as a general rule, one or more of the co-guarantors against whom the judgment is recovered may, upon paying the creditor, compel contribution from all other co-guarantors.

A creditor’s release of one guarantor does not necessarily release the co-guarantors.

In certain instances, a creditor must provide the guarantor with notice of a default or triggering event under the primary debt obligation before seeking to enforce a guaranty agreement.  However, the language of the guaranty is controlling in determining whether the creditor is under a duty to notify the guarantor of a default, and notice need not be given when the terms of the guaranty expressly dispense with the need for the notice.  The language of the guaranty may also include various waivers of certain rights by the guarantor.  Most of these waivers, if properly drafted are legally sufficient and will be upheld by the court in favor of the creditor.

For further information about this interesting topic please contact:
Harriet B. AlexsonChair Financial Services Practice Group
Bohm, Matsen, Kegel & Aguilera, LLP

695 Town Center Drive, Suite 700
Costa Mesa, CA 92626
Tel:714.384.6578
halexson@bmkalaw.com
info@alexsonlaw.comwww.alexsonlaw.com

Actual resolution of legal issues depends upon many factors, including variations of fact and state laws. This article is not intended to provide legal advice on specific subjects, but rather to provide insight into legal developments and issues. The reader should always consult with legal counsel before taking action on matters covered by this article.

Legal Fees:  Are Your Legal Fees Deductible?

Law Alert

March, 2012        No. 4

By: Harriet B. Alexson (714.384.6578)
halexson@bmkalaw.com
©2012. All Rights Reserved.

Generally, legal fees may be currently deductible as ordinary and necessary business expenses.  Examples of legal actions in which fees are currently deductible include:

1.    Creating or reviewing contracts and agreements, suing for breaches or defending claims of breach    of contract;
2.    Assistance in collecting outstanding accounts payable;
3.    Defending against trademark, patent or copyright infringement claims;
4.    Defending against wrongful discharge or other employee (or former employee);
5.    Obtaining tax advice, actions involving the IRS or state tax departments or obtaining IRS ruling.

When a business is formed, there are associated legal fees.  Deductions can not be claimed for legal fees that are viewed as capital expenditures.  These are costs associated with creating, acquiring, or protecting a capital asset, such as real estate or intellectual property.  These costs are added to the basis of the capital asset.

However, in some cases, the legal fees that are capitalized may be recovered through depreciation amortization.  For example, your company buys an office building and incurs legal fees of $3,000. The fees relate to the acquisition of a capital asset, the building, are added to the cost of  the building.  The costs of the building (minus the land) can be depreciated.

No deduction is allowed for legal fees that are purely personal in nature and not otherwise deductible if not related to the production of income, such as a recovery of a taxable award in a lawsuit.  Generally, no deduction can be claimed by a business owner for obtaining a divorce, even though the business is an asset subject to division or distribution during the course of the divorce.

When it comes to the deductible of legal fees, don’t make assumptions.  In the case of fees related lawsuits, look at the “origin of the claim” giving rise to the legal action.  If it relates to business issues not required to be capitalized, a current deduction may be appropriate.  Discuss the deductibility of fees with your tax advisor.

For more information on this interesting topic, please contact below:

Harriet B. Alexson
Chair Financial Services Practice Group
Bohm, Matsen, Kegel & Aguilera, LLP
695 Town Center Drive, Suite 700
Costa Mesa, CA 92626
Tel: 714.384.6578
halexson@bmkalaw.com
info@alexsonlaw.com
www.alexsonlaw.com

Actual resolution of legal issues depends upon many factors, including variations of fact and state laws. This article is not intended to provide legal advice on specific subjects, but rather to provide insight into legal developments and issues. The reader should always consult with legal counsel before taking action on matters covered by this article.

REO Sales for Rental to Hit the Market in Full Force

Law Alert

March, 2012       No. 5

By: Harriet B. Alexson (714.384.6578)
halexson@bmkalaw.com
©2012. All Rights Reserved.

On February 1, 2012, President Obama, as part of an overall plan to assist homeowners and help the housing market, announced a pilot plan for the U.S. Federal Housing Finance Agency (the “FHFA”) to sell REO currently held by Fannie Mae for transition into rental housing as a way to help stabilize neighborhoods and improve home prices.

Any investors desiring to participate in the pilot program are required to submit a prequalification request form published by the FHFA.  Based on a submission of the form, Fannie Mae will determine whether a party is qualified to bid.  Elements of the pre-qualification request require a bidder to certify as to matters with respect to itself, its affiliates and owners, including (i) organizational structure, (ii) experience, (iii) confidentiality and (iv) the source of funds used for the acquisition.

With respect to the organizational structure of a bidder, the pre-qualification form identifies only certain types of institutions or individuals that would be acceptable bidders and any potential bidder is required to satisfy at least one of those criteria.  The limited options available to bidders are generally as follows:  (i) a not-for-profit organization, unit of a local government or state agency, (ii) a bank, broker dealer or registered investment company, (iii) a trust with total assets in excess of $5,000,000 that was not formed for the purpose of acquiring specific assets from Fannie Mae and whose decisions are directed by a person with experience in the necessary matters, (iv) a natural person with a net worth in excess of $1,000,000, (v) a business entity all of whose equity owners meet one of the criteria of clauses (i) – (iv), and (vi) a natural person with an individual net income in excess of $200,000 in each of the two most recent years.

Purchasing REO is purchasing an asset that the bank, or other lender has already either foreclosed on or taken back the property by deed in lieu of foreclosure.  An investor in REO will also need to consider issues pertaining to the adequacy of title to the REO.  Typically, when a valid foreclosure is completed, the borrower’s equitable right of redemption ends.  In some states, however, the borrower also has a statutory right of redemption—that is, the borrower has an additional period of time post-foreclosure to pay the redemption price (typically the foreclosure sale price) and retain (or in some instances, take back) the property.  The statutory time period varies by state but can range from six months to over a year.  Therefore, an investor acquiring REO during this redemption period faces the possibility that its title to the property can be divested by the exercise of this right.

Another title issue an investor in REO must consider is the validity of the foreclosure sale itself.  All states mandate procedures by which a foreclosing lender must follow in order to foreclose on property.  Any lender that has not followed these requirements might be subject to borrower challenges, not just during foreclosure proceedings but possibly even after the foreclosure sale was completed.  I advise our clients to investigate the use of title insurance.  Generally, the owner of multiple REO properties would retain a manager to manage the properties:  to lease vacant apartments, collect rents, enforce the leases, repair and maintain the properties and generally oversee the properties on behalf of the owner.  Management agreements can be complex and frequently must take into account state and local law issues.  Extensive diligence on the manager should be considered when acquiring REO in bulk in any particular state, and contracts should be in place before the purchase.  Working with a law firm experienced in real estate law with local law and practice and the negotiation of management contracts is essential to the process.

For more information on this interesting topic please contact below:

Harriet B. Alexson
Chair Financial Services Practice Group
Bohm, Matsen, Kegel & Aguilera, LLP
695 Town Center Drive, Suite 700
Costa Mesa, CA 92626
Tel: 714.384.6578
halexson@bmkalaw.com
info@alexsonlaw.com
www.alexsonlaw.com

Actual resolution of legal issues depends upon many factors, including variations of fact and state laws. This article is not intended to provide legal advice on specific subjects, but rather to provide insight into legal developments and issues. The reader should always consult with legal counsel before taking action on matters covered by this article.