With the quick rise of real estate prices, people are crossing state lines to make quick transactions. This includes hiring the trades for their building needs. This makes almost any business owner want to close the deal just as fast and get paid. The question is whether in your haste, you’ve offered the right contract?

If you live in a close-knit community, your word has likely gotten you this far. But you’re not dealing with a community member on these swoop-and-buy deals, and to be frank, you need to constantly remind yourself of that fact or you’re going to lose money.

Reno business contracts with an out-of-state buyer need to be stronger, with more money up front, even if it’s not the way you’re used to doing it with a local.

It also needs a personal guarantor.

Many of the organizations that are buying up the commercial land are recently formed LLCs with one purpose: to hold the property. They get “born” in your state during week one, and then on the first day of week two, the LLC’s representative is signing engineering and survey contracts, cement contracts, heavy equipment contracts, construction contracts, etc.

But what happens when after most of the work is done, the LLC decides not to go forward and sells the land—and whatever’s on it—to another party who wasn’t the party you contracted with?

What happens when you try to go after the first guy, and he tells you, “We shut down the LLC. No money. Tough luck.”

Headache or heartache, that’s what happens.

But, if you made sure one of the LLC members first signed a personal guaranty to pay for the work, you still have a way to collect your money. Admittedly, most Reno business contracts don’t contain the personal guaranty language, and one of the perks of transacting through an LLC or a corporation is avoiding personal liability.

Still, it can be done. And in this climate, where more and more trades are getting stiffed by out-of-state people, the guaranty is a necessity.

According to a few federal cases, however, the guaranty has to be drafted appropriately to be effective. If you have any questions on drafting contracts, or would like to discuss your contract needs, drop me a line. At Ijames Law, Reno business contracts are just one of my specialties. 775.870.9199.

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