No. of Recommendations: 1
Hi Loki,

Both LLCs are shell companies for the developer

You have seen the shell game! Joel is absolutely correct, the financier would hold the key as to how the money could be used and may or may not put it in the "actual" contract. Which shell is it under? -

Those finance companies have literally hundreds of "affiliate" companies under the parent company a good portion are just legal entities, meaning no actual employees. They all have the required managing members, officers etc. depending on the structure but really just serve a booking entities where a loan may be booked in one, collateral may sit in another, and checks may be written by still a third. The money can get from one to the other legally.

So if I understand the scheme here, It would come down to what was written into the mortgage for that property - If it is specific in the mortgage or agreement that the money can only be used for XX, then it may be violating a loan covenant to redeem the other property but the money can get from one to the other with the stroke of a pen. And if the financier "understood" the redemption was going to happen he probably does not even care about the covenant. He has the personal guarantee which may encompass the two LLC's so it is just money from one pocket to the other....
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