Deadlock-Breaking Mechanisms in Real Estate LLCs: Avoiding Litigation When Members and Managers Fail to Agree

A live 90-minute premium CLE webinar with interactive Q&A


Thursday, February 27, 2020

1:00pm-2:30pm EST, 10:00am-11:30am PST

Early Registration Discount Deadline, Friday, January 31, 2020

or call 1-800-926-7926

This CLE webinar will provide real estate counsel with a framework for adopting deadlock-breaking mechanisms in LLC operating agreements and potential state law consequences when no such mechanisms are in place. The program will also discuss arbitration and mediation provisions as alternatives to litigation or judicial dissolution.

Description

Deadlocks typically arise when LLC members or managers fail to reach an agreement or obtain the required voter approval for a particular course of action. The failure to provide deadlock-breaking mechanisms in the operating agreement can result in significant expense, loss of time, litigation, or even dissolution. Where the LLC's purpose is investing in and operating real estate, deadlocks can result in deterioration of the asset or a defaulted loan.

Counsel can employ various provisions in LLC agreements to break a deadlock, including buy-sell provisions, external or internal "tie-breakers," rotating or alternating voting procedures, put or call options, and where appropriate, provisions for partition or sale of the company or its assets. These provisions may be critical for the continued operation of the business.

Absent such provisions, LLC statutes will typically provide for judicial remedies, including placing operational control in a custodian or dissolution of the entity. Operating agreements that do not offer mechanisms to breaking deadlock may nevertheless provide alternate methods of resolving disputes, such as mediation and arbitration. Counsel should understand the pros and cons of these alternatives for the LLC's members.

Listen as our authoritative panel outlines and provides drafting tips concerning various deadlock-breaking mechanisms in operating agreements. Counsel will also discuss arbitration vs. mediation, and why either option is likely preferable to litigation or judicial dissolution of the entity.

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Outline

  1. When deadlocks arise in LLC decisionmaking
  2. Provisions designed to resolve deadlocks
    1. Buy-sell
    2. External or internal "tie-breakers"
    3. "Rotating/alternating" or "casting" voting procedures
    4. Put or call options
    5. Partition or sale (is it a viable option with commercial property?)
  3. Provisions requiring alternative dispute resolution
    1. Mediation
    2. Arbitration
  4. Special issues with commercial real estate: managing and leasing the asset, avoiding mortgage loan defaults

Benefits

The panel will review these and other key issues:

  • What are the typical triggers of a deadlock between members or managers?
  • What are the key provisions that should be included in the LLC's operating agreement to resolve the deadlock?
  • When is a partition or sale appropriate to resolve a deadlock?
  • What are the advantages and disadvantages of arbitration and mediation, and what should the LLC provide?

Faculty

Kelley, Kathleen
Kathleen A. Kelley

Shareholder
Bean Kinney & Korman

Ms. Kelley focuses her practice on corporate and transactional law and government contracts. Her client base...  |  Read More

Additional faculty
to be announced.

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Strafford will process CLE credit for one person on each recording. All formats include program handouts. To find out which recorded format will provide the best CLE option, select your state:

CLE On-Demand Video

48 hours after event

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DVD

10 business days after event

$297 + $19.45 S&H