Legal Question in Real Estate Law in California
Minor signing a real estate contract
In early 2008, my daughter, along with myself and other investors loaned money for a 1st TD on property to be developed. The loan-to-alue was about 37% so it should not have been very risky. I was not aware that my daughter, who was only 16, could not enter into a contract of this sort. The mortgage broker knew she was a minor, but did not mention to me that she couldn't enter into this contract. Due to the economic climate and over-extending by the borrower, only four monthly payments were made. The broker is now trying to form--name removed--LLC for the investers to take over the property with a Deed in Lieu of Foreclosure. My daughter is going to college this fall and doesn't want her money tied up for several years while the land is developed and the market improves. The original note was to be paid off in October 2009. My understanding is that she can demand her money back since she is still a minor. Is this correct? Can she hold the mortgage company responsible?
2 Answers from Attorneys
Re: Minor signing a real estate contract
A contract can not be enforced against a minor but the minor can enforce performance of the contract by others. Your daughter probably can withdraw from the contract and get her full money back, but from whom? The developer probably has no money, the broker not telling her that she could not be bound by the contract did not hurt her as she found out later she could not be bound. The other investors may be able to claim that they did not know she was a minor and may demand that teh entire contract be voided, but form whom ar they going to get there money? The only thing of value may be the property, and by foreclosing you are getting that. That she was supposed to be repaid by 10/09 does not matter; no one is going to be repaid as to their investment until the property is sold.
Re: Minor signing a real estate contract
Nice try. Sure, she can demand anything she wants. What she will get is exactly the same treatment as the other investors. To do anything else would be improper and unequal treatment of investors. Her claims of special status are going to fall on deaf ears; you participated with her and allowed her to get into this, as her parent. She had to have signed numerous documents attesting that she was authorized and legally able to enter the contract. Don't try to blame someone else now for allowing her in.
Her money, and yours, is long gone, and will only be recovered if the property can ultimately be sold for enough to do so. Alternatively, you could sue the borrower and try to recover something from them. Good luck on that, they're likely insolvent and would file a BK if you try.
Her best interests are served by going along with the proposal, assuming it is run by competent people that know what they are doing. There are numerous properties being handled the same way all over the state and country. I'm helping some myself.
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