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Can Pacaso raise monthly operating expenses?
All operating expenses are passed through at cost, and all cost statements are available to owners upon request. Pacaso cannot increase its management fees without cause. As the LLC manager, we will only increase what is collected from owners as necessary to cover a change in household expenses (e.g., an increase in insurance rates).
Does your LLC asset management fee go up each year?
No, the LLC management fee is a fixed $99 per month.
Can Pacaso make changes to the owner operating agreement?
Material changes require an ownership vote. Pacaso has limited authority to make non-material changes (e.g., change of address for state reporting purposes) on behalf of the ownership group.
Where do the reserve funds go and how are funds used?
Reserve funds are held in the individual LLC's bank account, managed by Pacaso. Funds are only used for the home’s repairs and maintenance. When the need for a major repair arises, Pacaso will allocate funds after a transparent competitive bid process.
Can Pacaso borrow against the property’s LLC?
Other than for the purpose of securing a mortgage for the owners, Pacaso can not borrow against or encumber the LLC in any way.
How does voting work? How do owners call for a vote?
Every share owned holds a vote. Owners can bring major issues about their home to a vote of the group (e.g., a decision to upgrade the sound system). To call for a vote, notify the Pacaso Crew member who represents your home.
What kind of LLC does Pacaso create?
We use a multi-member manager-managed LLC. These LLCs are a unified front that represent and protect a group of buyers. Each LLC has its own bank account, tax ID number and holds title to the Pacaso Home.
Is Pacaso ownership the same as a Tenancy in Common (TIC)?
No. With a TIC, each owner’s name is on the deed, which requires a formal real estate closing and recording of a new deed each time a share is sold. With Pacaso, owners purchase a share in a property-specific, mult-member LLC, and the LLC is the singular deeded owner of the home. The LLC structure is widely adopted for residential and commercial real estate.
Can owners use an LLC trust to purchase their Pacaso?
Yes. Owners can close under an LLC, trust or use their legal name, subject to compliance with the details in the Pacaso Home Documents.
What if another owner defaults? How does Pacaso protect me as an owner?
Pacaso serves as the corporate guarantor of any share financing, protecting you should another owner default. In the unfortunate event of an owner default, Pacaso will step in to service the loan. If not resolved within 90 days, we will foreclose on that specific share and manage the resale without any disruption to the ownership group.
Does Pacaso pay the legal fees if the LLC is sued?
Legal expenses, to the extent incurred on behalf of the LLC, may be passed through to the owners as a Basic Expense of the LLC. Each home has a homeowners liability insurance policy of up to $2 million.
Can an individual owner be held liable?
Generally, to the extent such costs are not covered by insurance, the LLC indemnifies owners acting on behalf of the LLC in good faith and in accordance with the LLC operating agreement. Owners who act on behalf of the LLC with gross negligence or willful misconduct, or violate of the terms of the LLC operating agreement, will not be indemnified by the LLC.
Can owners decide to run the LLC without Pacaso?
Pacaso works at the service of its owners. If owners decide that Pacaso is not providing adequate service, the owner group can vote to remove Pacaso as the program manager of the home and self-manage the property.
Can Pacaso stop me from selling?
No, owners are welcome to sell their share(s) at any time after 12 months of ownership. You’ll work with a real estate agent, determine your list price, and they will market and list your share(s) on the open market much like a whole home sale.
Can Pacaso sell the entire property? What is a “liquidation event”?
Pacaso can sell the entire property in the unlikely event that more than three shares are in default for more than 90 days, and the shares fail to sell for the loan value ratio of 50%. Before a property can be sold, each owner will have the right to purchase the defaulted shares at a discount.
What is considered a “routine matter” that Pacaso can resolve without ownership voting?
Routine matters are minor repairs to keep the home in owner-ready condition. Examples are ongoing home maintenance like winterizing a deck or replacing a broken dishwasher.
Who is responsible if something breaks?
Owners are not individually responsible for life-limited items that eventually need repair or replacement, like a dishwasher; those are paid for by the LLC reserve fund. However, each owner is responsible for replacing or repairing items damaged as a result of their actions, such as a broken window.
What happens if zoning laws change?
Pacaso would step in and advocate on behalf of the LLC. However, this is very unlikely. Many second home markets are comprised of LLC-owned properties. We do not anticipate local zoning laws to change, given it would disrupt many households in many markets.
Can owners themselves borrow against their share in a Pacaso?
No, this is not permitted per the terms of our operating agreement.
How can owners use the reserve funds?
Owners have the right to use the reserve funds for replacing life-limited items (e.g., washers and dryers or roofs) and/or can request a vote to use funds to add or replace items in and around the house (e.g., upgrading the sound system).
How do taxes work?
Pacaso is responsible for paying property taxes and will provide an annual K-1 tax form for each owner. Funds for taxes are included in the owner operating expenses. We are not tax professionals and suggest you consult with a professional for more information.
How is the deed recorded?
The deed for each property is recorded in the name of a property-specific LLC. Each owner holds their interest through the LLC, which provides for both privacy and liability protection.
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