In a recent case, a Florida court held that a loan disguised as a sale
can be considered a usurious loan transaction if the vendor is obligated
to repurchase the property at an amount which would generate a "profit"
that would equal usurious interest. A usurious transaction is one which
charges interest at a rate higher than the legal limit. If a transaction
involves an intent to charge usurious interest, the result can be that
the party charging the interest can lose all of the interest or, worse,
if the interest exceeds 25% per annum (criminal usury), the entire "loan"
including principal can be forfeited. While mere receipt of improper interest
is not, necessarily improper, an intent to charge an unlawful interest
would constitute an illegal transaction.
In the most recent Florida case, a vendor desired to borrow money. The
"lender" lent the money through an agreement that essentially
sold a parcel of real estate to the lender and required the vendor to
repurchase the real estate at different time intervals at extraordinary
profits (which would have resulted in usurious rates of interest had it
been a loan). The Court confirmed that, if proven true, the entire transaction
could be voided and the lender could lose its entire principal and interest.
Business people desiring to enter into unconventional loan transaction
should beware of the consequences of these transactions. If it seems too
good to be true, it probably is.
Alex P. Rosenthal, Esq.
Rosenthal Law Group
2115 North Commerce Parkway
Weston, FL 33326