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Richard
Richard, Attorney
Category: Business Law
Satisfied Customers: 55134
Experience:  32 years of experience practicing law and a businessman.
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Hi we are trying to start a restaurant business in a new proposed

Resolved Question:

Hi we are trying to start a restaurant business in a new proposed building and the owners are asking for an admission fee. We've never heard of an admission fee before and am wondering if there is such a thing. The owners are charging us a $20,000.00 fee up front and the building hasn't even been built yet. They are not starting construction until December 2009 and completion will be around spring 2010. We will be leasing the space and on a contract for 3 years with option to renew. The building will consist of over 400 vendor space in a mall type setting. Please help. We don't know if we should proceed with this or not.
Submitted: 7 years ago.
Category: Business Law
Expert:  Richard replied 7 years ago.

Hi there. If you were to proceed, I would insist upon the following with respect to the $20,000 fee...1) first, that it be treated as a deposit and put in an escrow account with an independent escrow agent, such as a title company or law firm, so that if the building doesn't get built and these guys go under, you don't lose the $20,000; 2) second, that it be totally refundable if the building does not get built within some specified period of time...I would actually set more deadlines, so that if the building is not getting built timely that you don't have to wait until the final date when everyone can see it isn't going to get built; 3) that if the building does get built and you do actually move in....that this deposit is credited toward either rent or tenant imrovements.

 

 

I hope this has given you the guidance you were seeking. I wish you the best of luck!

 

 

 

The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Customer: replied 7 years ago.
So is it best not to proceed if the following options are not met? From what they were telling us they need the payment to help them proceed with the actual construction and downpayment. They did not state that the payment will be placed in an escrow account but in a separate bank account. Also when asked if the payment will be used towards rent their answer was no. Their explanation was that the business and space leased will be allowed to be sold to another individual in the future if we should want to at any price that we want to. Is this possible? If we were to lease a space in a mall is there a thing as an admission fee? Everything sounds fishy to us and wanted to get some type of legal advice before proceeding with loans.
Expert:  Richard replied 7 years ago.

I would recommend that you not proceed. These are the kind of projects that never get done and all these up front fees get lost. I have seen these kinds of things so often over the last 30 years and they all end up badly. This thing is obviously undercapitalized if they need to use your fees to build it. Projects being done by experienced developers that are properly capitalized don't require these kinds of fees...which are ridiculous. MY advice is to say NO and save your $20,000 ...I guarantee you if you put this up, you will have lost it....this project is not likely to get done. Obviously they don't have their bank financing lined up.

 

 

I hope this has given you the guidance you were seeking. I wish you the best of luck!

 

 

 

The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

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