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Tina
Tina, Attorney
Category: Business Law
Satisfied Customers: 32720
Experience:  licensed attorney for 13 years including employment, business, contract, domestic, and general civil
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I bought a business through owner and bank financing. I recently

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I bought a business through owner and bank financing. I recently found out I'm not in compliance with something that will make my ongoing costs prohibitive (and previous owner on the hook too). What recourse do I have? I can't just stop paying the note to him or the bank - and the business outlook is stifled as a result.
Submitted: 1 year ago.
Category: Business Law
Expert:  Tina replied 1 year ago.

Hello and welcome.

I am sorry to hear of your difficult situation. My goal is to provide you with excellent service. First, I have some questions for you so I can determine what information to provide you.


Did the previous owner know that compliance would be cost-prohibitive? What would you estimate are your damages due to this unknown factor? Did you personally guarantee the loan?

Customer: replied 1 year ago.

I can only assume that he knew it would be costly and minimize potential profit. He had (and still has) a tight relationship with an agent of my biggest customer. That wasn't disclosed either. His company would be liable for past payments. As for me, I'd be liable for approximately a 30-40% increase in labor costs since I took over and going forward.


 


Yes, I personally guaranteed the loan.

Expert:  Tina replied 1 year ago.
I see. Thank you for the additional information, Erik. That is really unfortunate.

Assuming you did your due diligence and the purchase agreement required full disclosures with regard to the business, the failure by the seller to disclose such relevant information would typically support a cause of action for negligent or even intentional misrepresentation (depending on the language in the purchase documents). In such a case, a plaintiff must normally prove that the seller knew or should have known of this detrimental compliance issue and they had a duty to disclose such information.

Here is a link that sets out the elements one must prove in such a case typically:

http://floridalegalwiki.com/index.php?title=Negligent_Misrepresentation

It would be best to retain a local business law or civil litigation attorney to represent you in this matter. It may be a case that could be settled without filing suit or going to trial through mediation or other negotiations if the seller wishes to avoid a potentially costly lawsuit.

I hope this helps clarify the situation for you.

It has been my pleasure to assist you. Kindly remember to rate my answer when our communication is completed so I will be compensated for my time in providing you with the information you requested. If you feel the need to provide a low rating, please stop and reply to me via the REPLY or CONTINUE CONVERSATION button with whatever issue or clarification you may need. I will be happy to continue further and assist you until I am able to explain your concern to your satisfaction. Please also remember that I cannot control whether the law is favorable to you or not, so please don’t shoot the messenger. Thank you and all the best to you in 2013.

Tina

Please feel free to bookmark the following link so you can request me to answer any future legal questions you may have:

http://www.justanswer.com/law/expert-tina/

Customer: replied 1 year ago.

What result or outcomes could I hope to see if I'm able to prove misrepresentation?

Expert:  Tina replied 1 year ago.
Hello again, Erik.

You would typically seek damages you have sustained, which could include the entire price of the business if you can show you would not have purchased it if you had known the truth of the situation, or you could seek the additional cost of doing business due to compliance requirement. It will depend on your specific situation and what injury you have suffered, but you are normally entitled to be put in the position you would have been if the seller had disclosed the information to you.

I hope this helps clarify the situation for you.

It has been my pleasure to assist you. Kindly remember to rate my answer when our communication is completed so I will be compensated for my time in providing you with the information you requested. If you feel the need to provide a low rating, please stop and reply to me via the REPLY or CONTINUE CONVERSATION button with whatever issue or clarification you may need. I will be happy to continue further and assist you until I am able to explain your concern to your satisfaction. Please also remember that I cannot control whether the law is favorable to you or not, so please don’t shoot the messenger. Thank you and all the best to you in 2013.

Tina

Please feel free to bookmark the following link so you can request me to answer any future legal questions you may have:

http://www.justanswer.com/law/expert-tina/

Tina, Attorney
Category: Business Law
Satisfied Customers: 32720
Experience: licensed attorney for 13 years including employment, business, contract, domestic, and general civil
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Tina
Tina
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licensed attorney for 13 years including employment, business, contract, domestic, and general civil