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Zachary
Zachary, Attorney
Category: Legal
Satisfied Customers: 3814
Experience:  Lead trial/International commercial attorney licensed 11 yrs
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Contract/Property Management - A year ago, we agreed to purchase

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Contract/Property Management - A year ago, we agreed to purchase a property management company. There was a purchased agreement drafted by the seller, then a counter offer (drafted by us) to which the seller agreed to. However neither of us actually signed the agreement. It was a one year agreement, with a time limit of one year. So if the financing was not in place to complete the purchase, the contract was ended and all entities were to be turned back over to the seller. We came in and began running the business as if all agreements were signed. Within 30 days of starting, the sellers trust account (with all of the security deposits and rents) were MY responsibility. The owner (seller)gave permission for me to make deposits and write checks on her behalf . . . signing HER name. There were probably 50 checks or more per month written and signed by me in the past 11 1/2 months, to home owners, vendors, and us for property management fees, and 8 - 10 deposits. From the checks written to us, we wrote checks from our own account to her for an agreed upon 20% of property management fees taken in by us. All accounting was done in quickbooks.

Now, our one year time limit is coming to an end, and we were unable to secure financing to finalize the purchase. The end date is April 30th. On or about April 21st I wrote the checks to home owners for their rent residual (and signed her name), I also wrote checks for property utilities, and to us for our property management fees for April. I then wrote checks to her (the seller) for her 20% portion. 3 days later, I received notice from our bank that all checks to us, written from that account were returned. I contacted the seller and she informed me that she had closed the account, and that she will NOT honor those checks which she said I forged until and or unless I sign the ORIGINAL agreement that was drawn up a year ago, which many portions of have changed by virtue of hers and our actions over the past year. She says I have NO ground to stand on because I forged the checks. I say their was implied consent, or express consent by her actions for the past 11 months. The amount of the checks we had written to ourselves were in line with the same amounts we had written for each of the previous 11 months. I'm at a loss as how to move forward, and get the money that we worked VERY hard to earn. I'm wondering . . . If she were to call THOSE final checks "forgeries", wouldn't she in fact be saying that every check I wrote on her behalf, and every lease I signed on her behalf ALSO be considered a forgery?
Submitted: 1 year ago.
Category: Legal
Expert:  Zachary replied 1 year ago.
Hi,

Thank you for your question.

Did you have anything in writing regarding her permission to you to sign the checks on her behalf?

Customer: replied 1 year ago.


Not expressly, however I DO probably have emails where she is telling me to pay this bill or that bill, or asking if I paid certain homeowners.


 


Also, she is telling me now that she wants us to sign the original contract (which benefits her, and many of the terms have been change by sheer actions and implied consent over the past year) She says if we DONT sign it, she will not honor ANY of the checks.


 

Expert:  Zachary replied 1 year ago.
Thank you for your response.

First of all, don't let yourself ever be placed into this situation again. Get all your agreements signed if you are going to start business. You have both set yourselves up for problems.

Second, she cannot rightly assert a forgery charge against you here. She has absolutely no basis on which to stand and you can disprove this through all the prior checks you wrote with her permission using her signature in writing. She is foolish to think that she can pretend these checks which she is dishonoring are forgeries.

Now, on the question of whether you should or shouldn't sign the document, you should refuse to sign. You should instruct her in writing that you are not going to be extorted into signing a document which you never agreed to sign and that she owes you money.

The reality is that you are operating the business without a written agreement. So she can terminate your right to operate the business at any time. I assume you are probably relying on the business for a revenue stream. Of course, she may also be relying on the income as well. But I would guess that she has more leverage on you on this issue than you do on her.

You are in a very tough spot. Would it be possible for you to simply stop operating the business and leave her with no choice but to either operate it herself or agree to your terms?
Customer: replied 1 year ago.


We did stop operating, and gave her all the invoices that correlated with the checks written. But Extortion is exactly how this feels. However, I think our position of strength are these two items. 1. She is /and needs to be a licensed realtor in order to operate this company (which means she is governed by those license requirements and 2. This account was a "trust" account, and although I took on the fiduciary responsibility of operating this account, she should have never given that responsibility to me, and I would think that she wouldn't want that information revealed.

Expert:  Zachary replied 1 year ago.
What are you wanting the outcome of this situation to be?
Customer: replied 1 year ago.


Just to get those checks paid. I told her we are willing to sign an "exit document" and "non compete" and a "confidentiallity" agreement, but NOT go back an sign a year old document. She says until that "year old document" is signed, she will do NOTHING. - We can't pay our bills without those checks. And they are fair checks based on gross rents and maintenance done. I think what she is trying to do is pin any "losses" on us and deduct from there. But NOT credit us for the MANY more "gains". Plus, looking at the original contract, it calls for us paying more to her than we've all been operating under for the past year.


 

Expert:  Zachary replied 1 year ago.
On what basis did you determine that amount owed to you in the checks at issue? Is there anything in writing where you and her agree on how to split the money, or was this a verbal agreement?
Customer: replied 1 year ago.


Some of these were bid jobs (approved by homeowners) the work was done, the checks issued, and she either stopped the payment or closed the account. (I haven't determined which remedy she took) But there are invoices, based on either bids or agreements.


 


The original agreement (that she insists now that we sign) was not an actual agreement but a "proposal".


 


Our original agreement (or proposal) was that we take the property management fee, then pay her 20% of that amount for the first 3 months, and 15% for each month after that until the purchase is completed. After reviewing the proposal this past week, I realized that it stated that we pay her 15% of maintenace as well. (we never did that, but she helped me figure out all the accounting each of the first 3 months, so neither one of us remembered THAT part of the proposal) We continued to pay her 20% of the p.m. fee. It also stated that either of us could end this "agreement" after written notice, which I never received (even yet today). My notice was my checks coming back unpaid. We've turned everything back over to her. She told us she would replace the checks once we got everything back to her. But . . . now she wants us to sign the original "proposal". I'm guessing her attorney told her that she doesn't have a leg to stand on without that agreement signed.


 


One of the checks was the April property management fee which was on average 8% of gross rents. Then we paid her 20% of that from our operating account. (this equation has been done every month for the past 11 months) I was using the word "defacto" to explain to her that this was a pattern of business that began 12 months ago.

Expert:  Zachary replied 1 year ago.
I think defacto is the proper term here.

The law provides that she owes you money for the work. Where there is an invoice, the amount that she owes you for that will be set by the invoice. Where there is not an invoice, the amount will either be set by the agreement between you or the fair market value for the work performed.

So, in this instance, if you were to sue her (which you might have to), you will need to establish that there was an oral agreement between you and her that you would be paid as you have stated above. You would prove this by past performance. You would only be able to point to the proposed written contracts as evidence that you were both contemplating entering into a written agreement.

I suggest you send her a demand letter stating that you (1) are not going to sign the agreement, (2) that you signed all the checks with her permission, (3) that if she continues to withhold payment and threaten to charge you with forgery, you will file charges against her for extortion and (4) that if she does not immediately pay you the amount due to you, you will file a civil lawsuit against her to pursue the rest of the money owed. Give her a deadline of 15 days, and if she does not comply, then you need to file a lawsuit.

How much money is owed to you?
Customer: replied 1 year ago.


So sorry! This response is going to be a little long. But so far, I'm in total agreement with your response and am very satisfied. Below, you will see her original response to our demand for payment, and then my response to her.


 


Her response to our payment demand: ( please realize the when she states "the amount you are owed" is based on her opinion or her "reconcilliation", not necessarily the amount invoiced.)


 


After our meeting yesterday….and after having time to think about how to “move forward” , I would like to propose the following. You were absolutely right about not having a signed contract…therefore


 


Option 1 We all sign the original contract as of today, or tomorrow, but an accurate date reflecting that it’s being signed now as acknowledgement that this is indeed the agreement we have been working off of since May 1, 2012. You would also be expected to sign a “cancelation” of that contract and would be paid what you are owed.


 


Option 2 No document governs us, therefore, you owe me nothing and I owe you nothing. Anything currently signed with Cj would stay except for the contracts on the property at 900 Hwy 24, Clearwater. That contract you can keep.


 


I will not work on any “reconciliation” of the books until I hear further from you on which way you would like to proceed.


Thanks for the consideration,


Cindy


 


My response:


 



After considering your 2 options, we've determined that neither of those works for us, and we stand by our proposal (copied and pasted below) There are dishonored checks that we need to have honored promptly. I honestly do not want this to get any uglier than it has already become, but we will not just walk away from dishonored checks, and let it go. Again, please see below.




FACTS -
The returned checks written to us totaled $3914.25

One of them was for work Bob did for Jean Thompson at 1230 Rolling Oaks in the Amount of $252.06. Jean has replaced that check.

It seems $40 of the $3914.25 was for Apollo snow plowing, which was an inadvertent oversight on my part.

We are still owed the Placement fee of $700.00 for 1230 Rolling Oaks, less your 20% which leaves amount of $560.00 owed to us for this property placement.

PROPOSAL –

We will be happy to sign any exit document you have that includes a one year non compete clause for Residential property management (to include apartment bldgs, duplexes, townhouses, etc) We want to leave the option for commercial open. (the contract that you have a copy of was never used except to give my nephew a document to bring to the bank to show what his lease payment would be, it was never a fully executed contract) In return you will honor the checks written to Bob minus the $252.06 and $40.00 mentioned above. The check total would be $3622.19 plus the $560.00 for Rolling Oaks with a final total of $4182.00 You can then also cash the checks that Bob issued to you. OR you can deduct the total amount of those checks from the check you write to us, and return those checks to us.

Within the "exit" document, there could be a "confidentiality agreement" that would specifically state that all business practices from the past year be kept confidential.



We all can then walk away and chalk this up to a learning experience.



Expert:  Zachary replied 1 year ago.
Why are you offering to sign a non-compete and a confidentiality agreement?

How does that benefit you?


I think you should go ahead and send the letter I proposed. Send it by certified mail and set a hard deadline. If she does not agree, then you will need to file a small claims suit in the Conciliation Court: http://www.mncourts.gov/selfhelp/?page=313

This is a very simple procedure, and is much like the People's Court. You would need to be prepared to argue that although there was no written agreement, she owes you money because you performed work. It seems like its a win for you if you file.
Expert:  Zachary replied 1 year ago.
Please let me know if you have any further questions. Please also kindly consider rating my answer positively so that I am compensated by the website for my work on your question. Rating positively does not cause an additional charge and does not prevent us from further discussing your questions.

Best Regards,
ZDN
Zachary, Attorney
Category: Legal
Satisfied Customers: 3814
Experience: Lead trial/International commercial attorney licensed 11 yrs
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