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Hi there, I am an LP in an LLC holding a large multifamily

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Hi there,

I am an LP in an LLC holding a large multifamily apt building in Colorado Springs. When we originally purchased the property, I signed a handwritten MOA with the GP stipulating that when I received 15% per annum, he would take 15% off the top of any distributions from then on.

The other LPs are relatives of the GP and so I am the only partner subject to this.

The building has done very well since we bought at the bottom of the cycle in 1990. Now my original equity of 60k is worth maybe 400k, and the distributions based on that amount of equity are close to 2%.

Three years ago the Lender required a new Operating Agreement to do a refi. The new contract is very clear than all previous agreements are null and void. However, the GP continues to take his cut, a couple thousand a year, because he can.

Any suggestions?

Thanks,

Gloria Roth

I would suggest that you make a formal demand for the return of the funds that he has taken now and in the past. You can say that you consulted with a lawyer about this issue, and that the amended operating agreement, that he signed, does not provide for these fees. You can also tell him that you are prepared to file litigation if he is not willing to return the funds, and that he may be subject to payment of your attorneys fees if it comes to that, but that you expect that he will just provide you with a refund of the fees.

 

Good luck to you. I wish you all the best.

Customer: replied 5 years ago.
I have stated this in a letter sent to all the Managers and partners some time ago. My GP plays total hardball and has said he would rather bankrupt me than pay me. His face lights up if someone threatens suit.
Joel will use the partnership money to pay the partnership's attorney to subject me to "maximum legal torment."

That lawyer, having drafted the new OA will be aware that
his client, the GP, is in willful breach of contract.


To my mind there is a conflict of interest here, since it's the partnership which pays the attorney, meaning I am paying the fees to the lawyers on both sides.

One might imagine the partnerships attorney has some obligation to

have to represent me, too, or at least keep the GP honest. Again, this maybe only in my imagination.


The question is:

Why do you suggest I should make a formal demand rather than have it come from a lawyer?

Dear Gloria:

There most certainly is a conflict of interest here, and if you file a suit against the GP, no matter how bright his face will light up, the attorney is representing the partnership and ethically that same attorney cannot represent the GP in the suit individually (unless there is a waiver, and the partnership could not give a waiver in these circumstances).

Therefore, in light of all you have been through and all you have done, you should just proceed to litigation and hire an attorney to sue him personally. Since the operating agreement clearly proscribes what he is doing, you will very likely win the suit and be able to recover attorneys fees from him.

I assume the amount you would claim is too large for small claims court, therefore you would hire an attorney to file it, otherwise you can always represent yourself pro se in court if you choose to do so.

Good luck to you, Gloria. I wish you all the best.
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