L/O gone bad - Legal trouble - Posted by Tracy Lance

Posted by Laure on May 06, 2000 at 18:19:58:


L/O gone bad - Legal trouble - Posted by Tracy Lance

Posted by Tracy Lance on May 05, 2000 at 24:35:40:

At the 1999 CREonline convention in Dallas, My wife and I bought Bronchick’s L/O workshop. We came home and within a month had two houses in sandwich L/O’s. With one of the two houses, our lease with the seller is set to expire, and so is our contract with the tenant. This deal is not profitable now that the option consideration is paid off (was paid monthly), and the tenants will not be able to buy any time soon. So, I advised the seller that I do not want to extend my lease/option with him, but he has tenants that usually pay their rent on time. He is fine with that. But, upon hearing that I am not the owner of the house, the tenants have gone crazy. They are mad that I am not the owner, and say that the whole contract with them was done in fraud, and so they want their option money, plus some, back. Obviously I told them to go read their contract because it says that the money is non-refundable. I used Bronchick’s contracts which say this multiple times. Well, tonight they called me and said that they met with a lawyer who says that our contract with them is fraud and that they can sue and win, plus all the court costs, fees, etc. To avoid an ugly mess of a court case, they are willing to settle out of court if we will pay them their option money, and some other money that they pulled out of the sky. Apparently, their big claim is that you cannot give an option on a house that you don’t own. Atleast this is what their lawyer told them. (for all I know this lawyer is the bartender at the local pub)
Any advice from you legal people out there? I need help on this one.

Tracy Lance

Re: L/O gone bad - Legal trouble - Posted by Bronchick

Posted by Bronchick on May 05, 2000 at 13:36:24:

If you used my “disclosure” form you will note that it says that the landlord is not necessarily the owner of the property. Even so, the tenant has no case. Even assuming the tenants could prove that your lied and said you were the owner (which I am sure you did not), what are the tenant’s provable damages? Even if the ownership issue was relevant (which it is not, since you could exercise your option from the owner and sell to the tenants), how would that change the tenants position, since they chose not to buy the house anyway?

I would tell them to go jump in a lake!

Re: L/O gone bad - Legal trouble - Posted by ScottE

Posted by ScottE on May 05, 2000 at 12:11:37:

Great advice below. The only thing I would add is this-in Bronchick’s L/O paperwork there is a clause that your T/B has to notify you in advance(usually 60 days) of their option to exercise. If this was not omitted from your contract and they have not notified you of their intent to exercise their option, too bad for them!
The bottom line is that if you T/B is ready to exercise, then you should be ready to exercise.

Keep us updated…


Re: L/O gone bad - Legal trouble - Posted by ken in sc

Posted by ken in sc on May 05, 2000 at 11:26:03:

Talk is cheap - lawyers are not! If THEY called you and not their lawyer, I would ignore this threat. Why spend your time and your money on an attorney who will tell you that Bronchicks forms cover you fine. I have had threats before, but after reviewing the paperwork to make sure that I made no mistakes, I just ignored them. Typically, nothing happens. Once, I even got a letter from an attorney (the sister of the party threatening me) and ignored that. Nothing happened that time either.

Re: L/O gone bad - Legal trouble - Posted by Mark (SDCA)

Posted by Mark (SDCA) on May 05, 2000 at 10:19:18:

All the advice on here is good. Follow it. And let me add one more piece. I love it when people threaten me with a lawsuit. I make it a point to call their bluff because almost inevitably that is what is it. I always make sure to cover my bee-hind legally in advance. And then I say “Great… See you in court.”. Strange that I never hear from them again. My advice is: DO NOT SETTLE.


Re: L/O gone bad - Legal trouble - Posted by Laure

Posted by Laure on May 05, 2000 at 06:41:07:

Also, my experience in these lawsuit threats:

If they had a lawyer, you would have heard from HIM, not them. Most of my dealings with these types of people are just THREATS, shaking the tree to see if a monkey falls out.

I would assume an attorney COULD have told them his fees, court fees, time involved, etc. and suggested they call you and threaten suit. That is if they even called an attorney.

I would be pleasant with them. Stand on your contract. You DO have equitable interest in this property, and the right to sell it, which is evidenced by your option with the seller. And don’t offer to show them the paperwork with the seller, unless you have to go to legal ramification. Your business is your business, and not theirs. Theirs is to prove in a court of law that you sold them a property without being able to. You ARE able and willing to sell them the property, they just don’t want to buy it and want their money back.

In your conversation with them, they are challenging you, and accusing you. Instead of taking a defensive position, take the offense and offer to fulfill your obligation of selling the property. Actually, I would just put it in writing and send it to them. You are able to close on xyz day and are awaiting their instructions on date and time. Heck, I’d even send it certified, or deliver it in person.

Bet that stops them in their tracks !

Laure :slight_smile:

Re: L/O gone bad - Legal trouble - Posted by Laure

Posted by Laure on May 05, 2000 at 06:30:34:

I agree with other posts. Say your Tenant’s option expires May 30th, and your option with the seller doesn’t expire until June, then you have a legal right to sell the property, and it is no problem. I would get on the horn to Bill. I use his contracts all the time. I don’t buy on Options though, I just sell on them. But his contracts are very, very good.

Call him, right now, TODAY ! He is a good man. I am sure he will not leave you hanging out there.

Laure :slight_smile:

Re: L/O gone bad - Legal trouble - Posted by George(OH)

Posted by George(OH) on May 05, 2000 at 06:27:26:

If you’re using Bronchik’s forms, your contracts should include a clause allowing you to sublease the property. The contract should also state that the option consideration AND any monthly rent credits are forfeited IF they do not exercise their option. Again, consult with an attorney, but I wouldn’t even worry about it.

Hope this helps,


Re: L/O gone bad - Legal trouble - Posted by John Behle

Posted by John Behle on May 05, 2000 at 01:29:18:

Yes, I think the attorney is also a bartender or hangs out there a lot.

You can give an option on a property you have an option on. This isn’t about your performance, it is about theirs. On the surface of what you describe, the attorney should go back to his bartending and stick to an area he has a clue about.

Yet, exactly what the documents say, the events and how the deal is structured is imporant and could make some difference as to your liability, etc.

In a case like this, you quickly assess your situation and then take a very firm posture. I’ll gladly look at the contracts if you want to run them down. Buy me lunch and check a couple titles for me up there and I’ll give you my 2 cents.

Drop a line to Bronchick too. The short time I spent with him in Columbus gives me the impression he might enjoy kicking this other attorney around a little. Being that they are his forms, he might have a desire to straighten this attorney out. It may be a quick call from him might put the attorney in his place. If not, I could probably recommend someone local.

Attorneys make much of their living off of threats and posturing. As soon as they see there isn’t gold in the pot at the end of what they though was a rainbow, they back off and find a client that can pay.

Call me.

Re: L/O gone bad - Legal trouble - Posted by JohnBoy

Posted by JohnBoy on May 05, 2000 at 01:06:03:

You say your lease is up with the seller and you don’t want to renew. When is the lease and option up with your tenant? I assume you did set this up to where your tenant’s lease & option expires before yours with the seller does, didn’t you?

As long as you structured this properly, then your tenant has two choices. Move out or exercise their option!

As long as YOU have an option to buy from the seller, then you can give an option to your tenant. If your tenant decides to exercise the option then you can sell them the property by exercising YOUR option with the seller. There is no fraud in that!

Me, I’d threaten their attorney with a counter suit for “frivolous” if he even trys to file a suit! But I’d reccomend you get with a good attorney before doing anything and have your contracts checked out first.

lake - Posted by Laure

Posted by Laure on May 06, 2000 at 18:21:18:

Would you specify in writing a particular lake? Or would just any old lake do??? hehehe

Laure :wink: