Travels through Property Law by Tom Brodersen, Esq.
These days, many people are tempted to stop working for someone else, and start working for themselves, especially when they have a bit of a nest egg saved up and can make some moves.
At the same time, other people who have run their own businesses for years are getting tired of the grind, and are ready to change their life, too. So, when one person from category 1 can get together with another from category 2, beautiful things can happen, right?
You better believe it! BUT, that DOESN’T mean beautiful things will necessarily happen. Many things can go wrong. The business being sold might not be in the best locale for the future, even though it was the perfect place years ago. Problems with staffing, supply chain issues, or changes in demand may raise their ugly heads.
These are all things that you, as a business person, must evaluate before you make the decision to act.
However, other factors may already be in place, but are just unknown to you. You may assume the seller tells you everything you need to know before you buy, but experience shows that is clearly not always true!
First, the business may not be quite as solid as claimed. How do you confirm the revenue and expense figures you are provided with? There could be debts and liens you have no idea about, or lawsuits in progress or about to hit that have not been disclosed.
We’ve been involved in two business purchases recently where debts and liens were present, but not disclosed. In one case, just days after closing, liens on all the equipment used by the business started showing up, along with taxes and other debts payable. Fortunately, the buyer was still in a position to force the seller to make it right, but only after incredible stress.
In another case, six months after buying, the client was hit with a lawsuit for (many) tens of thousands of dollars of debt. Then another lawsuit was filed for another chunk of money! Taken together, they are forcing the buyer to consider taking his “brand new” business into bankruptcy. This is not the outcome he had dreamed about.
When you buy a residence, the law imposes a duty on the seller to disclose so-called “covert defects,” but commercial real estate has no such protection, beyond the due diligence of the buyer, and the advice of the law “caveat emptor” (let the buyer beware).
Very few buyers know all of the tools available to look for such lurking land mines. But experienced lawyers do, and can make this process much safer for you and your life savings.
ANDERSON & BRODERSEN, P.A.,
350 Corey Avenue, St. Pete Beach, FL 33706
727-363-6100 • www.PropertyLawGroup.com