Expert: Dick Dennis - 8/2/2010

Question
QUESTION: Hello, my name is Wayne, and I live in Los Angeles, CA.  My father puchased a business last December through a real estate broker. We purchased it based on the numbers that the owner has given me as well as what they (including the real estate broker) had told me.  However, things have not gone as what they were saying, they had saying that they were making profits, but we are losing money. We talked to the broker (my father's friend) and asked him to come with us to talk with the former owner  But he refused because of lack of responsibility and we have not talked since. We talked with the former owner, but she was also being irresponsible and not willing to help... instead trying to stay away from it. She had said that her late husband founded this business and was looking for someone who can carry on this business because she would like it to succeed, but it ended up being a lie.  I am running a business from home (with former owner being the landlord) to save money, and our lease expired end of last month. I asked at the end of June and agreed that we are extending for 3 more months. It took over a month for her real estate agent to bring the addendum to sign... I actually asked if I could extend for 6 months instead since we are operating a business, and she verbally agreed.  But when the landlord and her agent came by this past weekend, the agent said that the landlord actually did not want to extend the lease, but agreed for up to 3 months. the agent even brought an addendum for month-to-month as well, which made me furious.  The landlord is putting the condo for sale, so the agent would not allow me to extend for 6 months... because obviously the agent wants to make the sale.  I just got an email this morning from the agent saying that they need the signed addendum by 8/5 or they would go through an eviction process.  I can get this done, but the way the email states really makes me furious. Does the former owner have the right to do all of these things? I do not think these were done in good faith. Is there anything I can do? Or is that something I should just suck up and try to move out in 3 months and forget about?

ANSWER: The way you presented the problem, Wayne, it is very confusing. You are leaving big holes in your plight, much like a giant jigsaw puzzle. You don't say what kind of business it is. You say your father bought it, but yet, it sounds like you are running it.

That broker does not sound like your father's friend to me. I get the distinct impression that you knew nothing about the business before it was bought. Did you do your research and inspection of the business books? Did you have a CPA verify the books? Did you watch and see how the business was conducted for a day, a week, or a month to get the feel for the business? If you checked the books you would have known all about the expiration of any leases being a liability, especially if it is very important to running the business.

Why is a condo part of this problem? It sound to me like if the owner had died, the business died with him. The listing broker and your father's "friend" should have disclosed lots more answers BEFORE you put one dime down. Ordinarily, the buyer puts down a deposit that allows him to inspect the books. Something is fishy here, Wayne. I need lots more information here before I can give you an intelligent answer.

Also, you may want to talk to a REAL ESTATE attorney to see if there is any relief in this matter. I do wish you well.

Dick Dennis
CA Real Estate Broker
Lic #00349415
dixiedee13@aol.com

---------- FOLLOW-UP ----------

QUESTION: Hello Dick, this is a travel agency business and it is a corporation. My father purchased it and I am running it.  The numbers that we have received was a year-end tax statement for the previous 3 years thru the real estate agent.  The business was originally ran inside the condo unit which I am currently leasing through the former business owner who is also the property owner. When we bought the business she said she love to see this business grow, and also it is best to keep the business in the same location... when we talked about extending the lease for 3 month, it sounded like she has no problem with it.  Then since I thought since I am doing a business here, it requires a lot more time/planning to relocate, I brought up changing the extension to 6 months, which she verbally said okay and she was going to talk to the agent.  But when she came over the weekend with the agent, the property owner did not say one word and let agent do all the talking.  And agent told me that the owner actually wanted me to move out after the end of the original lease.  Another problem is, we complained to the agent who handled the transaction (my father's friend for over 20 years, maybe not anymore) but he did not want to deal with it.  The agent said to him "you can sue me" and did not deal with the problem.

ANSWER: Then do just that, Wayne. Small claims court has a limit of $7,500. If you paid any figure up to that, then be sure to assemble all documents, receipts and notes and sue him. Keep one main thing in mind, Wayne, and that is, if it wasn't in writing, it was never said. And that is how the judge is going to make his decision.

The way I see it, the real estate broker screwed you over when he should have protected your interests even though he was being paid by the seller.

In today's technology market, why is it important to remain in that one location? Did the seller sell you a list of customers, too? And that is why it is so important to keep that location? So many businesses are conducted out of residences through computers, Wayne. But if the condo has some sort of unique presence then for sure the purchase should never have been made without at least a five-YEAR extension.

To be quite frank about it, whoever represented your interests did one miserable job and should be sued for it. That person left you hanging in so many ways. Be well.

Dick Dennis
dixiedee13@aol.com

---------- FOLLOW-UP ----------

QUESTION: Thank you Dick. I don't mind looking for another location, but couple things are still in the way... First, we're still going through the change of ownership transition.  The airline reporting agencies handled all airline transactions and act as middleman between us travel agents and the airlines. The are reallly a pain in the neck, and they need to inspect properties and other things. One thing that is required is that agent with minimum of 2 years experience needs to present full-time... I was in another industry so I only have about 7 months experience under my belt. The former owner's daughter used to work here, and she's been sick.  So that's holding up the transition.  Also, because the number that we make is so low, not like what we were told, I cannot afford to have another employee... I would have to work by myself... also I cannot afford to have separate location.  I lowered my income and kept the work location same as the residence to save money.  I am looking for a place where I can live/work at the same location, but if I think about the monthly expense and the location (and its safety), it's very hard to find a place that is as cost efficient.  Few places allow conducting business in the area.  I'm also considering somewhere outside of this area, but it is hard to find an apartment that allow business.

Answer
You know, Wayne? We real estate brokers must have at least two years under our belt before we can become a broker. There's a good reason for that: Experience and ethics.

I just cannot believe that the travel bureau business is any different. Based on what you have said so far, it appears you were antsy about getting into the travel business. You never gave yourself the chance to see if you would like the business.

It's too late now, but it looks like you're going to have to get all that experience on your own. You're going to have to dig in. You're going to have to do the research that you should have done BEFORE you bought the business. You're going to have to get the knocks. You're going to have to see how competitors do their business and see how you can improve on it.

I would recommend you buy books that have been written on operating a travel business. Google that information. Just maybe some of that information will lead you to a book or a course or any way to learn how to do this business. Yes, all this should have been done BEFORE you even put a dime down. You take care.

Dick