AboutMike Fortunato Expertise Can answer questions on all aspects of commercial real estate management, including lease administration, eviction issues, financial reporting and budgeting, asset valuation/enhancement, marketing & leasing, and site maintenance and repairs. 20+ years of real estate management.
Experience 20+ years in commercial management. Current own and operate property management company in southern California.
Question I have an issue with the prior property management. However, their management contract was sold to the new buyer. The issues were mismanagement and not screening tenants so now I have damages to the property that occurred during the prior management and I have no way of getting reimbursed for it.
I was told that the new property management is the successor of interest and therefore, is liable. However, they argued the following under Section 7.1 as state below: I have also included Section 2.1 for your review.
So I’m not clear as to who is responsible. I can’t go back to prior company since it is no longer in existence. Would the current management be responsible or the prior management? Since it was sold by a partnership who owned the prior management company, would they be responsible instead?
Section 2.1 Agreement to Purchase
Upon Closing, Buyer shall assume all obligations and liabilities with respect to the Purchased Assets and shall upon and after closing, forever indemnify, protest and defend Seller from any further liability whatsoever arising therefrom. Provided, however, Buyer does not assume and shall not in any manner become responsible or liable for, and the Seller shall retain pay, discharge, and perform in full, all other debts, obligations or liabilities of the Seller of any nature whatsoever whether known or unknown, fixed contingent or otherwise, including, without limitation, any debts, obligations or other liabilities directly or indirectly arising out of, or resulting from, the Seller's ownership or use of the Purchased Assets prior to the Closing Date, except that the foregoing does not include any obligations agreed to by Seller but which do not arise or accrue until on or after the Closing Date.
Section 7.1 Obligation of the Sellers to Indemnify Buyer (e) states “The Seller hereby agrees, to indemnify and hold harmless the Buyer from and against . . . . any claims asserted by any person against the Buyer arising out of , or based, in whole or in part, on any negligent act or omission or intentional tortious conduct by the Seller or the Business or any of their respective employees or agents which occurred at any time, including, without limitation, all claims by any customer(s) of the Seller for any act or omission caused by the Seller at any time.”
Answer I'm not an attorney (you should probably consult one), but the document between the prior management company & the new owners would seem to indicate that the buyer may not be responsible for what happened before they became involved. And after all, that's only fair. So, your action should probably be against the owners of the previous management company.
Granted, since they are out of business, you may be out of luck. However, if you should choose to pursue a lawsuit, one option may be to sue everyone involved and name them all as co-defendants, and let the court sort out who is responsible. I would include suing the partners individually who owned the prior management company.
Keep in mind though that even if you are successful in obtaining a judgment, collecting on it could be another matter entirely. This should be considered prior to spending money on a lawsuit (unless you plan to handle the lawsuit yourself via small claims court).
