Case No. 1
For the past 26 years, Lois and Dale have run their own printing business. Their customers are mostly medium-sized businesses. Like many successful entrepreneurs, they wear many hats – HR department, payroll processor, accountant, and chief technical officer, to name a few. They also dabbled in the law, as business life grew more sophisticated into the 21st century and their company needed contracts. Lois and Dale wrote most of their own agreements. They “borrowed” language from others, paid for access to websites offering “custom” documents, and even asked the other party in the transaction to prepare the agreement.
In 2013, Lois and Dale decided it was time to sell the Company. A buyer was found and agreed to pay $600,000 for the business. The buyer handed an agreement to Lois and Dale, who briefly reviewed it. The closing took place, with a $100,000 down payment and monthly payments for the balance over six years.
Two months after the closing, the buyer discovered that Lois and Dale had never retained an attorney to protect their Company’s name and identity. The buyer then received a letter from the law firm for a patent troll indicating the Company was being sued for violating a patent registration. The computer processes used by the Company to produce printing plates violated patents going back to 1981.
The buyer then realized that he had not complied with Michigan law to escrow the amount of the Company’s final taxes not yet paid by the closing, and was subject to paying those taxes, plus interest and penalties.
The buyer ceased making the monthly payments to Lois and Dale, who were living on the payments to support themselves. Lois and Dale’s lives were dramatically altered by this and they were threatened with being reduced to living on Social security and their modest savings.
All of this could have been avoided if Lois and Dale had retained a competent attorney to assist them throughout their years in business and with the sale of their business. The fees would have been a small fraction of the $500,000 they risked losing on the sale of the business when the buyer ceased making payments.
Case No. 2
Troy and Melinda had a successful collector car hauling business. They needed more room for the over-the-road car haulers their company owned, as well as for the cars their customers had them transport. Troy asked his brother if he knew of any good realtors. Troy and Melinda entered into a buyer’s agency agreement with a realtor (who was friend of Troy’s brother) to find them suitable properties where they could relocate the business.
The realtor found them a commercial parcel that Troy and Melinda decided to purchase. The parcel had a unique feature. Many years prior, in exchange for agreeing to allow an interstate pipeline to store natural gas under the property, the prior owner received a continuous supply of free natural gas. The continuous supply of free natural gas factored heavily into the price paid by Troy and Melinda for the property.
In addition, historically, there was an industrial facility adjacent to the property that had an unrecorded, informal easement to cross the property to get to its rear warehouse. In exchange, the property’s sewer was connected to the industrial plant’s sewer. There was no written agreement for this either.
Some months after the closing, the interstate pipeline did its annual search of property transfers affecting its underground gas storage facilities and discovered that the property had been purchased by Troy and Melinda. The pipeline company stopped supplying free natural gas to the property because the free natural gas agreement was not transferable. Troy and Melinda did not have access to natural gas from a utility so they had to begin using propane. The result was an increase in their monthly costs of $850 per month.
Subsequent to the natural gas debacle, the industrial plant next door wrote to Troy and Melinda informing them that it would be connecting to the new sewer line along the main road on the other side of the plant and the sewer line servicing the property would be abandoned.
As a result, in addition to the $850 per month increase on costs, the value of the property fell by $285,000.
Troy and Melinda had no recourse against the seller or the realtor, of course, because the documents absolved the seller and realtor of all liability.
All of this could have been avoided if Troy and Melinda had relied upon a knowledgeable attorney to assist them with the transaction. Instead, they worked with someone they knew as opposed to someone who knew the law.