Should I sue or not?

[David Clay]

I am not sure this is the right forum, but I posted here b/c of the type of deal that I have a question about. 

I am considering whether or not to sue someone who has agreed to do owner financing on a six unit apartment building. I have owned the building for nearly 3 months now. Here is the issue that I have to say is partially of my own making. When I purchased the building I failed to notice that the property manager provided a lease that included a security deposit, the first month's rent and the last month's rent. The issue is the last month's rent. I got the security deposit, but the PM previously disbursed (and took his 10% commission) out of the last month's rent.  I won't get into why I missed this issue as ultimately that is not important to the question, but I did miss it. In any event, Florida law stipulates that these payments for the last month's rent are to be held in escrow and does so with typical legalese.  This didn't happen. I have made an effort to communicate with the previous owner's representative as the owner lives out of the country and I have never met with him.  However, it is clear that the owner believes he has no further financial obligation for the property. The PM hasn't provided me with documentation of the disbursement of the money, but I believe he has done so (confirmation will be sought this week). In any event, I have made what I think are reasonable efforts to get the money with no success and this leads me to the point of this query.  

Should I just let it go and bite it or go after it? I will provide just a bit more information that might help with opinions and I know I need to do the confirmation with the PM. Let's assume he did as he stated. OK. It is a 6 unit, built in 1979 w/lots of delayed and improper maintenance (my kind of deal). The original list was 185K, negotiated to 170K, had some complications with financing d/t the age of the building which led to the owner agreeing to owner financing at 155K. Again, my kind of deal. It's commercial, so, given the community and the rents when full ($3200 month; one unit down d/t tenant move out and some flooding after a pipe clog) an appraiser (sight unseen) estimated the value at 200K+ (lots of caveats noted in this discussion and duly recognized).  

So, the amount in question is $2750. I could just bite it and let it go and maintain good will in the event something happens and I need some consideration which I don't anticipate but you never know. However, there is a lot of delayed maintenance and the rents won't justify high end upgrades. Thus, on one hand I could sue and possibly make the relationship contentious for the remainder of the 5 yr payoff (assuming I don't refi out of this original deal) or I could just let it go and move on. My main issue is that I am now responsible for these future payments. This isn't terrible as I have sufficient cash reserves and I earn enough to pay it from my regular gig if needed. It would change what I think of as the final purchase price, but not by a huge amount. We are scheduled on a short 5 yr payoff of about $2500 a month anyway. My wife says let it go, but I'm inclined to go after the money.  

That's everything I can think of at the moment except to say that I have some empathy for the guy as he is not a real estate guy and doesn't know property management laws and he agreed to owner financing which is the bigger issue for me. He was nice enough to do it. I don't want to be an a-hole about this issue, but I simply don't see $2750 as money I should just throw away. I'm torn. My wife suggests I let it go. Thoughts?

[David Clay]

Just thought I would update you all since you were so kind to post in my thread. I eventually did take the seller to small claims court after failed attempts to discuss the issue reasonably. We ended mitigation with a scheduled status update hearing date (to see if we resolved the claim out of court as the seller rep wanted to talk to the seller) and, simultaneously, and a scheduled hearing date (just in case we couldn't come to a resolution at some point). Cutting to the chase: The seller gave me the money that actually belonged to the tenant.

Interesting fact: The judge had a question regarding my ability to win in court because, as she say it, I may not have been the proper litigant for the tenants' money. I had to remind her of the statute (assuming she knows more than I, but may not be familiar with every word of every statute) that indicated that the money was supposed to be held in escrow for the tenants until such time as they used it or requested it back (properly). She advised the seller rep that she was in agreement that somebody would need to pay the tenants' this money in some form or fashion and that it would not be me the buyer. With that we closed things out and he had cut me a check within the week. A happy ending for me. I am also now telling my tenants about how I had to fight for their money, etc. I'll know sooner or later if this is building any good will. It doesn't seem like it so far (I'm 1 of 2 in this regard), but I'll see over time. 

Anyway, that's all. Thanks for the input. It was appreciated.