Do I sue? What a mess!

[Rich Weese]

I've mentioned that I bought a 154 unit building about 9 months ago. They are located on 2 streets 68 on one and 84 on the other. There are 2 water meters on the 68 and 1 meter on the 84. Tenants are billed back the water bill proportionate to their size. Worked very well. Until a couple weeks ago. Somehow, City of Garland had NO RECORDS for the single meter! They had not been charging anything for the meter that services the 84. Now they caught it.
Been negotiating with them for couple weeks. They wanted to back charge for 5 years! I can't backcharge tenants, so I'd be stuck with it. After a lot of stress, they have offered a "deal" for paying from Jan 1, 2010 in the amount of 16K. I'd have to try to recapture from the tenants their %.
The other building tenants have also received a bonus for all this time because the 2 meters have been prorated among ALL 154 units! I contacted an attorney and have been told I'd spend quite a few bucks in the lawsuit. I hate lawyers, but City won't budge anymore, and I'm a very good negotiator. Do I sue? I may lose more and there has been a LOT of free water even before I bought it.
I've been thinking about this for a couple days. I doubt anyone has a similar deal to discuss, but feel free to chime in. I'm leaning toward the settlement. They'll allow payment over 12 months.Rich

[Ralph S.]

Someone screwed up big time when you bought the place. Making sure the water bill was taken care of when title was transferred was most likely the selling agent's responsibility, and would have included actually contacting the city to confirm any remaining billiing outstanding. Even if the city wasn't billing, they would have discovered their error then. I would think the liability for amounts prior to your ownership would fall there. That's why they carry E&O insurance,

If the city has offered to settle for unbilled amounts since Jan 1, for $16k, then I'd take it and run, and make sure you get something from the city that outlines the payback plan. Since this is for prior billings, I would suggest you assess the full amount to the all of the existing tenants now and (maybe) grant the same 12 mos payback that the city is giving you.

I'm suggesting an assessment that, on average, would be $103.90 per unit ($16k / 154). Some might be more, some less, but I don't think it would be material to anyone if spread over 12 mos ($8.66 +/-per month?).

By assessing it in full now, you pave the way to recover any outstanding balance from their deposit if someone who benefitted leaves before the 12 mos are up.

I don't think cashflow would take a hit at all.