Crazy Property Damage Situation While Under Contract

[Joshua Fann]

I am in the process of trying to buy two properties side by side in a downtown, historic square location, both on "Main Street." One of them is an old warehouse, built in the late 1800s, that was condemned by the city in 2015 and has to be torn down. The other is a corner lot that has a car detail and tire service. The business is pretty small, and they rent the lot for $800/month. 

The warehouse has been on the market for a while, so I put it under contract in February, contingent upon rezoning and the condemnation being removed upon submitting my demo plan to the city. I do not have the car wash under contract yet. Even though it is not listed for sale, the owner came to me and asked if I would be interested in buying it as well. I plan to as it is virtually ready to build on immediately with it's road frontage and access to water/sewer taps. Some investors and I plan to tear down the warehouse, move the car wash trailer, and do a mixed use development that goes with the square. 

Unfortunately, one week ago, a strong north wind blew a 3-course thick, 20 ft high brick wall over onto the car wash property,totaling a work truck belonging to the owner, a small storage trailer, damaged part of the wall of a single wide trailer, and crushed his kids 50cc four wheelers. The roof caved in on this portion, so there was nothing holding the wall up. The city has declared that the car wash cannot do business there until the building is tore down or a structural engineer gives the okay regarding safety. The man who owns the warehouse has had four years to demo and/or shore up the walls. However he is 84 years old and has no money or energy to do anything. All he owns is this building. 

I do not think the car was people are going to sue. I have reason to believe that they partake in some sketchy activity of their own and wouldn't want others snooping around their business. I think they want to settle outside of court. The owner of the lot however has already "lawyered up" and is wanting both warehouse owner and the city to make it right. Making it right, as I understand it, would be--cleaning up the mess, paying for damages (including lost business), and paying for the structural engineer to give the okay on the remainder of the building that is closest to the car wash. The warehouse owner has already declared he's not doing anything unless we follow through with purchasing the lot so he can have some cash. Otherwise, he will probably just let the city take it. 

My question is, do you see an opportunity here to get two lots at a crazy low price, or should I run like heck to avoid this legal mess? If I follow through with purchasing, what's my liability in all this? At the price we are getting the warehouse, our lot cost per townhouse was going to be $17k, with a minimum sales price of $240k per unit. It's a rare deal and I hate to let it go. Thanks in advance