Strong-armed over leasehold improvements

Strong-armed over leasehold improvements

Watertown, MA · Member since 2016 · 53 posts · 42 votes

Long story short:

I went into business with some friends (we started a boxing club), and things have gotten sour. We've moved to dissolved, and in doing so plan on liquidating our assets. Here's where things get hairy....

Our landlord is the father of one of my former business partners. He's claiming that things such as the rubber flooring we laid in the gym would fall under leasehold improvements. This flooring is not adhered at all and can easily be rolled up and removed. In fact, some of it was purchased used and we did just that.

My partner is essentially moving to dissolve, and planning on keeping nearly all our assets so he can just reopen in the same spot. He'd retain our clientele and not have to pay me out as part of a sale.

I was under the impression that anything purchased by the gym that could be sold off would be fair game within reason. We installed garage doors and door openers, and I understand that those would clearly fall under leasehold improvements. The rubber flooring though? That seems like a real middle finger.

Any advice would be greatly appreciated!

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Scott HawleyPro Member
Investor · Bellevue, WA · Member since 2016 · 65 posts · 36 votes
9y
In my legal entities with partners, it defines how dissolution happens and how to resolve the assets. What does your operating agreement say? Also, on your taxes, how was the purchase of the rubber flooring defined? That might help, or hurt, your case. I'm not sure how much was spent on it, but if you disagree I would try to come up with a reasonable credit and meet in the middle. Scott
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  • Scott HawleyPro Member
    Investor · Bellevue, WA · Member since 2016 · 65 posts · 36 votes
    9y
    In my legal entities with partners, it defines how dissolution happens and how to resolve the assets. What does your operating agreement say? Also, on your taxes, how was the purchase of the rubber flooring defined? That might help, or hurt, your case. I'm not sure how much was spent on it, but if you disagree I would try to come up with a reasonable credit and meet in the middle. Scott
  • Watertown, MA · Member since 2016 · 53 posts · 42 votes
    9y

    Hello Scott,

    I appreciate you taking the time to respond. I'll do my best to clear up some of the confusion. 

    Our operating agreement states that all assets are sold and the money evenly divided in the event of a dissolution. My concern is whether or not the flooring would be considered a leasehold improvement. While I understand something like hardwood flooring or tile would be a leasehold improvement, I can't imagine non-permanent rubber flooring being such. 

    My partner is the one that voted to dissolve, and with his father owning the building, he's essentially bought me out without actually paying me a dime. If the flooring can be sold, I'd stand to make a much larger sum of money in the liquidation process, and my former partner would at least have to go through the process of rebuying the flooring before reopening.

    While I would be fine coming up with a credit and meeting in the middle, I can assure you that my partner would not. Our relationship is extremely strained as you might imagine, and communication is not as pleasant as it once was.  

    Not to overshare, but I offered to purchase the business for five times what he had offered me.  He declined my offer and voted to instead dissolve. In doing so I don't get any money from a purchase, I don't get to acquire the company like I had hoped, and my former partner is free to open right back up without me. It's been a pretty good punch in the chest to be honest. With his father claiming the floor as a leasehold improvement, it just adds insult to injury. 

  • Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    Not sure what the value of the mat flooring is, but it sounds expensive. Similar to area rug,, if it's not permanently attached and original flooring has not been disturbed then I'd say take your half out and happy trails.. 

    If you had an adjuster come in to auction off assets he would have that flooring as part of the auction, as long as it belonged to company and wasn't permanently installed.

    Rent a truck and some guys and take what's your's 

  • Minneapolis, MN · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    take photo's of original flooring after you removed your matts to have if the issue comes up on status of original condition, that you left as original, with no damages. 

  • Scott HawleyPro Member
    Investor · Bellevue, WA · Member since 2016 · 65 posts · 36 votes
    9y

    Sorry to hear that Matt. It sounds like a mess and is beyond my ability to provide advise other than 'lawyer up'.

  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
    9y

    Two questions:

    1. How much did the flooring cost, and how much is it reasonably worth on the used market?

    2. How much of you wants half of the flooring and how much just wants to make it more expensive for your ex-partner to reopen without you?

    If we're talking small scale stuff here - say the flooring was worth less than $2k on the used market - it's going to be worth less than the cost of a lawyer. If you can walk off with your half of the flooring rolled up, then you could just do that. Otherwise, if it's a hassle to get it, it sounds like you really want it for spite, and as they said in Seinfeld, spite is not a returnable condition :)

    Skyline Properties
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