Need help. Partnership gone South.

[Chris Da]

Here goes...

Approx 3 years ago I really dove into the realesate business. Since then I have aquired 7 houses and 2 plots of land. Have all the houses up and running, and have 2 approvals on my sub divisions. All is going well for me except.....

3 years ago I did my first deal with, at the time, a friend of mine. In my opinion at the time, he was an expert. What I have since found out is that he is not an expert, but a living on the coat tails of his expert father, who has since disowned him.

The whole thing started when he and I were going to "FLIP" a house. He was the money man, and I was the repair man. We would search for houses together, and goto the sherrif sales and finally one came through.

Joe went to a sherrif sale and was after a house we had found, but it sold for too much, but he bought another, as he liked the location. Fine. At the time he payed $170k for the house, which needed very little work, approx 2 weeks and 3k, and we planned to sell it for 205k.

He purchased the house in his name. Done.. We went over, got the people out, and I started work. Then, he went off the deep end with his personal problems, and went into rehab (14th rehab). Anyway, I continued to repair what was needed as we planned to sell it. We got offers, as I had put a "For Sale By Owner" sign out front while I was doing work, but it wasn't really my house, as he took an equity loan against his house to pay cash for it, and his name is only on the deed.
Anyway, I knew it was not going well then, and the market was just starting to come apart. When he got out of rehab, I suggested we rent it out for awhile. He said fine. I ran an ad in the paper, and found a tenant who was on section 8. For some reason I liked her, and knew she would be okay, so I suggested Joe rent it to her. She has been a model tenant. Now remember, Joe"s name is on the house only, so the lease via the Housing Auth. is in his name only. Now mind you, buy this time, I had about 3k of my money in repairs, and about 60 hours of time, and since we didn't know how long we were gonna get stuck with the house, I told him I wanted my name on the deed. On Jan 3rd, 2008 he added my name to the deed. So, now it is owned by Joe and myself as teants in common. No leans against the house, free and clear.

Well, I am happy now, as I would think most people would be in that situation.

Anyway, my buddie Joe is still having his personal problems, and I really avoid talking to him anymore, as he is a ticking time bomb.

I got a call this week from the tenant, who has been there for almost 3 years now letting me know that Joe wants her out, that he is moving some stripper in that he is in love with, and cut off her electric!!!

This woman has 3 kids, still in school, with no electric, and she is very upset. June 18th school is out, but now she is being forced to move, pull her kids from school, and has NO electric!!

This is the really bad part. He has been charging her $300 month on top of what the Housing voucher pays him, AND, her tell the housing Auth that he is paying the electric, but in fact SHE is paying it, and has receipts to prove it!! And, the dumb *** gave her receipts for the rent he took as well!!!

Anyway, I am thankful that I am not involved with any of that nonsense, as his greed is really gonna get him into trouble. My problem is this..

He wants the tenant to sign some papers he drew up that state he did repairs on the house, and that I never do anything, and he made up some phony bills that he had to pay. She called me and told me this, and she told him to goto hell as well. She let me know that he is planning on screwing me somehow, but she is not sure how, and to be honest, I don't know what he is up to either, as I really don't want to speak to him.(He is nuts anymore.) (Drugs).

What I would like him to do is buy me out. I figure, I want my 3k and what ever is fair for labor. Plain and simple. He says I get NOTHING.

If I am not mistaken, I own 1/2 the house. Am I wrong? He added me to a deed. Could I be a prick and demand 1/2? I would think so. Would I do that? No, I only want what I deserve, but now I am concerned that he is up to something. Does anyone have any input on this??

Oh, and tonight I called the Housing Auth. and let them know what he has done. Like I said, I am not on the lease as a landlord, never received one rent check, nothing, I am just on the deed, and was added after the tenant moved in. The tenant would also verify that I had nothing to do with all his scemes, as she is very upset.

How do I get out of this deal????? I don't need this ****... I don't want his money, I just want to get out. He is one of these 45yr spoiled little rich kids who's parents are worth in excess of 30 million, and he thinks he can just do what ever he likes to who ever he likes, and mommy and daddy write a check, and he usually does get away with it.

I was told that he really doesn't have a leg to stand on, that the dumb *** should have never added me to a deed, and that I should just ignore him till he becomes civil.

Any input would be lovely, as I am stresses out.

The good part is that all my other deals are just fine. All my other properties are good. tenants are all happy, no problems, but this situation with my partner has to end. He has not called me in almost a year, and the last time he called me, he was high as a kite, and let me know that he was gonna screw me worse than I ever thought, and I am not getting one dime out of him. That he would sue me, and that he doesn't have a problem spending a million dollars out of princible just to show me the power that he has over people. (Can you see why I avoid this guy.)

And his wife just left him as well. His father disowned him, and most of his freinds avoid him as well also because of this behavior

[Bill Gulley]

Hi, I have seen hundreds of partnership arrangements fall apart, none of what has been described is surprising to me!

You're intimidated (IMO) and I've seen this before with one partner having a greater capacity than another partner and the guy without the greatest means walks away. You have two choices, run away from it or stand and fight. Just like in grade school with the playground bully, but as I recall, standing up to them is something they don't expect and they usually back down. So, you can take care of this on your own toughness or get an attorney, but you need to act...as Jon pointed out this is a liability and you need to protect yourself.

What I would do is lease my undivided one half interest to the current tenant. That will give her the right to remain in the house. I would also write a letter to your partner explaining what you are doing. Now, this letter needs to be well constructed pointing outh everything that has transpired, his leasing it through the PHA, your acceptance of the deed in consideration of amount owed (but don't say how much, because as this goes on, your interests will increase for attoney fees and hassel factor...leave that for court if necessary). Be sure to include his addiction, treatment and change of personality together with his fraud with HUD (The PHA is a HUD agency). Explain why you leased your interest to the current tenant stating that she has been a good tenant with children and that you intent to protect her interest in this matter. Showing her the letter and explaining all this toi her will greatly limit your liability, she won't be so willing to go after you! her conduct as a tenant. Also, mention that your tenant has been instructed to contact law enforcement in the event her "quiet enjoyment" is interrupted ( if the stripper or anyone else shows up). Tell your partner too that you want the property sold and that you will be listing your interest for sale and that he can do the same with the broker...or, that you or he can seek legal action to force sale.

Now, contact an attorney an tell him that you are sending him a copy of this letter as you may need to hire him in this matter....that's all, no appointment is really needed. Tell the attorney he doesn't even have to read it! Put his name and address on your letter as a copy being sent to him as well. Send your letters certified mail, return receipt requested. Now, you are wearing the white hat here and you're following the correct path to cure this problem.

Then turn the power on in your name with a "landlord letter" to guarantee payments for utilities and put the bill in the tenant's name. There should not be any requirement for any consent to be given by your partner, simply show them a copy of your deed.

Now, plat your feet! You know how ticked-off your partner will be.

He really won't want to show that letter to anyone because he knows how he has acted, including the fraud. He may get on the phone to his family and they will likely tell him "just sell it"! Your letter to him will be brought up in court if it ever goes there and that won't be good for him.

After he cools off, you might have a civil seperation of interests and sell the property and it will be up to you to state the amount you are owed for your interest. Based on his conduct, your hassel, your time, work and materials, you having to protect your interests and limit your potential liability, half is not out of the question in my mind! But that's up to you.

Just to sum it up, you'll find that people with money are use to getting their way and most often, if they act properly, they do. You have to take the higher ground when dealing with people like that, let them show their tail end, that will always be to your advantage. But how they usually get their way is through intimidation. If you allow people to walk over you....they will. Money does not give them the right to do the wrong thing. In this case, because of the utility bill and fraud, you have him by the hair of his head! Good luck, Bill

As mentioned above you will need a lawyer, maybe....maybe not as many don't end up in court too.

First of all, I understand the thought that you are not entitled to equity in the property except for materials and labor...but unless there is a written agreement stating so, by the virtue of you being on title as yoiu are, you are without any question entitled to half the proceeds! At least at this point.