Legal Question in Business Law in California

Re: Contract Law

For more on the practical/business aspects, you may also want to see the John T. Reed book "How to manage apartments for maximum cash flow and resale value" (johntreed.com). If I recall correctly, I think one of the things he recommends in a similar situation is unplugging the machines, since you are presumably paying for the electricity. Of course, in theory, that could violate the contract if it's held to be valid and it an express or implied term of it was that you had to provide electricity.

Re: Contract Law

After thinking about this for a while, here's what I think is the proper legal analysis and how this would play out in court....but I could be wrong:

First, the arrangement between the former property owner and the laundry maching company is a kind of lease, or has some of the attributes of a lease. They get space to operate their business, the owner gets some money (think rent).

Then, keep in mind that pre-existing leases survive a voluntary sale of property. When you bought the 4-plex, that didn't invalidate the tenant leases, nor did it terminate the laundry machine deal.

However, sale of the building operates as an assignment of the contract to you, and you are entitled to the "rent" for the space the machines occupy. It is now your contract, notwithstanding that it has the former owner's name on it.

It is very important to get a copy of the contract, or a blank one just like it, to read and understand what the real deal is....the principles I've outlined could be modified by the contract, of course.

Now, as to the failure of the seller to tell you about the contract. You might win a suit based on failure to disclose, because a 4-plex falls under the stricter disclosure requirements of Civil Code section 1102 et seq. for residential real property, and as far as I know there is no requirement that the 4-plex be owner-occupied. On the other hand, the machines were in plain sight, obviously coin operated, and a court could perhaps hold that you were on "inquiry notice" to ask what the deal was.

A possibility worth considering is to sue the seller in Small Claims Court for the estimated income from the machines. If you can't figure out or get the company to tell you the amount, you should estimate it on the high side, then sue the machine company for it as well (you don't know if it's been paid by them or not).

I think money damages for the income is about all you'll get, whichever legal route you pursue. Perhaps, however, early termination of the 5-year lease could be negotiated. At the very minimum, the laundry company needs to recognize that you now are the owner of the building.

Re: Contract Law

No. Tell them to get their machines out, or you'll set them on the sidewalk. If they actually sue you, make sure you pursue and collect your attorney fees WHEN they lose. Call me if you need legal help in this. Theirs is a common tactic within this 'industry'.