Legal Question in Real Estate Law in California
I started an LLC (123 LLC) with an existing business partner in (ABC Inc.) The purpose of 123 was to purchase a building which we ABC would occupy as tenants. Man and Woman were existing partners in ABC for 10 years before I came aboard as a partner. Woman did not come in as a member of 123, or as a co-owner of the building, for financial reasons. After we occupied the new building and were in the process of doubling the office space, we were hit with a substantial property tax increase. Man and Woman had previously stipulated a monthly rent ABC would pay to 123; that rent covered ALL expenses with a approximately $1,000.00 positive cash flow each month. Because Man and Woman had stipulated the cost of rent (to which I had also agreed) Woman, because she would be receiving no benefit (not being an owner of the building) refused to pay any additional rent beyond that amount stipulated. She did, however, verbally agree to ABC Inc. making up the difference between the stipulated rent and the tax shortfall each month in lieu of raised rent. Man and I also verbally agreed that in leiu of increasing the rent, ABC would pay the tax shortfall each month. This arrangement was verbally agreed to separately by and between Man and Woman and then Man and myself. (Man being the managing partner and President of both companies) We have been operating under that verbal agreement, without issue, for the last 4 years. I am now in negotiations to sell the building to Man; he says if I don't agree to his price (reasonable but less than what I asked for) I will immediately owe half of the amount ABC has paid (he now claims ABC has merely been extending credit) for the last four years and I will also have to come up with half of the monthly shortage (between 400 to 500 - my half of which would be roughly 225 each month). I contend that our verbal contract is legal and binding because we have a 4 year established history of functioning under it and whether I sell Man the building or not I am not liable for anything out of pocket past or future. The mere fact that we are, and have been, functioning under it for four years now should prove its existence should it not?
1 Answer from Attorneys
That you have been operating under the agreement is evidence of the contract, but not necessarily all its terms. You still may have a he-said-she-said about whether it was credit or not.
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