Author Topic: Who should pay for repairs after a new business owner takes over prior to close?  (Read 206 times)

jeromedawg

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Hey all,

So some of you have seen my other threads about my in-laws' restaurant business selling. They agreed, against our advice, to allow the new potential business owner to fully take over operations (and thus collect the income) before the close of escrow. Part of the reasoning is because the ABC liquor license has been taking a while to close out and they didn't want to risk the buyer walking away (which the broker agent, who serves as both the broker for my in-laws AND the buyer, implied could happen... if that's not already enough of a conflict of interest). Anyway, the new owner started on 1/21 with my in-laws hanging around to help out and train where needed. The kitchen refrigerator motor went out and she had to pay $220 to get it repaired. She initially paid to get it fixed immediately. Then she went to the broker to complain about it. Right now the broker seems to be suggesting that my in-laws pay for the repair - he reminded that in the purchase agreement, there's a clause (which he and I think the buyer added) that states "All restaurant equipments, computer systems and applications, heating, A/C, plumbing, electrical systems are in good working order and repair." with no certain timeframe specified; the broker stated it's "normally 30 days" for things like this. We are concerned, on behalf of my in-laws, that more things will break and that she will start racking up a list of bills to provide the broker to hold against them.

So should my parents be paying in full for this and potentially for other future repairs that are incurred during this time?

Like I said, we advised against them handing off operations before closing but they insisted. They also went against our advice to retain proper legal counsel to review the purchase agreement and all other key documents. But my wife is the one who is having to deal with whatever outcome(s) is dealt.
« Last Edit: January 24, 2019, 01:12:47 PM by jeromedawg »

marty998

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These things should go in as a completion adjustment to the contract, e.g. get reimbursed through an adjustment to the final settlement value.

If it isn't documented, then what leg do they have to stand on if they've already allowed the new owners to collect the profits? Also - who is paying for inventory right now? Or rent staff wages? Please don't tell me your in-laws are paying for all that and the new owners are the ones collecting revenue?

Your in-laws may be like me in wanting to deal with lawyers as infrequently as possible. But they have their time and place. And a few weeks back was the time and place.

jeromedawg

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These things should go in as a completion adjustment to the contract, e.g. get reimbursed through an adjustment to the final settlement value.

If it isn't documented, then what leg do they have to stand on if they've already allowed the new owners to collect the profits? Also - who is paying for inventory right now? Or rent staff wages? Please don't tell me your in-laws are paying for all that and the new owners are the ones collecting revenue?

Your in-laws may be like me in wanting to deal with lawyers as infrequently as possible. But they have their time and place. And a few weeks back was the time and place.

Ah okay, I think that's what the broker is suggesting: that the $220 cost would just be taken out from the funds that my in-laws would collect at the close of escrow (basically, just another "closing cost" right).

I *think* the new owner is paying for all the inventory and staff wages, etc. AFAIK. My in-laws are just showing up and helping out on an as-needed basis.

Yea, they don't want to deal with paying for one or going that route, and they've been dodging retaining one for this even though it's a huge deal. They are really walking a fine line here as they will have very little recourse if things blow up. My wife has repeatedly told them to get a lawyer and the most they've done is talked to some legal assistant for a personal injury lawyer down the street who they've 'befriended' - the Chinese/Korean Asian culture in them strongly dictates that they wouldn't "trouble" or "bother" others. To the point that they are pushovers and awful business owners (their staff has taken advantage of them for the past 30+ years). There's only so much we can do as far as advising them but 30+ year old habits are hard to break especially when they think there's nothing wrong with the way they've been doing things...
« Last Edit: January 24, 2019, 02:01:30 PM by jeromedawg »