Please see the YouTube video by Todd Poole, managing attorney of Poole Huffman, discussing the hot topic of negotiating and modifying commercial leases.
As a creditor, you understand that your business involves certain risks that “come with the territory.” Sometimes, a debtor’s business may fail to attract customers or may be destroyed by a catastrophic event. Other times, though, the debtor is not an innocent actor, such as cases where the debtor engages in fraudulent transfers to try to dodge having to pay. When that happens, you may have the opportunity to recover many forms of compensation, including punitive damages, but to do so, you have to know the right way to proceed in court. For that, rely on representation from a knowledgeable Atlanta creditor’s rights attorney.
An Ohio lender found itself in those shoes recently. The lender had lent substantial sums to the owner of a construction business. As the business faltered and the owner fell behind on his loan payments, he transferred numerous assets to a number of Florida LLCs and also to himself and his wife as “tenants by the entirety.” This had the effect of making those assets unreachable by the business owner’s creditors.
The lender was not without any recourse, however. The lender sued in federal court, asserting that the owner had violated Alabama’s Uniform Fraudulent Transfer Act by transferring certain real estate to an LLC. A fraudulent transfer takes place when a borrower transfers interest in an asset or assets “with the actual intent to hinder, delay or defraud” a creditor.
As a commercial landlord, you know that sometimes you may have problems with a tenant. The tenant may fail to pay rent on time occasionally or sometimes may fail to keep up the premises as required by the lease. You probably don’t anticipate your tenant making an error that burns the building down but, sometimes, that happens too. Protecting your business interests fully requires knowing how to engage the legal system in the right way to get back all of the losses you’ve suffered as a result of your tenant’s failure to comply with the lease agreement – whether those losses are moderate or massive. By having legal representation from a skilled Atlanta commercial landlord-tenant attorney, you can make sure you are prepared to protect your business interests, whatever that protection entails.
A situation like that (a fire inside a commercial rental property) actually occurred north of Atlanta… and ended up in litigation. The fire occurred in 2015 after the tenant, a franchisee of a national chain of hardware stores, received a shipment of pallets and plastic totes from the franchisor’s delivery truck. An employee of the tenant pushed the delivery far into the stockroom, which was situated in the corner of the building. Not long thereafter, the same employee noticed flames shooting out of one of the recently delivered totes. The fire spread, causing major damage to the store. The cost of the landlord’s loss was $116,000 and it wasn’t covered by insurance.
The landlord took the correct next step: it sued the tenant and the franchisor. The landlord asserted claims of negligence and breach of contract. The lease required the tenant “to keep the leased space in a habitable, safe, and good condition,” but the tenant failed to live up to that obligation, according to the landlord, by storing unsafe chemicals in the stockroom. Additionally, the tenant was negligent in accepting the chemicals (and the franchisor was negligent in delivering them,) according to the lawsuit.
Whether you’re a small landlord with only a very few commercial tenants, or a very large one that has entered into hundreds of commercial leases, it is important to recognize that details matter, and even seemingly small details may matter a great deal. Even sections of your lease that seem like mere form language should not be taken lightly, as the language you include in (and exclude from) that contract may decide whether your tenant can or cannot legally escape complying with the agreement’s terms without penalty. To make sure you are getting the right agreement to protect your business interests, you should make sure you have the right Atlanta landlord-tenant attorney working for you throughout the process.
This, of course, meant the closure of nearly all businesses to in-person traffic, a restriction that massively impaired the ability of some businesses to generate revenues. Some commercial tenants have worked with their landlords to address problems with meeting rent obligations, but others simply have stopped paying rent. The question you, as a landlord, may wonder is… are there any situations in which they can get away with this?
In most cases, a party initiates a civil lawsuit because it has been harmed and it seeks an award of money damages to compensate it for the harm it suffered. Sometimes, though, the type of harm that is caused by a breach of a contract cannot be corrected through an award of money damages, regardless of the amount. When that is the case, such as in disputes over parcels of real estate, the injured party may seek other remedies, like a court order demanding that the other party complete the performance promised in the contract. This is called specific performance, and it can be difficult to obtain unless your case meets a exact set of criteria. If you have been harmed by another party’s breach of a real estate contract, make sure you have skilled Atlanta real estate attorneys on your side to protect your interests.
One example of a specific performance case was a litigation action recently decided by the Court of Appeals. In the summer of 2016, a man named Rahmat entered into a contractual agreement to purchase a shopping mall plaza from a family limited partnership. The buyer paid earnest money and also paid for an environmental assessment. Furthermore, the buyer allegedly put up more than $450,000 of the property’s $525,000 sale price. After the two sides held a meeting to talk about “expenses related to the ownership and management of the property,” the seller abruptly canceled the contract.
The buyer sued for specific performance. Specific performance, if awarded by a court, means that a reluctant contractual party is ordered by the court to perform as it had promised within the underlying agreement. Specific performance is a rare outcome and requires the judge to determine that an award of money damages could not provide proper compensation to the party allegedly victimized by the breach of the contract. A plaintiff is more likely to obtain an order of specific performance in a real estate sale dispute than in many other types of litigation actions. That is because of the inherently unique nature of a parcel of real estate.
Sometimes, some things that might seem straightforward still require considerable litigation to resolve. This is one reason why, if you are involved in a business dispute, it pays to have an experienced Georgia business litigation attorney working on your behalf. One example in which this was true occurred recently when the Georgia Court of Appeals issued a ruling re-affirming that LLCs are bound by their operating agreements, regardless of whether the LLC signed the agreement or not.
The case that prompted the ruling centered around a business providing outsourced payroll and human resources solutions to medical practices. Four owners of the business established an LLC. The LLC’s operating agreement called for each of its four individual owners, Richard, Helen, Marty, and Robert, to have one vote, either directly or through the owner’s designated entity. Eventually, due to a conflict, counsel advised the parties to combine the ownership interest of Richard and Helen into one new LLC called Practice Benefits LLC.
From 2010 to 2013, the LLC members allowed four votes to be cast – one by Marty, one by Robert, and two by Practice. Then, in 2013, Clark became the LLC’s manager. He refused to allow Practice to continue casting two votes and refused to allow any amendment to the governing documents with regarding to voting procedures.
If you are a creditor, you may not know that assets transferred in divorce settlements can be considered voidable transfers. The court can either reverse the transfer or enter a judgement against the spouse receiving the transferred property.
Under the Uniform Voidable Transactions Act (UVTA), previously known as the Uniform Fraudulent Transfers Act (UFTA), a transfer may be fraudulent or voidable if the debtor made the transfer with intent to hinder, delay, or defraud any creditor of the debtor, or without receiving a reasonably equivalent value for the transferred property.
In a recent case, the Georgia Court of Appeals determined that a divorce settlement transferring assets could be considered a voidable transfer. In Enlow v. Enlow, 352 Ga.App. 865 (2019) https://casetext.com/case/enlow-v-enlow-2 a minor threatened to sue her grandfather for molestation. Twelve days later, the grandfather transferred five parcels of real property in a trust, previously held by him and his wife, solely to his wife. A month later, the couple filed for divorce, and the grandfather deeded all five parcels to the grandmother in the divorce settlement. This settlement was approved by the trial court.
A “fraudulent conveyance” occurs when a debtor tries to avoid paying an unsecured debt by transferring property to another entity or person if the property is at risk of being seized by a creditor. In a Georgia appellate decision, a defendant LLLP appealed the lower court’s granting of an LLC’s motion asking to be substituted for the plaintiff in the lawsuit, as well as its motion for summary judgment denial. The defendant LLLP argued that the lower court had made a mistake in finding that the LLC had standing to recover under the Uniform Fraudulent Transfer Act (“UFTA”) claim.
The case arose in a trial of a different lawsuit. In that case, the court ordered the estate should specifically perform to buy the LLC’s stock from shareholders. A few months later the shareholders sued the estate, the LLLP and others asserting UFTA claims and asking for damages for fraudulent conveyances.
The plaintiffs claimed that a couple had created the LLLP in 2010 in order to transfer $5 million to the company with the goal of defrauding creditors. The couple asked for damages, including satisfaction of the $1.2 million judgment they’d been awarded. The plaintiffs argued that the UFTA allowed voiding of those transfers since they were made in order to defraud, delay or hinder the estate’s creditors (such as the plaintiff).
For many years, lawyers and other scholars of contract law have spoken of a “meeting of the minds.” This refers to a state, sometimes called mutual assent, where there is a common understanding of an agreement’s terms between all of the parties. When there appears to be a meeting of the minds, but subsequent disputes potentially reveal otherwise, then it may require litigation to reach a resolution. Wherever you are in the process, it helps to a knowledgeable Georgia commercial contracts attorney to provide advice and representation to meet your need.
A recent case involving a dispute between a cold storage facility and one of its clients was an example of this issue of assent. The dispute arose after the grass and sod company noticed that some of its stored seed had been damaged by water and rodents, and notified the storage provider of the problem. The grass company eventually sent the storage provider an invoice for $9,625.
A week later, the storage provider sent the grass company a check, but it wasn’t for $9,625. The $275 check represented 50 cents for each pound of damaged product. The storage provider arrived at the 50-cents-per-pound rate based on a set of “Contract Terms and Conditions” that were printed on the reverse side of its warehouse receipt.
Commercial litigation can take on many twists and turns. A skilled Georgia commercial litigation attorney can help you handle your dispute, whatever events take place. For example, in one recent case, which involved a contract dispute between a gas station and its petroleum supplier, the situation became more complex when the gas station filed for bankruptcy and “rejected” the parties’ contract.
The underlying contract that spawned this litigation made a Duluth-based distributor/supplier of petroleum the exclusive provider to a gas station in Suwanee. The contract also required the gas station to buy at least 60,000 gallons of product every month. The agreement additionally called for the distributor to pay the gas station a 2-cents-per-gallon rebate on each gallon the gas station purchased from the distributor Moreover, the distributor processed credit card payments for the gas station.
At a later point, the gas station fell behind on the payments it owed to the distributor. The distributor decided to take action by withholding credit card payments owed to the gas station and netting them out against the sums that it believed the gas station owed it. Along the way, the gas station declared bankruptcy. As part of that action, the gas station “rejected” the supply contract.