Rick Aidekman and the Crazy World of NYC Landlords-Part 14

This entry is part 14 of 14 in the series Rick Aidekman and the crazy world of NYC Landlords

Rick Aidekman and the Crazy World of NYC Landlords-Part 14, the attorneys

I thought I would give a break to the property owners in this article and talk about some attorneys that I had to deal with over the years.    I thought I would start with one attorney who had a strong education and had graduated from a top law school.   He was obviously bright but appeared to be building a career with some pretty disreputable owners.    I dealt with him on two of my acquisitions, both with the same owner.  The owner he represented had his own issues, one of which is that he spent time in jail for defrauding the government supported lender, Freddi Mac.   

In the first instance, my counsel was negotiating a Purchase and Sale Agreement for us to purchase one of his large apartment buildings in the Bronx.    The property was contiguous to two large building we owned and had invested a substantial amount of money to upgrade the building and its apartments.    The Seller’s property was the worst maintained on the block and was a haven for drug dealers, as the owner was happy to charge them higher than legal rents, in exchange for ignoring their bad behavior.   In any event, in a standard contract for the purchase of any property, the purchaser generally puts up a down payment that is held in escrow pending the outcome of the deal, that is if it closes, the seller keeps the money, if not, the purchaser gets the money back.    The escrow is generally held by the Seller’s attorney or a title company.   In this case, it was to be held in escrow by the Seller’s attorney.    Typically, the escrow agent will agree to escrow terms wherein, if the money disappears and the escrow agent has been negligent, or steals the money for himself, he is responsible.    This attorney refused to have any responsibility, even if he were to keep the money for himself.   He was defiant, that if the money was gone, it was not his problem.    (It is easy to understand that this attorney represented such a client).     Finally, it took the usual walk away threat for the Owner to agree to have the title company hold the escrow.   I always wondered if this attorney intended to grab the money for himself.   

At the closing of the second property we bought from the same owner, the attorney walked into the closing and hour late and in a very loud voice, he stated that he had reviewed the closing adjustments and they were a wash, so we could skip a review.    Closing adjustments, as most will know, are typically building income or expenses that overlap the closing day.   For example, if the owner paid a real estate tax bill for the period of Jan1-June 30 and the closing occurs on May 15, the owner has paid for a period of time when the purchaser will now be the property owner and that portion of taxes prepaid from May 15-June 30, would be an obligation of the Purchaser.    Thus, the adjustment would be that the Purchaser reimburse the owner for the taxes for that period.   Well it turns out that the Seller hadn’t paid taxes, or most of its other expenses for close to a year.   Thus, in fact there was in excess of $150,000 in adjustments due to the Purchaser.   The attorney shouted and yelled that we were wrong.    Again, it took our threat to leave to get him to do an honest accounting, which led to a closing.

Another attorney, who had represented over a dozen of the worst landlords in the City that owned apartment buildings in lower-middle income neighborhoods, had a reputation of being “difficult,” not an uncommon statement about attorneys in the lower end of the real estate world.    With this attorney, he would not let any documents out of his office.   It is customary to have the Seller’s attorney prepare a Purchase and Sale Agreement and give it to the Purchaser’s attorney for his review and comments.    In his case, you had to go to his office, sit in a small, poorly lit cubicle and review the document there.   My attorney wouldn’t do it saying it was insulting and abnormal.    I finally agreed and he went with me to the attorney’s office.   It didn’t start well.   When we received the draft agreement, I notice that there were no representations, which typically appear in a contract.    Representations include guarantees by the Seller that, for example, the building is union or non-union, that there are no tenant strikes, that he is the actual owner, etc.    I asked about whether there was a tenant strike, to which they giggled, and said of course there is no strike.    My partner, then pulled out photographs of tenants with bedsheets hanging out their windows, saying “Tenant Strike.”    They at first denied it was the subject building, but finally acknowledged it.    This became so frustrating, that my attorney took the copy of the contract that he had being marking up and walked out the door of the lawyer’s office.   I chased after him and said, it was up to me, as the client to walk out, not him.   He told me that he couldn’t deal with this animal, and he went to the elevator.    The Seller’s attorney followed, yelling that my attorney could not take the contract out of the office.   My counsel cursed and told them to try and stop him.    My counsel left, marked up copy of contract in hand.    Needless to say, we decided this was not going to happen, and walked away from the deal.

More attorney stories in my next section.

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