Editorial
Front Page - Friday, June 25, 2010
Under Analysis
It’s not so easy to develop easy money
Mark Levison
A few years ago, it became fashionable for everyone to redevelop property. Everyone, I mean everyone, thought there was money to be made. Having represented real estate developers for a long time, and being aware of their creativity, salesmanship, vision, risk tolerance and dangerous pursuits, I was always a little taken back when people I knew suddenly started to redevelop properties. Of course, back then, with property values constantly climbing, a significant margin for error was built into the system, you know – easy money.
That day is gone. So, when my future wife got into the residential property development business, I was less than cheerful. In her defense, she didn’t do it on purpose.
It all started when Cheryl worked a deal with a legal south-of-the-border craftsman named Jesus. Cheryl agreed to cover a mortgage for him on a little property – for a short period of time – while he renovated her kitchen, etc.
According to the plan, once the renovation was done, Jesus would take over the mortgage payments and possession of the little house. Jesus was talented in home renovation, and I will forego any jokes about carpentry. Unfortunately, despite the talents which he and the crew he convinced Cheryl to hire possessed, several tasks were taken on, but none of them were ever completed. All of us who have had the courage to take on home renovations know how that goes. Months turned into over a year, and the promised times for job completion kept getting extended. In addition, the cost overruns were staggering.
Long after the time when Jesus was supposed to assume the mortgage payments, Cheryl was making them to keep the property out of foreclosure. Finally, after Jesus had missed the sixth or seventh “final” deadline, Cheryl felt she could absorb no more cost, and make no more mortgage payments.
She told Jesus he would have to leave and she would find someone else to finish the renovation. He promised to be out by a “date certain”, which somehow was extended several times. Months later, and after all the work on Cheryl’s house had ceased, he still wasn’t out.
Finally, Cheryl gave him a day upon which he and all of his property had to be removed. He agreed again. On that day, some of his property was still in the house. Assuming he had abandoned it, Cheryl hired Johnny, a disabled friend, reminiscent of Lennie in Steinbeck’s “Of Mice and Men”, to dump the remaining debris.
A couple of days later, in the middle of drafting a Motion for Summary Judgment, I received a panicked call from Cheryl. She was in the basement of the property where Jesus had been living. Jesus was drinking, and was unhappy with the fact that the things he had left in the house were being thrown out. He threatened to kill her, and called four of his “disciples”, who arrived a lot quicker than the workers every had, and piled out of a truck. One of them lifted up his shirt to reveal a gun. Cheryl headed in for the basement, locked the door and called me.
After Cheryl ran to the basement, her mountainous friend Johnny, grabbed a bat and blocked the front porch in a forceful but calm protective stance. He informed the five males that since he’d already been shot four times, their little gun didn’t intimidate him in the slightest, then started down the stairs after them. This behavior was so macho – or crazy, depending on one’s perspective – that Jesus and his friends turned tail and ran.
Cheryl was now in the redevelopment business. The place was in shambles. Cheryl worked hard, month after month, renovating the property. She eventually offered it for sale and received a contract. Two days before our wedding, a week before the scheduled closing, her real estate agent called. Somebody had broken into the property and removed four old stained glass windows. It looked like an inside job, but it scared the purchasers and they backed out of the contract.
Many more months went by and finally Cheryl received another contract. However, this buyer was getting an FHA loan and his inspector demanded a new roof. The first buyers had thought the existing roof was fine. Nevertheless, Cheryl was counting the days until she could retire as a developer, so she agreed to put on a new roof, and proceeded to contract with the lowest bidder.
The job was set for a Monday and Tuesday, but by the end of the day on Tuesday, it had not been started. Cheryl asked me to telephone the contractor. We’ll call him “Rufus”.
Rufus explained that his people had not put on the roof because they found out they needed a 60-foot ladder. Further, he realized he hadn’t included the dormers in the original bid. There was arguing over that “little oversight”, but Cheryl wanted to get rid of the house, so she agreed to pay Rufus more money.
On Saturday he put on the new roof. The only thing was, he put it on the neighbor’s house. We realized the “problem” late Saturday afternoon. My first fear was that the contract was for the wrong address. A quick drive to my law office relieved that panic. We next took pictures of the addresses on both houses. Each address was big and bold. The neighbor’s new roof looked very good.
On Monday, Rufus called to convince me it was my fault he had put Cheryl’s roof on the neighbor’s house. He told me I should have known he didn’t need a 60-foot ladder. (The neighbor’s house is three stories while Cheryl’s is one and a half.) I reminded him I previously told him I didn’t know why he needed a 60-foot ladder, but that I was a lawyer, not a roofer. I explained that I had enough trouble claiming expertise in the law, and that I had no knowledge, whatsoever, in respect to the proper ladder height needed to replace shingles. Failing on his liability argument, he then turned to damages. He suggested he couldn’t do the job without a lot more money.
It was unfortunate that my door was open, because the words I yelled at Rufus probably shocked and/or entertained a lot of the lawyers and legal assistants in nearby offices. As a last straw, he threatened to hire a lawyer. That did not cause me much concern, in fact, I urged him to hire a lawyer. I told him I knew what the lawyer was going to tell him. That seemed to be the winning argument. He changed his tune and agreed to put on a second new roof.
To his credit, the new roof was fine. Still, throughout my negotiations with Rufus, I kept having two nagging thoughts: I was glad he hadn’t chosen to
be a surgeon, and there is no
seasy money.
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