Welcome to Part 9 in our 12-part series entitled “12 Warning Signs You’re Headed for a Lawsuit with Your Partner”. If you missed Parts 1-8, click here to get to our Real Estate Investor bLAWg where you can find those and many other informative blog posts. The ninth warning sign is …
#9: Partner has past track record of being litigious
You should perform “due diligence” on your prospective partner just like you do due diligence on your investments. One of the things you must investigate is how many times they have been a party to lawsuits. The results can sometimes be shocking. A friend who I had not seen for a long time wanted me to partner with him on a deal. I met him for lunch, told him that I always do a litigation check on all my potential partners and, since I had seen him for years, I asked if he had been involved in any lawsuits. He replied “No, other than the usual landlord-tenant minor matters.” When I got back to my office, I did a 5-minute online search of his county’s court database and discovered that he had had been involved in 69 lawsuits! And that was just in one county! I called him and said that while I appreciated our friendship, I could never be in a partnership with anybody who had been sued so many times and felt so comfortable suing others to resolve a dispute. Out of curiosity, I re-checked his county’s court database a couple of years later and saw that the number of lawsuits to which he was a party had increased to over 100! Glad I passed. Anybody who finds themselves in court frequently should not be high on your list of potential partner candidates…I don’t care how much you like them. Whenever a client tells us they are thinking about partnering with an individual, I always do the same litigation check for them to determine their litigation history AND we always include a written representation and warranty from the partners identifying all litigation they have been involved with. There are a lot of risks in real estate that you cannot predict or protect yourself from, but getting into a partnership with a litigious partner is not one of them. Forewarned is forearmed.
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