Posted by JohnBoy on September 05, 2004 at 10:30:53:
I assume this is part of your original contract and not a separate release?
What else does your contract say? Doesn’t it say anything about you agreeing to make any payments on the seller’s loan?
Bill, Assigned Sub2 -now sued - Posted by JB
Posted by JB on September 04, 2004 at 08:59:54:
Bill,
Need some specific guidance. Took a house Sub2 about 5 months ago and assigned our beneficial interest and the trustee position to another investor. The investor defaulted on payments and actually placed someone in the house and I assume probably collected rent money from them and come to find out that they subsequently assigned the beneficial interest to yet another investor.
3 months ago we got a call from the original owner that they were getting notice of 3 months payments due and possible foreclosure and said someone was living in the house. We were sympathetic to their situation and directed them to the person we sold the beneficial interest to and their phone number. We got a call back and they said they talked to him and that he apologized and said the payments would be made and that the house would be shortly cashed out.
We received a call a 2 months later that payments were not made as promised by the investor we assigned it to and that the investor had subsequently assigned it to another investor during that 2 months who did not make payments.
Yesterday, we get sued from the original owner. The suit says we are responsible for all payments and asks the court to return the title to the previous owners as this was a sham and claims the investor who we assigned it to is an associate of “our” company; which is all completely false and that we promised them to “have the house cashed out completely in 3 months if they put it in trust and relied upon our expertise as an investor”. FALSE! And, of course claims fraud.
Bill, utilizing your forms in this transaction what should I point my attorney to in the forms to forego a lengthy and costly process. Is there a one-two answer to the suit to negate being found liable for the loan payments the other investors did not pay??? Need some guidance to help my attorney knock this out quickly without costing a fortune.
Help
JB
Hire counsel… - Posted by William Bronchick
Posted by William Bronchick on September 07, 2004 at 09:51:35:
You need to hire counsel to represent you in this suit. Selling a
property “subject-to” that you bought “sub2” is a very risky
proposition, since the end-buyer’s default can result in your liability. I
read your disclosure, and it will help you, but ultimately any lawsuit
comes down to what a court believes you told the sellers and whether,
in fact, they were misled.
Don’t proceed further without hiring a local atty.
Re: Bill, Assigned Sub2 -now sued - Posted by JohnBoy
Posted by JohnBoy on September 04, 2004 at 22:21:16:
I doubt you will get an answer to this because you are asking for specific legal advice which the attorneys here won’t answer. You need to post general questions where they don’t pertain to specific legal matters.
Instead of asking about a specific matter, ask in a general matter.
Example:
Suppose an investor buys a property subject to the existing mortgage and later assigns their interest to another investor. Then that investor assigns their interest to another investor. Investor 1 makes the seller’s payments as agreed. Investor 2 never makes any payments. Then assigns to investor 3 and investor 3 never makes any payments. The seller files suit against investor 1 claiming fraud and making false accuations about what they originally agreed to. Is investor 1 liable to the seller because investor 2 and 3 never made the payments like they agreed to do? What could investor 1 do to resolve the matter quickly and avoid a costly lawsuit?
Notice how the questions don’t pertain to a specific person? It’s more of a general question. This would have a better chance of getting answered.
As to your situation, my question to you would be…did you get a signed release of liability signed by the seller when you assigned your interest to another investor? If not, then you are liable to the seller regardless of who you assigned your interest to. The seller has a contract with YOU, not the other investor. So you remain liable to the seller the same as the seller remains liable to the bank for the mortgage they have on the property. The seller does not escape liability from the lender for the loan they took on the property. Why would you escape liability from the seller on the contract you have with them just because you assigned it to someone else?
Unless you got a signed release of liability from the seller when you assigned your contract to someone else, then you are probably going to be held liable to the seller for making their payments like you agreed to do when you entered into a contract with them. Just because you assigned your contract does not let you off the hook. That is between you and the investor you assigned to.
So without a signed release of liability from the seller, then the way this is likely going to go down is the seller will sue you (which they are doing), you will be held liable to the seller since you breached your contract with them. You would have to sue the investor you assigned to and that investor would have to sue the investor they assigned to. You have a chain of lawsuits to go through to get this mess cleared up.
The easiest and quickest way for you to clear this up is probably by getting the investor who has it now to assign the property back to you and you get the payments made and caught up before it gets really ugly. This is going to be the quickest and least expensive route to take if you can get the seller calmed down enough to drop their suit if you agree to step in and catch everything up.
The bottom line is this. YOU agreed to take over the payments. YOU then assigned your interest to someone else leaving the seller stuck with depending on some other stranger to make their payments instead of you. Then that stranger assigns everything to another stranger. Now the seller is the one left hanging with a foreclosure suit hanging over their head and their credit being damaged all because of you not living up to your end the agreement you had with them. Can you honestly blame the seller for suing you???
My opinion. Do whatever it takes to get this resolved with the seller ASAP!
In the future, don’t assign subject to deals. And if you do then make sure you get a signed release of liability signed from the seller where the seller accepts and acknowledges the fact another buyer is taking over their property and they are in full agreement with it and releasing you from any future liability.
Release of Liability - Posted by JB
Posted by JB on September 05, 2004 at 08:53:36:
Thank you for the response:
The Acknowledgement they signed specifically states in bold print: "Seller agrees to hold Purchaser, his/her heirs, and/or assigns harmless of any action, nonpayment, or defamation of Seller’s credit including but not limited to late payments, credit score decline, foreclosure, and any and all other outcomes which arise from Purchaser’s action or non action as it pertains to said property and affected loan. Seller agrees that liquidated damages for any and all disputes has been paid today in hand and Seller acknowledges receipt of payment and declares it to be sufficient for any and all disputes that may arise.
Signed and notarized.
Would this be similar to what you are mentioning???
JB