Business changes fast and furiously, leaving you sometimes stuck between a rock and a hard place in the absence of a business agreement. Imagine a case scenario: you’ve bought a commercial property, but part of it is still being let by a business owner whose business agreement lies with the previous property owner. You think, “Wow, I’ve inherited a customer from the previous property owner. Business is going good right from the start.”
What should your first step be, if you want to make this business agreement or arrangement official and run smoothly? Talk to a corporate lawyer first. Some business owners take people at face value, but in business and in court that’s not good enough. Someone looks trustworthy and you’re a very good judge of character anyway, but suppose they feel the same about you, which is why they do not take any precautions for a rainy day. You shake hands and continue happily doing business without any precautions and no business agreement, until one day everything changes in one single moment: half the rent has been paid, the locks have been changed and CCTV cameras have been set up to watch your every move. You see, your customer is a great guy until he found himself short of cash to pay his rent. Now he’s looking after number one and he will use every means at his disposal to win the battle.
Those precautions would have come handy now, wouldn’t they? Too late to take any precautions, but not too late to find out what your rights are and do something about it. You ask your lawyer to prepare a business agreement but your new customer or business partner refuses to sign it. Moreover, they begin to make changes in the property without your permission, thinking that if they’re leasing it, they have rights that help them manage their business. What are your rights then? They got away with a lot because you’ve allowed them to get away with a lot from day one, so nothing’s stopping them from delaying rent payment or reducing the payment as they see fit. There’s nothing in writing so anything goes, right? Well, speak to your lawyer and find out what your rights are.
Have you verbally agreed the rent amount and payment date? Who pays for your tenant’s business rates, utility bills? Are you able to prove this? Do you have proof of previous payments made by your tenant? You must always protect your business arrangements even if it is an agreement with a family member or a friend, because people forget what they’ve agreed on and things get very tricky when it comes to payment. The one issue that causes most if not all arguments in business is payment – money. There’s nothing wrong with a handshake but it must be documented. You will more than likely not think of the nitty-gritty details but it’s your lawyer’s job to do so.
If you have entered a handshake business agreement, whether it’s worked out so far or has gone sour, please give us a call and we can help you document that handshake. If you’re entering into a business agreement, by all means shake hands on it but whilst you’re handshaking, do agree with your new business partner to document your business partnership. Give us a call and we’ll help you through the initial set up. By Sandra Garcao
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