Bridget Beckett 07.23.2018
ONCE UPON A TIME . . . in the real world. . . Michael and Lisa decided to purchase a four-plex apartment building as an investment. Their idea was to renovate the four-plex, rent out the apartments and enjoy the rental income stream equally. Michael and Lisa were neither family nor friends. They were social acquaintances. As fate would have it, the four-plex was expensive, the rental income stream was sparse and neither Michael nor Lisa had the time, energy or resources to devote to improving their investment.
Michael decided he had enough of his venture into real estate investment and told Lisa he wanted to sell his interest in the four-plex to her. Lisa said she would pay $100 for his interest in the four-plex. Michael said he wanted Lisa to pay $500 for his interest in the four-plex. This is the point at which Michael and Lisa both wished they had played Monopoly during their childhoods, as I did.
Let me take a brief pause in the Michael and Lisa story. In Monopoly, a player may draw the “Go to Jail” card. On the way to jail, the player may pass “Go.” If the player passes “Go,” does the player earn $200 for passing “Go?” Of course, the player passing “Go” will want his $200. The other players will want the player to forfeit the $200. The creators of Monopoly have brilliantly resolved this dilemma. In the instructions, the creators of Monopoly have directed “Go to Jail. Go directly to Jail. Do not pass Go. Do not collect $200.” By having rules/instructions, the creators of Monopoly have resolved any possible conflict among Monopoly players about collecting $200 by passing “Go” on the way to jail. Much like Monopoly, business associates can head off all manner of future conflict by crafting an agreement at the outset of their relationship addressing the “what ifs” of the relationship.
Returning to our story, because Michael and Lisa did not think to address any “what ifs” at the outset of their relationship, when the negotiations regarding the sale price of the four-plex reached an impasse, Michael and Lisa were left with an expensive and cumbersome court process to resolve their impasse. We no longer have jousting as a means of resolving conflict.
The lesson is this. A good attorney can help you with the “what ifs” of forming a business relationship. A well-crafted operating agreement can save time, energy, expense and stress. Much like Monopoly, a good operating agreement will address the “what ifs” of playing the game all the way to the end.
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