My brother and sister are withholding the rent

[Landy]

What is the name of your state (only U.S. law)? Pennsylvania

My brother and sister and I own a commercial building in a LLC. They also are 100% owners of the business that rents that building. They have begun withholding the rent to the three of us and also the buyout payments that I am receiving for my share of the business because of cash flow problems of that business. Do I have a fiduciary duty to them to help finance their short fall with my rent and buyout payments? They claim if they go bankrupt the building will be vacant and I will never get my rent or the buyout payments.

 

[LdiJ]

What is the name of your state (only U.S. law)? Pennsylvania

My brother and sister and I own a commercial building in a LLC. They also are 100% owners of the business that rents that building. They have begun withholding the rent to the three of us and also the buyout payments that I am receiving for my share of the business because of cash flow problems of that business. Do I have a fiduciary duty to them to help finance their short fall with my rent and buyout payments? They claim if they go bankrupt the building will be vacant and I will never get my rent or the buyout payments.

Well, an empty building can be sold, and the proceeds split, but the value of the business will be gone...if it really has any true value. I can understand them stopping their portion of the rent payments but not your portion or the buyout.

 

[Landy]

Well, an empty building can be sold, and the proceeds split, but the value of the business will be gone...if it really has any true value. I can understand them stopping their portion of the rent payments but not your portion or the buyout.

Thank you for your reply. That's why ask about my fiduciary duty. Do I have any fiduciary duty as one third owner of the LLC to help them reduce their expenses at my expense in order to help keep the rent coming in to the LLC in the future? If not I could take steps now to get a lawyer to help me because the promissory note is in default and also take action because of the violation of the lease. Any help would be greatly appreciated.

 

[LdiJ]

Thank you for your reply. That's why ask about my fiduciary duty. Do I have any fiduciary duty as one third owner of the LLC to help them reduce their expenses at my expense in order to help keep the rent coming in to the LLC in the future? If not I could take steps now to get a lawyer to help me because the promissory note is in default and also take action because of the violation of the lease. Any help would be greatly appreciated.

You are NOT 1/3rd owner of the LLC. You sold your share to them. You have no fiduciary duty to the LLC.

Now, from a practical standpoint, if you could examine the books and determine that this is purely a temporary cash flow shortage, for an otherwise healthy business, then it might be more practical to give it a little time to see if things turn around. However, if examining the books show that its a lost cause, then you could be better off taking action now

 

[OK-LL]

You are NOT 1/3rd owner of the LLC. You sold your share to them.

I can't see where you get the idea that OP sold her share of the LLC to her co-members? She is a one-third owner of the LLC. The LLC owns the building. The brother & sister only are owners of a business which rents the building from the LLC.

My response would be, if the business renting the building is failing to pay rent, and the building owner (LLC) wants to take action to cancel the lease, it has the right to do so. It will be up to the LLC's managing member to take such an action, and if that is anyone other than the OP, it's unlikely to happen. But if the LLC does cancel the lease, there's no reason they can't lease the building out to another business in order to maintain the LLC's income. If I were OP, I'd be getting an attorney. The LLC and the business do not have the same goals, and it sounds like the individual LLC members are not in agreement over their goals and actions. It's time to split their interests and go their separate ways, and if I'm OP, I'm wanting my investment back, at a minimum.

 

[LdiJ]

I can't see where you get the idea that OP sold her share of the LLC to her co-members? She is a one-third owner of the LLC. The LLC owns the building. The brother & sister only are owners of a business which rents the building from the LLC.

My response would be, if the business renting the building is failing to pay rent, and the building owner (LLC) wants to take action to cancel the lease, it has the right to do so. It will be up to the LLC's managing member to take such an action, and if that is anyone other than the OP, it's unlikely to happen. But if the LLC does cancel the lease, there's no reason they can't lease the building out to another business in order to maintain the LLC's income. If I were OP, I'd be getting an attorney. The LLC and the business do not have the same goals, and it sounds like the individual LLC members are not in agreement over their goals and actions. It's time to split their interests and go their separate ways, and if I'm OP, I'm wanting my investment back, at a minimum.

I got that mixed up for a moment. Its the business that she doesn't own any of, not the LLC that holds the real estate.

However, I still maintain that she does not have a fiduciary obligation to her brother and sister, but rather they have one to her. The LLC does not need the business. The building can be rented to someone else or sold. They are taking advantage of her in order to salvage or hold onto their business.