Threatening letter buyer's attorney for breach of contract

20 Replies

I'm unlicensed architect, I sold a duplex with entitlements for a lot split and infill single-family. I created the construction documents for the proposed design but chose not to pursue development and sold the property instead. The design of the single-family was not part of the purchase and sale agreement for the property or advertised as such. As per the contract I delivered copies of all the drawings in my possession but did not release the rights to use them or agree to transfer the digital files. 

The contract was for the purchase and sale of the property and nowhere in the contract does it include assignment of intellectual property rights. I offered to cooperate with the buyer and share the drawings for a reasonable fee. 

Today, I received a letter from his attorney requesting I assign all intellectual property rights to my design or agree to damages ($250,000) or to mediation. 

So, who here has gone to mediation? From my perspective, the buyer would rather compensate their lawyer for my design than to compensate the designer. 

Happy Friday, thank you for your thoughts. 

I'm not a legal professional, so take this for what it's worth...

I would recommend that you find a good real estate litigation attorney, use the upfront consultation to determine whether the other party has a case or not, and then go from there.  If the attorney says that the other party might have a case (for whatever reason), it may just be easier to transfer the intellectual property.  If the attorney says they have no case, then you need to decide how much time/effort/money you are willing to expend to fight. 

It's not a fun process, even when you win.  I spent over two years fighting for $50,000 that I was owed.  I got it, but I'm not sure the two years of wasted time and energy was worth it. 

The other big question you need to ask the attorney is whether you'd be entitled to legal fee reimbursement should you win the case -- this is likely addressed in the contract.  Assuming you'd be entitled to attorney fees, it may be worth a strongly worded letter from your attorney laying out your side and reminding the other party and his attorney that it will get expensive should they pursue the case and lose.

There's a good chance that the other party figured it was worth $200 to have his attorney write a letter in the hopes of scaring you.  He may be prepared to back off should you resist in any way.

Don’t let them scare you. Good advice from @J Scott . And, mediation is really nothing anyway....it’s just a forum to negotiate, nothing binding comes out of it unless you agree. 

Personally, I’d tell them to pound sand. I’ve been through a lengthy arbitration process, which is binding, spent almost $60k chasing $19k, got it all back in the end....but it wasn’t fun. 

I feel like we are missing  a substantial part of the story somewhere. What are the damages?

Why would you have to agree to assign the rights OR to mediation. What part of your contract requires you to enter into mediation over something you claim isn't in the contract? 

I would have your attorney review make sure you are in the right, and then respond accordingly. I would not sign up for mediation unless I had no better option.

Thanks for the reassurance gentlemen. I'm looking for a real estate litigation attorney if anyone knows a good one. It's curious they had the letter delivered on Friday at 5:00... The games have begun it would appear. 

Danny, 

Exactly. The buyers offered 250k over asking and claim it would cost them $133,700 to have my plans recreated. The damages would be for misrepresentation despite the buyer verbally telling me he did not regard the entitlements as part of his buying decision. 

wow 250k for plans.. never heard such a thing for a duplex and a house..  I mean we get plans for 2 to 4k that are semi custom total custom are never more than 15 to 20k per.. 

@J Scott   if he used a CAR form there probably is a mandatory mediation clause so you cant sue until you go to mediation first its the same with OR and WA standard realtor contracts.. keeps the courts from being all clogged up and gives retired judges something to do.

Originally posted by @Jay Hinrichs :

wow 250k for plans.. never heard such a thing for a duplex and a house..  I mean we get plans for 2 to 4k that are semi custom total custom are never more than 15 to 20k per.. 

@J Scott  if he used a CAR form there probably is a mandatory mediation clause so you cant sue until you go to mediation first its the same with OR and WA standard realtor contracts.. keeps the courts from being all clogged up and gives retired judges something to do.

Yup, Maryland and Georgia are the same...  I wasn't sure about CA, but I typically assume that mediation won't resolve the issue (it typically only works when both parties are willing to be reasonable, and it sounds like the buyer isn't being reasonable here).  Most likely, the buyer is going to back down when he sees the OP isn't going to give in, or he's going to be prepared to file suit.  So, mediation is just a speed bump on the way to litigation...

Originally posted by @Jay Hinrichs :

wow 250k for plans.. never heard such a thing for a duplex and a house..  I mean we get plans for 2 to 4k that are semi custom total custom are never more than 15 to 20k per.. 

@J Scott   if he used a CAR form there probably is a mandatory mediation clause so you cant sue until you go to mediation first its the same with OR and WA standard realtor contracts.. keeps the courts from being all clogged up and gives retired judges something to do.

The 250k was the accepted offer over asking in a competitive multi-offer scenario. It was offered as a turnkey duplex with the option to subdivide and build if a buyer was interested and wanted to take it on. I did not agree to convey the rights of my design with the property without written agreement and appropriate compensation. It wasn't part of the offer nor part of the negotiation. 

We used a standard CAR Income Property Purchase Agreement that requires mediation and both parties agreed to arbitration of disputes. It reads in in all caps that "you are giving up any rights you might possess to have the dispute litigated in a court or by jury trial" 

I feel like I'm in compliance with the contract and the buyer feels like I'm adding a lien or encumbrance by asking to be compensated for architectural drawings that were not included in the sale. The contract states that the seller is to deliver copies of plans, surveys, etc. which I have. It does not say convey all digital files and assign all intellectual property associated with the creation of the plans ... which is what his attorney is demanding under threat of 250k in damages. 

A sticky situation for sure not made any better with ultimatums and threats. Buyer messed up, made a lot of assumptions. Didn't get what he thought he was going to and decides to threaten the seller with legal action. We'll see what my attorney says on Monday. 



How would they known these plans even existed? If you advertised these, even if not included in the contract, they may need to have been specifically excluded from the contract if they were in fact advertised. 

Here is the thing with both mediation and litigation....everyone 100% thinks they are always right. If you are not going to be in the administrative court, then you might end up pretty surprised at how little your contract means. And if you do end up the administrative court, you might be pretty surprised when the court tells you the contract clause in fact means the opposite of what the laymam reads from it.

@Michael Wlosek

What does it cost to give him the digital copies and rights to the plans

I get plans drawn all the time for .85 to 1$ per square ft if we use the plan off the internet we buy those in addition to not get in trouble with copyright laws. So additional 800-1200 for those so we have the permission to use and modify them

We had a non compete contract we had to enforce was told by 2 law firms it would cost about $7500 to get a injunction and about 45 days to do it.

The other side had lots of money and thought they could make it to expensive for us to continue

$28,500 in attorney fees and 9 months we won. But a real pain of time and mental energy

Sometimes even if your right and costs you a few bucks it’s better to not go to litigation to save the mental damage

Always pay for good advice glad to see your visiting your attorney

Originally posted by @J Scott :
Originally posted by @Jay Hinrichs:

wow 250k for plans.. never heard such a thing for a duplex and a house..  I mean we get plans for 2 to 4k that are semi custom total custom are never more than 15 to 20k per.. 

@J Scott  if he used a CAR form there probably is a mandatory mediation clause so you cant sue until you go to mediation first its the same with OR and WA standard realtor contracts.. keeps the courts from being all clogged up and gives retired judges something to do.

Yup, Maryland and Georgia are the same...  I wasn't sure about CA, but I typically assume that mediation won't resolve the issue (it typically only works when both parties are willing to be reasonable, and it sounds like the buyer isn't being reasonable here).  Most likely, the buyer is going to back down when he sees the OP isn't going to give in, or he's going to be prepared to file suit.  So, mediation is just a speed bump on the way to litigation...

agreed  I have had it go both ways as well..  EM disputes usually get settled cutting the baby down the middle usually works.. although its extremely rare that anyone actually sees the inside of a court room..  they may sue and go through the first stages of filing and depos and orders to compel and all that.. but when reality sets in about how much an actual trial is going to cost that's when they usually have a come to Jesus moment and either settle or go for binding arb. 

 

Why would copies of the plans be included with the sale of the property but not the intellectual property rights? That sounds like you are including the existing plans as part of the sale for the buyers use which is attractive to the right buyer. As a buyer that would be very confusing and misleading. Did you have an agent or lawyer assist you in the sale or did you come up with the wording yourself? Again... I don't get what conveying copies of the plans does for the buyer if they don't have rights to use them? If I'm  buying a property and the contract states that it includes copies of the plans you're right to think I would expect to have the right to use all plans presented in the marketing of the sale and that it included conveyance of the intellectual property rights. Should have been clarified in contract. And if you got 250k over asking... what are you fighting for... maybe I'm misunderstanding your post.  I'm not a lawyer and this is not legal advice... blah blah blah...  

@Account Closed

I would contact a RE Attorney as soon as possible.

I would carefully read over your contract,email,text messages,advertising as

I also believe there seems to be some implied agreement that is somee where



"As per the contract I delivered copies of all the drawings in my possession but did not release the rights to use them or agree to transfer the digital files."  There appears to be an implied agreement that by transferring copies of the drawings, the Buyer has an implied  right to use them. When you advertised the property did you use elevations or verbage to suggest they were included ?

The Buyer obviously connects the use of the drawings with the sale of the property.

Your big question is how much are you willing to invest in legal fees to litigate this. As a counterpoint you might want find out whether your contract calls for Non-Binding or Binding Mediation. If Binding Mediation , then a RE lawyer would be advisable.



It's a common mistake to think of architectural drawings as a product instead of an instrument of service. If an owner hires an architect to design a project, ownership, and copyright of those drawings belong to the architect. The client is granted use of the instruments of service for the specific project for a fee. This protects the architect/designer/engineer from having someone copy their plans without their consent, have it reproduced repeatedly, limits their liability and makes sure they get paid for their work. 

In this case, the buyer and his attorney want me to transfer all rights and ownership so that his architect can recreate the project. No part of the proposed design was advertised or implied to be transferred in the sale nor was it implied or explicit in the contract. 

I'll be making some calls tomorrow. 



Originally posted by @Michael Wlosek:

It's a common mistake to think of architectural drawings as a product instead of an instrument of service. If an owner hires an architect to design a project, ownership, and copyright of those drawings belong to the architect. The client is granted use of the instruments of service for the specific project for a fee. This protects the architect/designer/engineer from having someone copy their plans without their consent, have it reproduced repeatedly, limits their liability and makes sure they get paid for their work. 

In this case, the buyer and his attorney want me to transfer all rights and ownership so that his architect can recreate the project. No part of the proposed design was advertised or implied to be transferred in the sale nor was it implied or explicit in the contract. 

I'll be making some calls tomorrow. 



 Its a very common mistake, which is why good AE service contracts stipulate exactly how you can and cannot use the documents. You are hanging your hat on "copies of the documents to be included". Gut feeling, it isn't going to be worth your time and you will be ok'ing them to use your design. Your plans should have been stamped with "not for construction", and your contract should have explicitly said "drawings are included for reference only, drawings are NOT issued for construction, should owner wish to use drawings for construction they may be purchased for $x plus any changes at our standard hourly rates" (something along theses lines that makes it very clear your intent).

I would probably play chicken with them a little just to see if they back down, but no way would I show up and burn time/money in mediation/court in this case.



@Account Closed Exactly what I have said as a licensed architect. However I am lost as to how they became aware that you had a set of design documents.  

Also as others have stated, if it is not explicitly included in the contract, why they would think it was included with the sale? 

Sounds as though they are trying to scare you into handing them over. 

Originally posted by @Emilio Ramirez :

Why would copies of the plans be included with the sale of the property but not the intellectual property rights? That sounds like you are including the existing plans as part of the sale for the buyers use which is attractive to the right buyer. As a buyer that would be very confusing and misleading. Did you have an agent or lawyer assist you in the sale or did you come up with the wording yourself? Again... I don't get what conveying copies of the plans does for the buyer if they don't have rights to use them? If I'm  buying a property and the contract states that it includes copies of the plans you're right to think I would expect to have the right to use all plans presented in the marketing of the sale and that it included conveyance of the intellectual property rights. Should have been clarified in contract. And if you got 250k over asking... what are you fighting for... maybe I'm misunderstanding your post.  I'm not a lawyer and this is not legal advice... blah blah blah...  

I think you are misinterpreting record drawings showing the exiting conditions for (new) design drawings to change the current property. Two very different documents and intents.

 

@Account Closed Architect here, quick question regarding the sale of the "entitled" property. When you sold the property as entitled am I correct in assuming that the permit was for the drawings you produced? If so I think the buyer may be in a position where you have essential shown them what can be permitted but have removed their ability to utilize said entitlements by withholding the design that's been green-lighted by the jurisdiction. 

I completely get where you are coming from and I more than most think you should protect and value your time and efforts BUT I do think that there was some serious miscommunication between the two parties and that the escalation in price may have been in part due to the misunderstanding that the property was shovel ready when it in fact was not without your drawings.

I imagine at this point you have already spoken to your lawyer but I would search for some middle ground on this as this doesn't from my point of view appear to be solely their mistake. Maybe you offer CA services or find some other way to get some compensation for your time, or you sell them rights for individual use at a discounted rate as an olive branch and to recoup some of your costs. If your plan was to get market rate for architectural services on top of the sale you may be out of luck but if the work put in was to drive the sale this could end up being a little bonus at the end.