Have a business partner who may be taking advantage of me...

Have a business partner who may be taking advantage of me...

Member since 2024 · 9 posts · 3 votes

My partner in my business, a contractor just by himself, has been dragging his feet on our first couple deals the last 6 months on the excuse that his recent separation from his wife is effecting him mentally. Although, I think it's just an excuse to take advantage of me to use the couple houses we got for him to work on as a place to stay and earn extra money from the couple draws we've gotten so far. 

Hos behavior has been upsetting me more lately with him going a week at a time between getting back to me between messages or calls, being ignored for days at a time. Assuring me were close to getting the next stage done and another draw coming soon. With no proof of that happening or often leading into the next week repeatedly. There's other stuff, but just to give you an idea. 


Wondering if I should take some kind of legal action to get him to work right, otherwise I'm gonna lose my mind. It's been 6 weeks since I've seen any progress or we've had another draw, with the payment a month on the place hitting us now, and I'm not sure how to get him to do some dang work and get this project going again. 

He also is not receptive to getting hired help to get things moving faster, assuming he wants to keep the portion of the draw money all to himself on that regard, but still. 

My money is what's tied up in the house as well, another reason I think he isn't as URGENT as I am with getting the place done and sold. 


Just want some advice on what I could do here? The project is in Pennsylvania, by the way.

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Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 3k+ votes
1y

Hang on--this contractor/partner is living in the project house?  And they are not working, making progress, or communicating with you?

You have been paying for your education; errors made in handling this person/partner, and things NOT to do with a contractor.

The solution is simple (not easy):  get rid of this contractor/partner asap.  This is not a time for kum-bai-ya, it's the time for termination of the 'partnership' and eviction from your house.

Or you have hope/faith that they will eventually do what they are supposed to do.  

That decision is up to you; just be aware If you just wait, you will continue paying tuition for your degree at the University of Hard Knocks.

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  • Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 3k+ votes
    1y

    Hang on--this contractor/partner is living in the project house?  And they are not working, making progress, or communicating with you?

    You have been paying for your education; errors made in handling this person/partner, and things NOT to do with a contractor.

    The solution is simple (not easy):  get rid of this contractor/partner asap.  This is not a time for kum-bai-ya, it's the time for termination of the 'partnership' and eviction from your house.

    Or you have hope/faith that they will eventually do what they are supposed to do.  

    That decision is up to you; just be aware If you just wait, you will continue paying tuition for your degree at the University of Hard Knocks.

  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    1y

    Did you have a timeline?  Tell him you need to get moving and if can't do it, then you need to find someone else and it will cut into his share of the profit as it is for work he's meant to do.  Be firm and explain it is costing you money.  I'd also start doing weekly walk throughs so you can see what progress is being made.

    He could be having a hard time with the break up and tell him it is understandable, but it doesn't change the fact that you need to get things done so you can move on.

    Having him live in the place is not a good idea for many reasons, but you live and learn.  If the renos are extensive, the house should not be lived in as it will slow things down, not to mention he may drag his feet, so he has a free place to live.

  • Member since 2024 · 39 posts · 5 votes
    1y

    Well , I think you need to hire another contractor, He's just gonna drag it out, 

    What city and state is it in?, If it's in Ohio, we can help you with that.

  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    1y
    Quote from @Dakota Workman:

    My partner in my business, a contractor just by himself, has been dragging his feet on our first couple deals the last 6 months on the excuse that his recent separation from his wife is effecting him mentally. Although, I think it's just an excuse to take advantage of me to use the couple houses we got for him to work on as a place to stay and earn extra money from the couple draws we've gotten so far. 

    Hos behavior has been upsetting me more lately with him going a week at a time between getting back to me between messages or calls, being ignored for days at a time. Assuring me were close to getting the next stage done and another draw coming soon. With no proof of that happening or often leading into the next week repeatedly. There's other stuff, but just to give you an idea. 


    Wondering if I should take some kind of legal action to get him to work right, otherwise I'm gonna lose my mind. It's been 6 weeks since I've seen any progress or we've had another draw, with the payment a month on the place hitting us now, and I'm not sure how to get him to do some dang work and get this project going again. 

    He also is not receptive to getting hired help to get things moving faster, assuming he wants to keep the portion of the draw money all to himself on that regard, but still. 

    My money is what's tied up in the house as well, another reason I think he isn't as URGENT as I am with getting the place done and sold. 


    Just want some advice on what I could do here? The project is in Pennsylvania, by the way.

    This situation highlights a tough lesson many investors learn the hard way. Partnering with a contractor can be risky, especially if they’re not contributing capital. Without financial skin in the game, there’s often little accountability, and when personal issues arise, you’re left holding the bag.


    In cases like this, it’s crucial to separate roles clearly. If you do involve a contractor in a deal, they should be treated strictly as a third party vendor with defined scopes of work, timelines, and pay tied to performance, not equity or loose partnership terms. When they’re also a partner without capital invested, the misaligned incentives can stall a project, just like you’re experiencing now.


    For your current situation you may want to

    • Review any written agreements in place. Does he have contractual obligations with timelines?

    • Begin documenting all communication moving forward.

    • Consider a formal demand letter (from you or an attorney) if the lack of performance continues

    • Start exploring replacement options or subcontracting critical tasks to avoid further holding costs - I would not care what he thinks, he is not performing


    Ultimately, you need to protect your investment. And unfortunately, if there's no formal operating agreement or contract holding him accountable, your leverage may be limited without legal recourse. You’re right to be concerned. Six weeks of inaction and missed communication is more than a red flag.


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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    1y

    @Dakota Workman It is quite possible that his separation is affecting him mentally. You can have compassion for him but that should NOT stop you from moving forward. 

    like others have said look at your agreements and perhaps go after him legally. However DO NOT wait for a resolution to settle with him. Move on with a  new contractor. 

    I had this happen once and I told my business partner  "stop worrying about getting paid back by the old contractor and just move on a get the project done".  Our project was delayed months at substantial expense while he ruminated on how to get our money back from the old contractor. We never got a penny from him but paid months of high cost interest and lost rent. 

  • Member since 2024 · 9 posts · 3 votes
    1y

    I seriously appreciate all the good advice I got, whether I look foolish from my own ignorance or not, I know I have to take it all seriously.


    Honestly, the first few months were fine, up until his divorce. And it's spiraled downhill since. I've been patient, compassionate of his worries, and more. Everyone is right when you say I have to keep moving forward, regardless. 


    We do have an operating agreement made up for our business LLC, so that'll be helpful. And while no agreement was written up on a timetable, which I obviously regret at this point, that was under the expectation he was doing something to move the project forward, which he's failed on.


    It seems everyone thinks I should reach out to an attorney correct? I'll have to do that soon then. I'll still start with speaking to him to get him to understand and see if that gets the project moving again but the attorney will be the quickest, next immediate option.  

    If I can't be in the area for whatever reason, is a lawyer allowed to check up on him and the house in my place, for walkthroughs or otherwise, or should I find someone else to do such a thing?

    Covering bases here I guess. 

    Also, to add, he is based out in Pennsylvania, the house too. 


    Any other advice to be more aware of in the future going forward, will always be appreciated.

  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    1y

    @Dakota Workman yes you should probably have a lawyer. The operating agreement if well written should cover situations like this. His share may be diluted by your capital contributions for example. Some of your questions can't be answered without knowing exactly what is in your agreements. 

    An option is to amend your operating agreement or other contracts if he is agreeable. This is probably done sooner rather than later, as people who get into financials can lash out as they get more desperate. Unless you really understand contact law you should be speaking to an attorney. 

  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    1y

    @Dakota Workman terminate the partnership and move on with a different contractor.

    My first and only real estate partner embezzled over $20,000 from our account in terms of personal gas, personal purchases, and personal draws.

    We did not have a formal partnership agreement and ended up in court. Cost me the $20,000 to get it resolved but was able to force the partner to buy me out.

    Today 25 years later I walked past one of the two properties to find it fairly dilapidated and the yard overgrown with 1.5’ tall weeds.

    Sad state of affairs.

    But 25 years ago I didn’t know enough about real estate to buy him out.

    Know your value, know your worth. Kick him out and find a new contractor who can finish the projects.

  • Member since 2024 · 9 posts · 3 votes
    1y

    @Alecia Loveless I'm seriously considering it. Especially to avoid something crazy like that. And while we've kept expenses separated and what not, I do worry he could do the same to me.

    He's, no doubt, definitely gotten to make some money from some of the draws we've had, I've at least been able to grab enough from them to keep up on top of bills or what not. Nothing majorly helpful though. Pretty much have to talk him into it just to get something to help. Which feels crappy to begin with.

    We do have a partnership LLC together on this, to add. But he's definitely not the same guy I went into it with, not at this point. Definitely feel like he's using me WAY more than he should, at least indirectly.

    Is it even possible to kick him out of a partnership LLC? Not sure how those different from regular, single member ones, but still. Something has to be done, I don't want to get to such an extreme point like that. But may not have the option anymore.

    Doing this in a different state presents so many challenges on how to handle things and laws and what not. Me, in the state beside his, but still. Any piece of knowledge on it is definitely helpful.

  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    1y

    Forward him this thread… Your venting to the  wrong people… 

  • Real Estate Broker · San Diego, CA · Member since 2016 · 187 posts · 117 votes
    1y

    Hey Dakota,

    What you need to do right now is write down all of the questions you're asking us and any other questions you may have then find an attorney.  

    He/she will want a retainer of course.  email the questions to the attorney, that way you won't be using up so much time asking the questions over the phone and you will get the answers in writing.

    • NY · Member since 2024 · 20 posts · 14 votes
      1y

      I echo what others have written.  It's time for an attorney unfortunately.  Not to force him to finish the job but to get him out of your life so you can hire another contractor to finish the job. 

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