There are clients you regret agreeing to serve right after you did, and there are times you regret not listening to your inner voice or to an outside warning and agreeing to serve them.
When he sat in my office and presented the company's project portfolio it sounded impressive, and the presentations he sent right after the meeting were polished and looked like the dream of every potential investor. But the “talk” in the market about his company was that it was an inflated balloon, that his brothers abroad were supposed to bring the financing and are currently in a feud. I thought all of this was background noise; after all, I know the marketing company that sent him to me, they are serious, they surely checked, and if they are willing to market the project for him, why shouldn't I serve as trustee of the buyers' funds?
I sent him a fee quote, and he signed it without haggling, and the next day his secretary was already calling to arrange a work trip to meet the local lawyer accompanying him and to see the building he was about to buy and convert into an apart-hotel on the shore of the Black Sea. This is a building whose construction has not yet been completed because the owner cannot finance the loans he took and the bank wants to sell. During the meetings we also met with representatives of the bank and it was agreed that upon completion of the consideration the building would be transferred to the ownership of the client's company and at the same time pledged in favor of the trustee, in my favor, so that the client could use future buyers' funds to finance the equity completion for the purchase of the building. With his local lawyer we agreed on the milestones for transferring the buyers' balance of consideration in accordance with the progress of the work to complete the building, the way the apartments in the building would be registered in the buyers' names, and the set of documents he needed for that.
When sales began, the problems emerged. The order and organization that are so important to us were lacking. With every client who came we had to chase the developer and his team to get the full details of the sale in order to prepare the documents for signing, and each time we discovered anew that promises or commitments had been given that they “forgot” to tell us about, and we found out about them after the buyer came to us with complaints that the contract did not match what had been agreed. We had quite a few arguments after buyer A was promised payment terms that were different and did not match the milestones we had set, or with buyer B they agreed on works or fixtures to be installed in his apartment that differed from the rest of the apartments (which naturally makes it harder for us to monitor the execution of the works or the fitting out).
The progress reports arrived in a manner that made it difficult for me, as trustee, to release funds to the developer, whether because they were not accompanied by photos, as agreed from the outset, or because they included details suggesting we had not reached the “milestone” as committed and funds could be released. Each time we had unpleasant conversations about it, to the point of raised voices.
The climax came when one of the buyers contacted me and said that he had visited the building and for a whole week had not seen workers working at the site, and it looked to him as if the site was abandoned. A phone call with the local lawyer confirmed the concerns, when it turned out that for over a month no work had been carried out at the site because the contractor who had been hired claimed that a debt owed to him had not been paid for several months, and all this while we were already slightly late with regard to the company's commitment to deliver the ready apartments to the buyers.
The next phone call between us was not pleasant, and the meeting that followed even less so. I informed the developer that from this moment on, to the extent it depended on me as trustee, the money would be paid directly to the suppliers and not to the company. He objected. Raged. Shouted to the point that the office staff had to come in to see that everything was all right.
As trustee, my duty is to make sure that the funds of the apartment buyers reach their destination. I do not have the authority or the ability to control and see what the developer does with the funds transferred to the selling company, as long as he meets the requirements of the agreement in terms of the documents brought before me demonstrating that we have reached the stage at which, according to the agreement between the developer and the buyer, I am supposed to release the funds.
In this case, in order to ensure the completion of the project, I exceeded my authority in order to secure the buyers' funds and make sure the project would reach completion, and I intervened directly in the developer's conduct to the point that I put myself in his place, but I believe that had I not done so, to this day this project would not have reached the finish line. To this day I do not understand, and I did not check, what was done with the funds transferred to the company, since to the best of my estimate the developer was supposed to have all the sums required to pay all the payments and complete the construction, and as evidence, when we “took command” of the payments to the executing contractor and the rest of the suppliers, the works returned to order and within about two months we managed to complete the works and deliver the building to the buyers.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית