Lessons from massive New York real estate deal dispute

On behalf of Steven Waldinger

Two lessons from the recent Margaritaville real estate dispute.

Real estate disputes can take years to unfold. A recent case provides an example. It began with a contract agreement and negotiations in 2011 and resulted in a lawsuit recently filed in court. The parties to the lawsuit include a large brokerage firm and the Margaritaville hotel and restaurant chain. The brokerage firm claims it provided the famous chain with services that led to its recent New York expansion.

The claim began with conversations in 2011 and led to a contract in 2012. At that time, the brokerage firm claims it reached out to the company to help it search for a potential expansion location in New York.

The firm states it entered an exclusive agreement with the company. The terms included sole representation and a requirement that Margaritaville representatives would reach out to the firm with any questions about expansion into the Manhattan area. The firm also claims the contract included language requiring the company to inform the firm of any competing offers. According to the firm, the parties entered the agreement with a one-year end date. When the agreement reached the end date, the parties allegedly chose to extend the deal through June 30, 2017.

The firm provided evidence of its work with the company. This evidence included showing Margaritaville executives multiple potential locations throughout the East Coast.

What went wrong?

It appears Margaritaville executives got a better offer while still under contract with the brokerage firm. The firm states Margaritaville agreed to work with a competitor before their contract had expired. Leaders within the brokerage firm state they were assured that they would “work something out” by Margaritaville executives prior to the end of the contract. Yet the firm has yet to receive a deal. As a result, the firm has filed suit against Margaritaville for breach of contract. The firm states it is owed at least $3.5 million.

What can others learn from this dispute?

The case is ongoing but provides valuable lessons for brokerage firms, investors and companies looking to expand. Two examples include:

• The power of the written word. Leaders within the firm relied on assurance from Margaritaville executives that they would “work something out.” Unfortunately, these assurances proved false. It is generally best to rely on the provisions within the contract and push for
• The importance of the contract. The outcome of this case will likely hinge on the language used within the initial contract agreement. If it was well drafted, the brokerage firm should have a good chance of winning the case.

Those who find themselves navigating similar issues are wise to act promptly to protect their interests. An attorney experienced in real estate matters can review the case and provide guidance.