Partnership Agreement Can Resolve Real Estate Title Transfer Dispute

Q: I had a partnership with another guy for 30 years with a buy and sell agreement and with a right of first refusal.

We owned a building with several stores. His wife received the rents and paid the bills. I had the security money and did the books.

At one point in time he became ill and he quit claimed his share of the building to his wife without telling me. We had money and utility property assets in the partnership. Can he legally do that? Is she now a partner in the building partnership? Does she own half of everything?

A: I’m not an attorney, but when people own real estate, they frequently enter into partnership agreements to handle the affairs of the building they own.

But the partnership can take different forms. In a more formal arrangement, the partners create and sign a partnership document describing the duties of the partners to the partnership and to each other and the benefits they get out of the partnership. The partnership would own the building and all assets of the partnership would be in the name of the partnership.

But sometimes people are less formal and they buy property in their own names and then sign a partnership agreement that provides for the duties and rights each partner has.

Frequently, unmarried couples will buy a home together but will sign an agreement that will resemble a partnership agreement that will discuss the responsibilities of each owner to pay expenses of the home, what happens should either person die or if the couple breaks up.

But for financing and ownership purposes, the couple buys the home in their own names. They can finance the property with greater ease and they do not operate the home as if it was a business.

In the more formal arrangement, the building would be owned by the partnership and if title to the building is in the partnership’s name, one of the owners can’t convey title to the partnership to a third party unless the transfer of title is done in the partnership’s name.

That is to say, if John and Fred own a building under the name of JF Partners, Fred could not sell the building under his name or may not be able to sell his share of the building to anybody. Fred could, however, sell his partnership interest to someone, provided the partnership documents allow the sale.

Given this information, if you and your friend owned the property in your names, your friend could transfer his ownership interest to his wife using a quit claim deed or other real estate transfer document. But if the property is in the name of the partnership and he quit claimed all interest he had in the property, his wife should not have received any interest in the building that is owned by the partnership.

Your friend could have transferred his share of the partnership to his wife by following the mechanism set forth in the partnership agreement allowing for the sale of a partner’s interest. But in that case, the transfer documentation would not be a quit claim deed or other real estate transaction document, but, rather a document that would convey a partner’s interest to a third party.

It would be as if a corporation owned a building. For that corporation to sell the building, the corporation would have to be the seller of the building. But the shareholders might be able to sell their shares in the corporation to each other and other people.

Now if the partnership did not own the building and he has successfully transferred title to the home to his wife, your former partner would have violated the terms of your partnership agreement. If you had the document property drafted, the document might give you the right to force the wife to sell you her share of the property or might have some penalty for the transfer that went against the agreement you and he had.

If having the wife as your new partner is a real problem for you, you will have to talk to an attorney to go over the documentation that was signed along with the documents relating to the property to determine what course of action you should take.

Keep me posted as to what happens.


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