Legal Question in Real Estate Law in California

Property Sale by General Partnership

3 partners own a vacation home. 2 partners own a total of a 5/6 interest and want to sell the home. 1 partner owns a 1/6 interest and does not want to sell the home. Can the partners with the combined 5/6 interest sell the home for the entire general partnership???

The partners (general partnership agreement) states in the (operations) section: ''all decisions concering the property shall be made by majority vote of the partners''

and in the (Sale or Assignment) section ''any partner's interest in the partnerhsip may be sold or assigned only with the consent of a majority of the other partners''

There is also a (Statement of Partnership) that states ''any two of the avove named partners may convey as defined in Section 15010.1 (2) of the California Corporations Code title to real property standing in the partnership name by a conveyance executed in the partnership name.''

Asked on 7/21/01, 10:35 am

1 Answer from Attorneys

Lloyd Kirschbaum Law Offices of Lloyd Kirschbaum

Re: Property Sale by General Partnership

The short answer is that as the "majority" you can sell the property on behalf of the partnership. However, simply attempting to sell the property out from under the "minority" partner will most likely lead to more problems, particularly if the "minority" partner attempts to stop the sale with a lawsuit claiming (with or without good reason) that you don't have the right to sell it. Such a roadblock could also entitle the "minority" partner to file and record what's known as a "lis pendens" which is Latin for "action pending." That is essentially a notice to the world that there is a lawsuit pending that relates to the title to the real property, and will keep any new buyers from getting title insurance (which in turn will keep any bank from lending any money to buy the property). A better (although more expensive) way to go would be to take the initiative yourselves, and file what is known as a Partition action. People who own property together can't be forced to continue to own that property forever, and if they can't agree to sell all or part of it, a court will agree for them, and "partition" or divide the property according to each of their interests. What happens in 99 out of 100 partition cases is a forced sale, ordered and then supervised by the court, and subsequent equitable division of the proceeds from the sale according to the ownership interests. Courts often "punish" the party that caused the need for such an action by apportioning the costs of the sale (sometimes including attorneys fees) to that party. It sounds to me like a preemptive strike (by filing your own lawsuit) may be more effective than waiting for the "minority" partner to try to stop a sale that you arrange and then counterpunching your way out. Lastly, in a fair number of cases, the simple filing of the partition case brings the non-agreeing party to their senses, and an agreement to sell the property can be reached. Best of luck.

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Answered on 7/23/01, 1:07 pm

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