I need some legal/ non legal business advice!
Discussion
In a nutshell (or as few words as I can) the potential problem is this:
I jointly own some residential investement properties on a 50/50 basis with my business partner. Lately he has over-extended himself with his own business (as he has a separate company in addition to our partnership).
I am now concerned he is at risk of bankruptcy, if this happens and his assets are frozen or reposessed how do I stand with my 50% share of the jointly owned properties?
Any experienced legal types or anyone out there ever been in a similar situation? I would appreciate any input as I am looking to protect my interests in the event things go badly.
I jointly own some residential investement properties on a 50/50 basis with my business partner. Lately he has over-extended himself with his own business (as he has a separate company in addition to our partnership).
I am now concerned he is at risk of bankruptcy, if this happens and his assets are frozen or reposessed how do I stand with my 50% share of the jointly owned properties?
Any experienced legal types or anyone out there ever been in a similar situation? I would appreciate any input as I am looking to protect my interests in the event things go badly.
telecat said:
If the company in trouble is a Limited Company he is only liable for the amount in it. Others assets should be ok.
correct,
but in the worst case, you may be asked to sell the properties to realise the profit from his 50%, more likely, you would need to buy him out.
Greg
Normally, inder partnership law, every partner is joint and severally liable for the debts incurred by the other partner. As has been already pointed out, the debts incurred by your business partner may actually be in the name of his limied company. If that is indeed the case, those debts should stay with the company and not pass on to him as an individual. However, limited liability status can be compromised if a) he has secured some of the debts of hsi company using privatley owned assets, b) signed personal guarantees for debts taken out by the company c) behaved in a reckless or fraudulent manner as a director of his company. In scenario c), a judge could order that a director could be personally pursued for company debts.
Have you got a formal partnership agreement in place and, if you do, does it have a clause indemnifying one partner from the other partner's debts?
Have you got a formal partnership agreement in place and, if you do, does it have a clause indemnifying one partner from the other partner's debts?
Thanks for the information put forward, I should have mentioned there is no limited liability involved. If the worst does happen it will all fall on him personally and all his peronal assets will be taken into account by his creditors.
I could offer to buy his share but he will refuse at the moment as he doesn't seem to be taking in his real situation.
I assume I would become responsible for the total of all the mortgage repayments. As such the bank we are mortgaged with would be ok, no cause for any action on their part as long as payments are made. It's his other creditors (Banks) I am concerned about. Specifically their treatment of his share of the assets.
I could offer to buy his share but he will refuse at the moment as he doesn't seem to be taking in his real situation.
I assume I would become responsible for the total of all the mortgage repayments. As such the bank we are mortgaged with would be ok, no cause for any action on their part as long as payments are made. It's his other creditors (Banks) I am concerned about. Specifically their treatment of his share of the assets.
Thanks for the information put forward, I should have mentioned there is no limited liability involved. If the worst does happen it will all fall on him personally and all his peronal assets will be taken into account by his creditors.
I could offer to buy his share but he will refuse at the moment as he doesn't seem to be taking in his real situation.
I assume I would become responsible for the total of all the mortgage repayments. As such the bank we are mortgaged with would be ok, no cause for any action on their part as long as payments are made. It's his other creditors (Banks) I am concerned about. Specifically their treatment of his share of the assets.
I could offer to buy his share but he will refuse at the moment as he doesn't seem to be taking in his real situation.
I assume I would become responsible for the total of all the mortgage repayments. As such the bank we are mortgaged with would be ok, no cause for any action on their part as long as payments are made. It's his other creditors (Banks) I am concerned about. Specifically their treatment of his share of the assets.
Yeah, thanks Eric! I am getting concerned as i dont want his issues to affect my credit worthiness.
Also we have no formal Partnership agreement. As for him taking advice, he's not the sort.
He will keep going or bust, I know his attitude. Before anyone berates him or me for being partners in the first place we have been successful partners for 10 years. Only his own personal life has fallen apart and I dont think he cares anymore. Hence my concern.
Also we have no formal Partnership agreement. As for him taking advice, he's not the sort.
He will keep going or bust, I know his attitude. Before anyone berates him or me for being partners in the first place we have been successful partners for 10 years. Only his own personal life has fallen apart and I dont think he cares anymore. Hence my concern.
I would guess that about 90% of business partnersships have no written partnership agreements in place.
Business partnerships are very like marriages. All can be fine, for years - but when things start going awry (not always directly relating to the business either) the partnership can suddenly look awfully shaky.
I would seek out some legal advice, particularly from a solicitor who is well up on partnership law.
>> Edited by Eric Mc on Monday 17th October 16:53
Business partnerships are very like marriages. All can be fine, for years - but when things start going awry (not always directly relating to the business either) the partnership can suddenly look awfully shaky.
I would seek out some legal advice, particularly from a solicitor who is well up on partnership law.
>> Edited by Eric Mc on Monday 17th October 16:53
This is a very technical legal issue but there is a crucial step to take immediately. Check your purchase papers to see if the investment property is held as "joint tenants" or "tenants in common".
Joint tenants own all of the property jointly so if any claims are made on his personal assets they include the full value of the properties.
Tenants in common each have a defined share and any claims on the other owners are limited to their shares.
To protect your interest fully you also need an entry on the registered titles. There is one which is standard to indicate to anyone looking that there is a tenancy in common even though it does not say that in so many words.
The important thing is to get this checked out by a lawyer immediately, preferably the one who acted on the purchase. If you are already tenants in common you just need to make sure that the relevant entry is on the title and your lawyer should be able to check that over the internet and get the forms submitted if it is not there.
If you are joint tenants (which I doubt but it is possible) you will need to serve a notice "severing" the joint tenancy and turning it into a tenancy in common. This is very easy and is simply a letter which your lawyer can prepare.
It is essential that you check this out immediately. You cannot do it after your co-owner is made bankrupt. It is a simple process for a lawyer but do it NOW.
Joint tenants own all of the property jointly so if any claims are made on his personal assets they include the full value of the properties.
Tenants in common each have a defined share and any claims on the other owners are limited to their shares.
To protect your interest fully you also need an entry on the registered titles. There is one which is standard to indicate to anyone looking that there is a tenancy in common even though it does not say that in so many words.
The important thing is to get this checked out by a lawyer immediately, preferably the one who acted on the purchase. If you are already tenants in common you just need to make sure that the relevant entry is on the title and your lawyer should be able to check that over the internet and get the forms submitted if it is not there.
If you are joint tenants (which I doubt but it is possible) you will need to serve a notice "severing" the joint tenancy and turning it into a tenancy in common. This is very easy and is simply a letter which your lawyer can prepare.
It is essential that you check this out immediately. You cannot do it after your co-owner is made bankrupt. It is a simple process for a lawyer but do it NOW.
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