As Los Angeles real estate litigation attorneys we are often called upon to help clients untangle a messy “partnership” dispute. But when clients call with a “partnership” issue they can be referring to a variety of different situations. What we commonly refer to as partners could include actual partners in a legally recognizable general partnership. Or limited partners in a limited partnership. Or Members in a Limited Liability Company. Or co-owners of a property who hold title as Tenants-In-Common.
Here is a quick comparison of the different ways that we partner with others and what that means legally:
A general partnership in California is old-school. In a general partnership there were general partners with unlimited liability. With the introduction of the Limited Liability Company, which affords corporate protection to everyone, the general partnership is a disfavored approach.
Similarly a limited partnership would include at least one general partner (unlimited liability) and limited partners (limited liability). A developer would typically be the general partner and his investors would be the limited partners. This structure is also rarely used today because the LLC offers better protection.
Members in a Limited Liability Company:
While the legal jargon labels LLC parties as ‘Members’, we conversationally think of Members as partners. However, different laws apply to Member disputes versus partnership disputes, although many of the ideas are similar.
Co-owners usually hold property as tenants-in-common. Oftentimes there is no written agreement—just a grant deed naming the various co-owners. In the family lawsuits, we handle the family members have bought or inherited a property together and are all listed on the grant deed. Sometimes in more sophisticated situations the co-owners will have a tenancy-in-common agreement outlining each co-owners obligations.
Each of these ownership situations involves a different legal remedy when things disintegrate into a lawsuit. The biggest distinction is between a partnership or LLC lawsuit and a partition lawsuit.
Partners are each a party to an entity. Bob Smith may be a partner in Downtown Commercial Property partnership. And Downtown Commercial Property Partnership may own a building. But the partnership itself is on title to the property, not Bob Smith. Bob Smith has a personal interest in the partnership but not a real property interest in the property owned by the partnership. Mr. Smith may not file a lawsuit to partition the property (force its sale). Instead he is limited by his rights under the partnership law and the written partnership agreement.
Co-owners who hold title as tenants-in-common will all show up on the deed to a property. As co-owners they are entitled to partition. In a partition lawsuit the court will order that the property be divided up or sold with the profits then distributed. While the court prefers division only land is usually suitable for division. A home or a commercial building will typically have to be sold. Co-owners almost always have an absolute right to partition. The court will not force co-owners to remain
co-owners against their will. A partition may also include an accounting to equalize contributions and distributions.
We protect your property. Laine Wagenseller and the attorneys at Wagenseller Law Firm specialize in real estate lawsuits. Call us at (213) 286-0371.