Partnerships.

[steveny]

Here is my question. Two people are involved in a partnership in a real-estate company. One of the two partners has a great deal of experience and the other has very little experience. In fact the other partner has never run a business. Since the business started the partner with little experience has moved 1200 mile away from where the business is located.
The person with experience wants to charge 1/2 of the cost to complete tasks which the other partner can not complete or is not interested in completing.

Example, a piece of property that the business bought and then resold holding the mortgage is now coming back to the partnership because the buyer has declared bankruptcy. A lawyer needs to be contacted to handle the court proceedings, also the lawyer will need to speak with one of the partners several times over the next few months to get the property back in the partnerships name. Also the property will need to be cleaned up and the pipes drained for winter and the property secured. In addition the property will need to be listed for sale again, meeting with real estate agent and phone calls..

So if all these responsibilities fall on just one of the partners, do you think it is ok for the partner who takes care of all these issues to charge the other partner for 1/2 his time, including 1/2 the time spent at the property or 1/2 the time making arrangements by phone. The partner who all the responsibilities would fall upon lives 30 miles from said property. The other partner lives 1200 miles away.
There is no written agreement. The partnership is between 2 friends of 30 years.
The partner will not be losing any ownership or proceeds from sale of the property or partnership. This is simply for work that needs to be done for the partnership.

Here is an example... One partner goes over to the house and drains the pipes and cleans out all the trash left behind. This will make the property bring more at sale benefiting both partners equally because when the property is sold the proceeds will be split 50/50. This partner spends 3 hours at the house doing the above plus drives 30 mile drive each way. So the partner who does the work charges 35 dollars per hour for his time plus 40.5 cents per mile.
3 hours=$105.00
60 miles=$24.30
total===$129.30
1/2 of the total $64.65 charged to the other partner who was unable to help or do any of the tasks needed.

One partner is and has been doing this type of business for his entire life, and still is. The other partner worked in a factory. The partner, who the responsibilities would fall upon, could be draining pipes for paying customers if he were not draining pipes for this partnership.

Friends for 30 years... in business together for less than one year. When the one partner moved the other partner did not know about the move until months after it happened. Before the move all the real-estate in the partnership had been sold. There was no need to discuss the move because the there was no longer a partnership until one of the houses came back by way of foreclosure.
The $65 is an example. The true figures would be in the hundreds of dollars maybe over a thousand.

one partner has offered to sell his half for 10k or buy the others half for 8k

Thanks in advance and feel free to make any comments.

 

[White92]

Wow, that is alot of info to read. So are you one of these said partners? I think the key here is when you said nothing was in writing because they were friends for 30 years. Always get it in writing. Alot of friendships are destroyed over money.

 

[SNDSOUL]

If this is your last property together then there is an easy solution. Hire an outside contractor to drain the pipes and both of you split the bill. At $35 an hour, you are not exactly hooking your partner up(although I understand your time is worth that at least). If you are both paying someone else to do it then neither partner can feel slighted. As far as talking to the attorney, suck it up for the good of the business this last time, resale the property, split the profits a second time and move on as it sounds as though this partnership does not have a forseeable future.

 

[steveny]

I have asked several times to hire an unrelated party to get the work done. He is not interested in paying anyone to do anything other than lawyers fees and transfer fees.

I am sorry if this makes me sound like a prick but I will NOT spend one minute of my time for nothing in return within a partnership. A partnership, to me, means every single cost and profit is split 50/50. If the profit is split 50/50 and the cost to do business is left to one partner than the profit was not exactly split 50/50 was it?

If I have to send my guys, tools, truck over there to spruce up the house I have to pay them with no one to bill for the work. 1/2 the cost belongs to me not all of the cost.

I tried to do a freind a favor and get him out of the factory he was working in. :frown:

 

[steveny]

If this is your last property together then there is an easy solution. Hire an outside contractor to drain the pipes and both of you split the bill. At $35 an hour, you are not exactly hooking your partner up(although I understand your time is worth that at least). If you are both paying someone else to do it then neither partner can feel slighted. As far as talking to the attorney, suck it up for the good of the business this last time, resale the property, split the profits a second time and move on as it sounds as though this partnership does not have a forseeable future.

$35 an hour is my direct cost to run the contractors. If it were a matter of just making a few phone calls to the attorney I would maybe do it. But the attorney is just one of the hassles. There is the matter of getting the property insured, calling and meeting with the insurance agent at the property.
Then meeting with RE agents and appraisers. Dealing with the town for past due tax bills our buyer left unpaid. Making sure the house is cleaned out and ready to show. making sure the driveway gets plowed this winter, or the lawn cut next summer until it sells. The list goes on and on.

 

[steveny]

$35 an hour is my direct cost to run the contractors. If it were a matter of just making a few phone calls to the attorney I would maybe do it. But the attorney is just one of the hassles. There is the matter of getting the property insured, calling and meeting with the insurance agent at the property.
Then meeting with RE agents and appraisers. Dealing with the town for past due tax bills our buyer left unpaid. Making sure the house is cleaned out and ready to show. making sure the driveway gets plowed this winter, or the lawn cut next summer until it sells. The list goes on and on.

I should also add to the list that the two buyers of the property have left the state and will need to be located to sign needed paperwork. Those two are the other partners sister and her husband.
I am so glad that I did this as a side venture with this guy and that I did not bring him into my own RE company like I was going to do at first.

 

[ncdogdoc]

It really comes down to the wording of the original partnership agreement. If everything was agreed upon as 50:50, then yes, he should be responsible. If he was primarily a capital partner, then his share could be greater (or less) depending on how the proceeds were to be divided. Otherwise, act upon the dissolution clause and buy him out, or have another partner buy out his equity.

 

[steveny]

It really comes down to the wording of the original partnership agreement. If everything was agreed upon as 50:50, then yes, he should be responsible. If he was primarily a capital partner, then his share could be greater (or less) depending on how the proceeds were to be divided. Otherwise, act upon the dissolution clause and buy him out, or have another partner buy out his equity.

Everything was to be 50/50. He will sell his half for 10k or buy my 1/2 for 8k. IMO he should not offer what he is not willing to accept.
I would buy his half but because he is f***ing with me and his sister was the buyer I am a little apprehensive to spend any more on this project. It wouldn't be any skin off my back if the place just fell to the ground and rotted.

 

[jimmycinla]

I would take the "fees" (contractors, lawyers etc out of the gross profit) and then do 50/50 split with the remaining profit. If he doesn't want to pay contractors then tell him to fly out and give you a hand in preparing the property for sale, which I believe he should do and not "expect" you to do just because you happen to live near by.
As much as i agree with you, a partnership is a partnership, 50/50 all the time, but they are difficult to enforce between friends and especially when not in writing.
With today's real estate market I think you need to look at the big picture. I am assuming you will have a nice profit since your initial sale. You came up with a figure of hundreds of dollars to maybe a thousand. Compared the the total profit and the 30 year friendship, is it worth the hassle ?

-j-

 

[SNDSOUL]

You're in a no win situation. Have the work done, bill the company(partnership) and have the closing attorney remove the money for paying the bill at the closing. Since you are doing all of the legal legwork, this shouldnt be a problem. The work has to be done one way or another and the company will have to pay for it whether the partner agrees or not. Shit, I dont agree with alot of my bills, but I still have to pay them. Its all part of the game I guess. Sounds like you are getting the short end of the stick for sure. Good Luck as partnerships rarely work no matter how good of friends you start out to be. Money is the root of all evil and the fruit of all labor.

 

[steveny]

I would take the "fees" (contractors, lawyers etc out of the gross profit) and then do 50/50 split with the remaining profit. If he doesn't want to pay contractors then tell him to fly out and give you a hand in preparing the property for sale, which I believe he should do and not "expect" you to do just because you happen to live near by.
As much as i agree with you, a partnership is a partnership, 50/50 all the time, but they are difficult to enforce between friends and especially when not in writing.
With today's real estate market I think you need to look at the big picture. I am assuming you will have a nice profit since your initial sale. You came up with a figure of hundreds of dollars to maybe a thousand. Compared the the total profit and the 30 year friendship, is it worth the hassle ?

-j-

Yes it is worth the hassle. I bought a few properties with this guy and he has done this on all of them. It has been a huge waste of my time and distracting from my other property holdings.
He would not quit his job until the partnership was putting a certain number of dollars in his pocket each month. So how is the business going to build? I was left to do 99% of the management and effort while he worked his job. I even offered to let that continue if he wanted to give me 1/2 his paycheck but he said no.

 

[steveny]

You're in a no win situation. Have the work done, bill the company(partnership) and have the closing attorney remove the money for paying the bill at the closing. Since you are doing all of the legal legwork, this shouldnt be a problem. The work has to be done one way or another and the company will have to pay for it whether the partner agrees or not. Shit, I dont agree with alot of my bills, but I still have to pay them. Its all part of the game I guess. Sounds like you are getting the short end of the stick for sure. Good Luck as partnerships rarely work no matter how good of friends you start out to be. Money is the root of all evil and the fruit of all labor.

No good deed goes unpunished they say.

 

[Sig]

Sounds like the business is saving money by using your services at a 50% discount to market rates. That is more than fair and should be considered a favor. Now if it were to cost out at a premium to open market rates, then that is another question.... however, it sounds like he has already rejected that path.

 

[steveny]

Sounds like the business is saving money by using your services at a 50% discount to market rates. That is more than fair and should be considered a favor. Now if it were to cost out at a premium to open market rates, then that is another question.... however, it sounds like he has already rejected that path.

He is use to me taking care of things for free and he thinks he is going to take a free ride on my coat tails.
I don't think he would take a shit unless someone else was doing the pushing for him, for free.
Deeded Tenancy in common :biggrin: I got a plan :wink: