So every now and then I am tasked with drafting or reviewing real estate partnership agreements. As a real estate attorney, my objective is not to tell people what’s the “best” way to form real estate partnerships. I don’t think that I can honestly answer that question anyway. My goal is to make sure that the parties understand their roles and obligations, and to anticipate legal issues. The easiest way for me to do this is by asking questions.
Here are questions that I believe agreements for real estate partnerships should answer from a legal perspective. I’m doing my best to ask the least amount of questions as possible.
Warning, it starts super basic.
- What is the name of the partnership?
- What is the principal place of business of the partnership?
- What is the purpose of the partnership?
- Should partners and/or the partnership guaranty loans?
- How will the partnership be taxed?
- How many partners will there be?
- What is the role of each partner?
- How will partners hold each other accountable?
- Will the partnership be general or limited?
- Will a partner’s contractual obligations bind me?
- Will the partners form a business entity?
- How will title to property held by a partnership be held?
- What is the initial contribution of each partner?
- Will additional funds be required of partners in the future?
- Do you anticipate the admission of future partners?
- Who or how will day to day activities be managed?
- How will the partnership be managed overall?
- What if partners disagree on a decision?
- How will partnership books be kept?
- How will profits and losses be divided? (50/50, 70/30, 90/10)?
- Will partners be entitled to salaries?
- Should partnership interest be freely transferable?
- If not, what procedures should apply?
- Under what circumstances should the partnership terminate?
- Should the partnership have a fixed term?
- Should some partners have more say than others?
- What happens if a partner files for bankruptcy?
- What happens if a partner dies or becomes legally incompetent?
- What happens if the partners have a legal dispute?
- What happens if a partner wants out?
- Should there be a non-compete agreement?
- If so, should it be limited?
- What is the procedure to amending the partnership agreement?
Are there any more questions you think should be added to the list of questions to consider before forming real estate partnerships?
Please let us know in the comments! This list of questions is a work-in-progress so I greatly appreciate any help. 😊
Also, if your firm needs help forming real estate partnerships do not hesitate to contact The Pendergraft Firm, LLC.
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