Does partnership status exist where 4 individuals own an 10 unit multi-family rental income property?

Asked almost 2 years ago - San Francisco, CA

-No owners live in the property.
-Each own the building as tenants in common with 25% interest.
-All share in profits and losses of the property.
-No type of written owners agreement exists.
-No entity exists e.g.LLC.
-However an agreement with a property manager exists signed by all 4 owners.

Are we a partnership or are we simply 4 individuals who own separate TIC interest.

If we are partnership, do state laws govern our partnership. If so, which laws?

In the absence of any agreement, I would like to assert to the owners that our relations to each other are governed by state laws (e.g. "California Code - Article 4: Relations of Partners to Each Other and to Partners") which would provide for a framework of conduct i.e.fiduciary duty, access to records, majority rule.)

Attorney answers (3)

  1. George William Wolff

    Contributor Level 13

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    Answered . Depending on all the details of your relationship and subject to anything contrary that might appear in any writings or agreements between you, it appears that you are a common law general partnership and the provisions of the Corporations Code governing general partnerships, including fiduciary duties etc.

    (There is a brief legal article on our website on this topic, under the heading "business law".)

    Obviously its better to have a written partnership agreement where possible, so that everyone's rights and obligations are clear.

    Is there any current specific dispute between the owners?

    This is NOT legal advice, just a general discussion of the law, as we are not familiar with the specific... more
  2. Andy I Chen

    Contributor Level 12

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    Answered . Hi,

    You guys are a general partnership because you've engaged in a profit-making venture together. In addition, the 4 of you have done formalized things like sign an agreement with a property manager. State laws would govern your partnership. As to which ones, it would depend on what situation you're talking about (e.g. state laws on civil liability, criminal liability, income tax, etc?)

    Hope that helps.

    Andy

    The answer provided above is based upon California and/or New York law and is based solely upon the limited... more
  3. Frank Wei-Hong Chen

    Contributor Level 20

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    Lawyers agree

    1

    Answered . You have a general partnership, governed by Title 2 of the California Corporations Code.

    The same rules for duty of loyalty, access of records, etc. apply.

    Frank W. Chen has been licensed to practice law in California since 1988. The information presented here is... more

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