You are paying the price of aggravation over this, and I'm sure it has cost you so much more than the $100 or so it would have cost you to create a "legal agreement" in 2005. Don't make the same mistake again. This is not a do-it-yourself problem with a do-it-yourself solution. Do what you should have done in 2005. Go see a lawyer. Yesterday.
I hope you found my answer helpful. If you did, please click "helpful" and/or "best answer," because doing so helps my Avvo rating. Please also understand that answering this question doesn't make me your lawyer, and my answer is not even an "initial consultation" with me. In answering your question(s), I am merely giving you VERY GENERAL ADVICE based upon your VERY GENERAL QUESTION. If I indicated that you need to see a lawyer personally, then PLEASE DO SO. Good luck to you!
Have you discussed any of the issues with your former friend? The more that you can agree upon, the less time will be required to create a written agreement. Whose name is on the deed, one or both? You will need a lawyer before you are done. Choose wisely.
This response does not create an attorney-client relationship. Unless you are already a client of the Mallory Law Group, pursuant to an executed employment agreement, you should not use, interpret, or rely on this response as legal advice or opinion. Do not act on any information in this response without seeking legal advice. Earl K. Mallory