Difficult economy can bring issues on partnerships to boil

<p>SAN RAFAEL – Partnerships can combine individual resources to take advantage of property investment opportunities, but tough times often imperil partners who haven’t seriously addressed a dozen common aspects of the relationship beforehand, according to a longtime real estate law expert.</p><p>Residential and commercial tenants late on their payments can cause a cash-flow crunch for the ownership. Retailers dependent on consumer spending may not be able to make rent payments to owners of a shopping center. Or, perhaps a commercial building gets condemned during a legal war between disgruntled partners.</p><p>These are recurring problems San Rafael-based real estate attorney and property investor Jeffrey Lerman has seen in his 28-year career, and economic downturns only accentuate any underlying issues.</p><p>“Any time you have any kind of business ‘marriage,’ when money gets tight then troubles can come,” Mr. Lerman said.</p><p>Generally, the 12 warning signs he has seen threaten a partnership, limited liability company, tenancy-in-common or other structure result from the partners not having deep discussions before the venture and periodically thereafter as well as not detailing the agreed terms on paper.</p><p>Mr. Lerman suggests those discussions and subsequent written agreements include:</p><p>• Profit and loss proportionment when one partner has more cash than the other</p><p>• Delineation of what each partner contributes to the venture</p><p>• How much each partner must contribute should the business need more capital</p><p>• Determination of who makes the decisions. If the partners have split ownership, they may need to pick one of them as managing partner, assign someone else to break a tie vote or to arbitrate, according to Mr. Lerman.</p><p>His other suggestions for partners to keep their business relationship healthy include:</p><p>• Check each other at the beginning for business successes or failures, legal troubles and litigiousness.</p><p>• Keep orderly records to avoid disputes when profits are distributed or capital infusions are needed.</p><p>• Use attorneys with experience in the types of contracts and documents drafted.</p><p>Also tearing at joint-venture cohesion is a sense that the other partners aren’t putting in as much effort or taking as much risk, he said.</p><p>Ventures that involve family members also loosen the “glue” of the original business relationship when longstand-ing family matters enter business decisions, according to Mr. Lerman.</p><p>“The potential for problems is greater in those situations because of the existing relationships,” he said.</p>