When partners jointly own an entire multi-unit building, dissolution involves considerations that go well beyond a single apartment. The rights of tenants, the building’s overall value as a portfolio, and potential redevelopment opportunities all affect the dissolution strategy.
The Building as a Portfolio
An entire building is worth more as a single portfolio than the sum of individual apartments sold separately in many cases. Institutional buyers, developers, and investors may pay a premium for a building they can acquire and manage as a whole.
Dissolution strategy must consider whether the optimal approach is selling the entire building as a portfolio or dissolving individual units separately.
Tenant Rights and Building Dissolution
A multi-unit building typically has multiple tenants with various lease terms. Their rights must be respected throughout the dissolution process. In some cases, protected tenants in the building may significantly affect the property’s value.
Physical Division vs. Sale
If the building is large enough and structured appropriately, it may be possible to physically divide it between the partners, with each partner taking ownership of specific units or floors. This requires legal conversion to shared building (bayit meshutaf) and registration of individual units.
Whether physical division or sale produces better outcomes depends on the partners’ individual needs and the building’s characteristics.
Management During the Dissolution Process
While dissolution proceedings are underway, the building must continue to be managed. Tenants need services, maintenance must be done, and the property must be kept in condition. Clear arrangements for this management period prevent the property from deteriorating and the value from being lost.
Redevelopment Potential
Older buildings in desirable locations may have significant redevelopment potential through urban renewal. Before proceeding with dissolution through sale, it may be worth exploring whether a development project could dramatically increase the value available to the partners.
