The best partnership dissolution case is the one that never happens. Proper planning and documentation at the time of creating a property partnership can prevent the disputes that lead to expensive dissolution proceedings.
The Partnership Agreement as Prevention
A comprehensive partnership agreement drafted at the time of property acquisition is the most powerful tool for preventing future disputes. Such an agreement should address: decision-making processes, expense sharing, rental income distribution, what happens if one partner wants to exit, buyout pricing mechanisms, dispute resolution procedures, and what happens upon a partner’s death or incapacity.
An agreement that anticipates likely friction points and provides clear procedures for resolving them makes dissolution proceedings much less likely.
Keeping Records Throughout the Partnership
Many dissolution disputes are complicated by poor record-keeping. Partners cannot agree on who paid what, when decisions were made, or what the property’s original cost was. Meticulous records of all income, expenses, decisions, and communications throughout the partnership period prevent these factual disputes.
Regular Communication and Review
Partnerships that have regular communication between partners – even informal meetings to discuss the property’s status – are less likely to develop the level of resentment and distrust that leads to dissolution disputes.
Scheduled annual reviews of the partnership arrangement, and prompt attention to any friction that develops, prevent small issues from becoming major conflicts.
Early Mediation When Disputes Arise
When disagreements do arise, addressing them early and constructively prevents escalation. Mediation at the first sign of serious disagreement is far less expensive and disruptive than waiting until the relationship has completely broken down and litigation is the only option.
Planning for Partnership Exit From the Start
Thinking about how the partnership will eventually end – even when the relationship is collaborative and everyone is optimistic – allows for clear exit provisions that all parties find fair. Planning exit terms when everyone is agreeable is infinitely easier than negotiating them when relationships are strained.
