Legal Question in Business Law in California

Re: commercial lease up

It sounds as though you have been in a business partnership with someone for at least five years, and now you are using the opportunity of a lease expiration to terminate the partnership.

You are confusing two different concepts, right to possession of real property under a lease and the duties of partners to each other.

The fact that you don't have a written agreement with your partner is almost meaningless. Partnerships can be created on paper, by express oral agreement, or by behavior and conduct. If it acts like a partnership, it is a partnership.

If you were to do what you propose -- and I think you actually have the legal power to do it -- your actions would terminate the partnership. However, having the legal POWER to do something is NOT the same as having the legal RIGHT to do it!

Your former partner would probably sue you. For one thing, your actions would probably look to a court as though YOU withdrew from the partnership, and SHE would be the remaining partner, with full power to continue the business, or wind it up, at her sole election. You would get to keep the building along with the lease obligation; she would get everything else, along with an obligation to cash you out by paying you your share of the business value. (Actually, it's a little more complicated than this, but I can't recite the entire partnership law in a LawGuru answer.) You can look up the Revised Uniform Partnership Act in the Corporations Code, sections 16100 to 16807.

So, it is the partner who decides to withdraw that gets paid off, and the one who didn't withdraw who keeps the business and pays off the other. Further, the size of the payoff is NOT the "depreciated value" of the withdrawing partner's share. It is half of the going-concern value of the business at the moment of withdrawal, with adjustments for the net capital contributions of that partner as shown in the capital accounts on the partnership's books. Could be much more than depreciated value.

In sum, I think you need to be MUCH more cautious about terminating this partnership; you should negotiate something rather than doing a midnight lock change. Partners owe each other a fiduciary duty of candor, loyalty and fair dealing, and your proposed actions don't measure up and thus point to additional legal troubles if you proceed with this plan.