Legal Question in Real Estate Law in California

Legally you cannot have a partner exit a partnership (there are some arcane exceptions, but they are not relevant here). By definition you can only dissolve a partnership, and then the remaining partners form a new partnership if they choose. The exiting party forces a dissolution simply by demanding it, and if the other partners will not comply then by filing a dissolution lawsuit. When a partnership is dissolved, legally its assets must be sold, its debts paid and any remaining proceeds divided equally. Of course the three partners are entitled to negotiate a different dissolution agreement on any terms they like, particularly if the other partners want to keep a partnership going. The base-line, however, is what would each partner get if the assets were sold and the debts paid and the remainder distributed. You negotiate from there. Establishing that net partnership value can be simple or very tricky, and there are all kinds of fancy dispute resolution techniques for breaking a disagreement as to what that value is. A significant part of my practice is providing the services of a professional neutral party to help sort out these issues in real estate matters, and to facilitate the parties reaching an agreement. If you would like to give me a call, we can see if my services might be useful to you and your partners, and if not, I'll be happy just to give you some tips on how to work this out.

Unless the partnership agreement provides otherwise, the provisions of statutory partnership law will govern. For most partnerships formed in California in the last 15 years or so, that will be the Revised Uniform Partnerhip Act, or RUPA codified at sections 16100 to 16962, with the most relevant provisions being 16701 to 16705, collectively entitled "Partner's Dissociation when Business Not Wound Up." (I assume the remaining two partners will continue the business).

Section 16701's subdivision (a) says, in part and with an exception, that the partnership shall cause the dissociated partner's interest in the partnership to be purchased for a buyout price determined pursuant to subdivision (b).

Subdivision (b) of 16701 says the buyout price is based on the value of the dissociated partner's interest as of the date of dissociation, with interest from the date of dissociation. The value is the greater of the liquidation value or the going-concern value. There are some additional wrinkles in the full text of the section, and some procedures for valuation and handling of disputes.

In looking at your items 1, 2 and 3 above, I'd say that these would, or could, figure into the calculation of the buyout price, but to base it solely on these three items is a huge oversimplification, biased in favor of the dissociating partner. There almost certainly are other elements in the calculation, and many of them are likely to have the effect of pulling down the amount that must be paid.

I doubt that the dissociating party is obligated to pay a portion of "selling fees" if they are theoretical future expenses of the partnership. However, commissions that might have to be paid to wind up a real-estate partnership would certainly have some impact on the going-concern value of the partnership. Therefore, the prospect of having to pay commissions might be a negative factor in determining the amount payable to the dissociated partner. Note that the applicable law is rather different if the partnership business is wound up and terminated upon the dissociation of a partner, rather than continued, as I've assumed.

Partnership capital accounts and buy-out requirements are influenced by capital contributions, capital withdrawals, and shares of profits and losses over time. Unrealized profits from selling assets are speculative, and therefore not necessarily equivalent to cash-in-the-bank profits, but do have an impact on the statutory valuation calculation and the buy-out price. You might also want to look at Corps. Code sections 16401 and 16807. All can be found on line.

You are invited to contact me directly for a further, no-obligation, discussion of these issues.

Mr. McCormick's answer is wrong. What he says was true and correct decades ago, before modern partnership law was enacted, but it is no longer the law that the withdrawal (or dissociation) of one partner dissolves the partnership.

No one is 'obligated' to do anything not specified in the Partnership

Agreement. However, any partner can demand dissolution of the partnership, appraisal of interests, and distribution of his share of the assets. Negotiate your way out of this, or litigate it. If you get serious about having counsel to represent you, and if this is in SoCal, feel free to contact me.