Legal Question in Real Estate Law in California

I purchased a property with a friend a few years ago. It is a duplex, so we each had our own unit. Our agreemnt when we bought the property was simply to equally split the mortgage/taxes/insurance and costs for CAM. And, if we sold or refinanced the property we would split costs/gains. Other than this, I was solely responsible for my unit, including costs to remodel etc., and she was responsible for hers. Since this time we have each moved out and rented our units. Even during times when one of us had a tenant and the other didn't, we maintained our agreement that we were independently responsible for our own unit and the person without a tenant would pay their half of the mortgage out of their own pocket. Now, a few years later, she is suing me for a "dissolution of partnership" and she wants full accounting of all the rent I collected on my unit (profits/losses). We never had an agreement to discuss nor disclose how we managed our unit, and it was not purchased with the intent of being operated or treated as a business. Is what we had a "Partnership" in the legal sense? Do I have any protection against this sense we agreed to manage our units separately? If you can refer me to any legal text, I'd appreciate it. The more info the merrier.


Asked on 9/29/09, 12:32 am

2 Answers from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Under California partnership law, co-ownership of property in and of itself does not create a partnership, and this is tru even if there is a degree of sharing profits and losses. It is the intent to operate a business together as co-owners that is the main hallmark of a partnership. On the surface at least, I'd say this is not a partnership. It is late at night. I'll try to get back to you tomorrow, or e-mail me privately with details for a sharper free analysis.

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Answered on 9/29/09, 12:53 am

A key question is whether you got any of this in writing. Although Mr. Whipple is right that mere co-ownership does not create a partnership, it does create a complex web of mutual rights and obligations that starts to look a lot like a partnership. Add to that the single mortgage, shared expenses, etc., and there's definitely a case to be made that you had a partnership. And even if there is no partnership, there is law to the effect that co-tenants have an equal right to all rents and profits generated by the property. So partnership or not, you don't have a slam-dunk win in the absence of a written agreement on the terms you outline. On the other hand, depending on how it all plays out with the numbers, and if you plowed most or all of your rental income into the mortgage, joint expenses, and remodeling, you may come out ahead.

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Answered on 9/29/09, 1:23 am


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