Legal Question in Real Estate Law in California

Re: Real Estate - Equity Share

The first question here would be whether the facts show a general partnership so that the parties' rights and obligations should be analyzed under partnership law. Someone who merely "invests" may be nothing more than a lender, and the fact that some of the interest to be paid the lender is conditional upon the profitability of the investment is not necessarily enough to make the deal a partnership. One of the hallmarks of a partnership is that an investor doesn't have an absolute right to repayment of her money, but expressly or by implication agrees to share in losses as well.

Further, it doesn't require an express (written or oral) partnership agreement to form a partnership; the existence of a partnership only requires the factual circumstances of a partnership - the association of two or more persons to carry on as coowners .a business for profit. A partnership can be formed whether or not the partners intended their relationship to be a partnership.

Co-ownership of real estate as tenants in common, or even as joint tenants,sometimes, but certainly not always, results in a partnership, or is a factor tending to show there is a partnership. Your question does not state whether the investor is "on title" to the property; this is not decisive but could lend support to a partnership theory.

If it is a partnership, the risks and losses you describe will be shared as set forth in the partnership agreement, if any. If it is a partnership with no agreement, a court would struggle with the facts to determine the parties' a prioi assumption as to how losses would be divded (with "equally" being the default if no contrary agreement were expressed or could be inferred).

So, in broad terms, if she is an investor she is more likely to be entitled to full payment, but if she is a partner, more likely must share the losses.

I further assume that there was no security given to the investor, such as a mortgage or deed of trust. If there were, that could raise a ton of additional issues.