Legal Question in Real Estate Law in New Jersey

Re: not paying mortgage

It depends on whether you have a partnership agreement and what it says about partner contributions/payments.

What you cannot do is stop paying on the mortgage, because then you will risk losing the property and everyone's investment in it.

If this is an investment property, shouldn't the rent received from tenant[s] cover your mortgage? Is anyone actively managing the property so that the investment value as well as the property itself is being maintained?

It may be possible to buy out the interest of the non-paying partner, but you will have to negotiate this unless you have a written agreement that provides for a buy-out procedure.

Re: not paying mortgage

So long as the remaining partners can fund the expenses of the partnership for a short time and the sale of the property is not pending, you need not rush into anything. For the moment, keeping track of the paying partner's additional contributions is a bookkeeping matter.

For a long term solution, we need to look to any written partnership agreement that you have or, if there is none, to the default provisions of the NJ business statutes. The mortgagee is also a concern. It is possible that the lender may have relied on the credit history and earnings capability of the non-paying partner in extending credit. For that reason, it is important that you don't just kick him out without understanding the consequences of doing that.

Because this matter could become more complex than is first apparent, I recommend that the paying partners consult with a lawyer who handles business matters. Important documents to have are the partnership agreement or any pre-partnership documents between the partners, the mortgage application, note, and mortgage.

This is the type of matter that my firm handles on a regular basis. If you are not regularly represented by a lawyer, feel free to call or email.

See also: http://info.corbettlaw.net/lawguru.htm