Legal Question in Business Law in Texas

Business Law

An investment in a Real Estate Limited Partnership developing 138 acres in Mansfield, Texas wants to change the interest rate on Class 'D' investors.

They offered 150% rate for 90 days in 2006. They have had trouble finding funding and want to change the rate to 18% since inception.

They are saying without cooperation the project will have difficulty even getting our principle back.

I don't feel comfortable accepting this offer without complete & full knowledge of the finances on the project including the sale of all lots at x dollars.

Is there any way to get all the financial info and who are all the other class D investors from the partnership?


Asked on 2/22/08, 10:18 pm

1 Answer from Attorneys

Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Business Law

I gather that you are a California investor in a limited partnership organized under the laws of Texas. If so, as you seem to know, Texas law will apply, and as a California attorney I can only tell you that in your circumstances you will need an answer from an attorney who is licensed in Texas.

Going beyond your specific situation, and addressing limited partners in general, I can say that in many states it is possible for limited partners to demand information of the kind you want and to enforce that demand with legal action if necessary. Limited partners can often also bring the limited-partnership equivalent of a corporate shareholders' derivative action to oblige the general partners to observe the partnership agreement and/or to carry out their fiduciary responsibilities. Limited partner suits are a specialty and should be referred to law firms (a) in the state with jurisdiction, and (b) with prior experience in this specific area. If their hourly rate is higher to start, the suing limited partners will save in the short run because there will be less of a learing curve, and in the longer run because the results will be better.

Hopefully, a little pressure on the general partners will get your answers for you, short of suit. In the longest run, everyone is dependent upon the general partners and managers to exercise wisdom, experience and good faith so the limiteds make money along with the promoters and general partners, who have doubtless figured out how to feather their nests, come hell or high water.

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Answered on 2/22/08, 11:33 pm


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