[WSBARP] Q re Amendment provision

[Jennifer Y. Sohn]

You are right. It is just an agreement among the tenants in common. It shouldn't even be called a partnership agreement. They want to accomplish 2 goals: (1) to ensure that the current guys get to deal amongst themselves first a third party gets involved, and (2) to create a market for their partial interests in real property in the event any one of them needs/wants to sell. I believe these are buy-sell concepts. If we don't call it a partnership agreement and call it an agreement among tenants in common, does that change your analysis?

Thanks for any insight.

Best,

Jennifer

-----Original Message-----
From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Mark Higgins
Sent: Thursday, February 5, 2015 9:19 AM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] Q re Amendment provision

Jennifer--I am confused.  I think you are saying that this partnership owns nothing--that the real estate is owned by three tenants in common.  If the partnership owns nothing what is being bought and sold under the buy-sell provisions in the partnership agreement?  Is the agreement really an agreement among tenants in common?  I don't usually think of a tenants in common agreement as being a partnership agreement.  It might help your analysis if you work through these issues.

Mark

On Wed, Feb 4, 2015 at 10:19 PM, Jennifer Y. Sohn <jennifer at sohn-law.com> wrote:
> I am helping a partnership with revising the buy-sell provisions of 
> its partnership agreement. The partnership is owned by 3 partners – an 
> s-corp who owns 70%, and 2 individuals, each owning 25% and 5%. They 
> own a commercial real estate in CA as tenants-in-common, and have a 
> partnership agreement to govern how they will manage their business 
> relationship. The partnership agreement (which was drafted over 20 
> years ago) allows for any amendments to be made by partner owning 50% 
> or more interest. We are now doing an amendment to the buy-sell provisions in the partnership agreement.
> The partners owning 95% want to leave the amendment provision the same 
> (i.e., allowing partner with 50% or more interest to made amendments), 
> and the 5% owner is insisting that amendment shouldn’t be allowed 
> without a unanimous consent.
>
>
>
> The partnership agreement doesn’t have a governing law section, but 
> the s-corp partner and the 25% guy are in WA, but the 5% partner and 
> the commercial real estate that the partners own are in CA. The atty 
> in CA who represents the 5% partner told me that, under CA statute, 
> the amendment provision in the partnership agreement as written will not hold up in court.
> This is not true for WA – in WA, most of the default partnership rules 
> can be contracted around.
>
>
>
> 1. I wanted to know whether that CA atty’s statement is true (i.e., a 
> partnership agreement that allows for amendments with vote of partner 
> owning more than 50% interest rather than by unanimous vote).
>
> 2.  And, for buy-sell agreements, do you always require unanimous 
> consent to make amendments? Personally, I have seen plenty of 
> partnership and LLC agreements that contain buy-sell provisions that 
> do not require unanimous consent to amend.
>
> 3.  In this situation, if the 5% partner decides not to sign the 
> amendment, can the amendment still be enforceable against him?
>
>
>
> If you have any insights on this, I would really appreciate it.
>
>
>
>
>
>
>
> Best regards,
>
>
>
> Jennifer Y. Sohn
>
> Attorney at Law
>
> (Licensed in CA and WA)
>
> Sohn Law PLLC
>
> 10900 NE 4th Street, Suite 1850
>
> Bellevue, WA 98004
>
> Tel: 206.617.7874
>
> Fax: 425.732.9748
>
> Email: jennifer at sohn-law.com
>
> http://www.sohn-law.com
>
>
>
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--
Mark T. Higgins
Mark T. Higgins, P.C.
P.O. Box 57
Darrington, WA 98241
206-491-2420


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