property partnership

[ryantommy7]

Hi all, wonder if I could get some opinions on the following situation. Many years ago some friends of mine entered into a partnership operating buy to let properties. Party A put up all of the initial capital and party B was to handle the rentals, maintenance etc.. with both receiving a 50% stake. The initial capital was used a deposit ( roughly 10% ) to purchase numerous properties. Over the years party B operated the business often at a deficit and funded the shortfall out of their own pockets. After many years and a huge amount of equity built up in the properties party b has informed party a that they are now a minority shareholder in the venture and essentially entitled to nothing offering them a few thousand to hand over their stake. The accountant who prepares the accounts is the personal accountant of party b and an old friend also. The accountant is very elderly and seemed not able to provide a clear explanation of exactly how he came to this conclusion has retired his practice in the middle of this. Does anyone have any ideas of exactly what methods should be applied to calculate the fair split of equity in the properties? Is there some sort of partnership accounting that would take into account the stages at which party b introduced new money to fund the operational shortfall and how much of this affects the split of ownership in the leveraged properties ?

 

[bklynboy]

Not an expert here but I would argue that the party that funded some of the losses actually gave a loan to the partnership and did not dilute the ownership ratio. He should be paid back (with interest) but not awarded a higher stake of ownership. A lot depends on whether there was any written agreement how the additional funding would be calculated - barring none then I would argue its a loan and not additional equity. Get an attorney if this cannot be adequately resolved.