How to avoid a real estate partnership dispute

Investing in real estate development requires large sums of money, so there is a high chance that you need to find one or more partners to raise the necessary funding.

A good partner can do much more than provide capital. They can provide skills, knowledge and experience in areas you lack, making your business a more formidable proposition than if you run it alone. However, whenever one or more people get together to make decisions, there is the potential for conflict. 

Planning is key to preventing partnership disputes

Assuming you are a match made in heaven is foolish. It is safer to presume that you and your business partner will eventually fall out. It may be over minor issues, or it may be over major ones, yet assuming you will not always agree allows you to provision for when you do not. Failing to plan and waiting until you have a partnership dispute will leave you in a weakened position if they do.

Here are a few things to consider when drafting your initial contract to work together:

  • Ensure an uneven balance of power: When one of you holds a majority share, you avoid decision-making stalemates.
  • Stipulate how disputes will be resolved: You could stipulate using arbitration to avoid unnecessary conflict and cost when you cannot resolve disputes alone.
  • Have a plan for an ending: Things do not need to go wrong for a partnership to end; there are many reasons you may wish to terminate your relationship. Consider how you will calculate pricing and whether the remaining partner has the first right of refusal. 

Your partnership contract is the basis on which your success will depend. Take time to ensure it provides the protection you need.

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