Business divorce in commercial real estate and partition

On Behalf of | Apr 27, 2023 | Business Transactions, Commercial Real Estate, Purchase, Sale And Loan

Most people who enter a business partnership have good intentions. However, just like human relationships sometimes go sour, so do business relationships. In this blog, we will discuss business divorce and how to separate assets in the context of real estate.

Allocating the assets among the partners of a project or company can be much more complicated than it appears, specifically if there are more than two business partners.

What is the best way to divide assets in a business divorce?

The parties are better off dividing the assets on their own. Attorneys or mediators can help with this process, which is the most cost effective and best solution for dissolving a partnership. Alternative dispute resolution, for example, is an excellent option for parties who are willing to work together to find a solution.

What is a partition?

If that does not work or the parties refuse to work together to find a solution, the parties can use a legal mechanism called partition. In a partition, the parties seek a court order to divide a property into separate concurrent tracts where each party owns one piece.

Partition often leads to a forced sale of the initial property because it often does not make much sense for the parties to continue to own the same property together. After the sale, the profits are split among the parties.

The partition process

The partition process requires the parties to petition the court to split the property. Based on the facts of the case, the court will determine whether to partition the property or whether to sell it. If the property cannot be split, the court will order the parties to sell the property and split the proceeds among them.

Bottom line

The partition process can effectively solve the division of commercial real estate in a business divorce. However, it usually comes at a hefty financial cost. Alternatives, such as mediation and collaborative law, could serve the parties more efficiently and effectively than going through this mechanism.