Best Bet May Be Going Down With The Ship
Mary went into a partnership with three other families to purchase a rental property. The other three partners want to walk away, but Mary wants to sell it and pay off what they owe.
QUESTION: Mary in Los Angeles went into a partnership with three other families to purchase a rental property. It’s now not being rented, and they’ve all agreed to stop the bleeding and dump the property. The other three partners want to walk away, but Mary wants to sell it and pay off what they owe. Dave thinks the property will be foreclosed.
ANSWER: You can’t. That’s the problem with partnerships. The only ship that won’t sail is a partnership. The sad thing is you probably used to be friends. You can’t make them do anything, and you don’t have the power to protect yourself is what you’re telling me, short of some kind of lawsuit to sue them if they have the money to perform on their partnership obligations. And that might cost you more than the whole deal. They’re choosing strategic default. Translation: I don’t want to pay a bill I owe, because it’s inconvenient. You could force them to do the right thing if you had a binding partnership agreement. You could sue them on that. You’d have to have the LLC documents looked at by an attorney and see if they could be used to sue on specific performance. Can you specifically make them perform? You’d have to ask an attorney to do that.
On a mortgage, you are joint and severally liable. They can sue any one of you for the whole thing or all of you. Technically, you are not liable for just your part. Morally, you are. Technically, you’re liable for the whole thing.
I think you’ve been outvoted. I think the property’s going to be foreclosed on or short-sold or something. You’re going to pay your part of that when they come to you for it. I don’t think you’re in control here. You could be in control of the property. If they don’t want the property, ask them to quitclaim deed it to you, and you can take care of it. Then the problem is you get to pay the whole difference, which is what you said you didn’t want to do. If you don’t pay the whole difference, then it’s going to be a short sale on just you. That doesn’t make sense. You’re either going to pay the whole difference or you’re going to go down with them. Legally, you could spend more than your share in legal fees and sue this bunch of clowns to bring them into the circus ring, but I wouldn’t spend my life’s money or energy doing that either.
When I do something stupid, I call it stupid tax when it costs me money. From a financial standpoint, you’re going to lose the least money by going down with them. Of course, your credit gets tagged in the process, but it probably already is. If you all still have good credit, I would at least beg them to negotiate a short sale with this company.
If I were in your shoes, I’d probably go down with them. Just chalk it up to stupid and move on to the next thing. I don’t know what else to do, because it’s going to put your family in pretty serious jeopardy moving forward if you try to go the other route. I just can’t call you into that. If you told me you had a million dollars in the bank, I’d tell you to shut up, write the $150,000 check, and move away. But this completely cleans you guys out and leaves you with nothing. That’s what I heard from you.