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Welcome to Real Talk Real Estate, the show where we cover how to build wealth in real estate with no fluff, no bs, and no sales pitches. I'm David Green, and I've been doing this for over 10 years. I've seen the ups, the downs, and everything in between. This is the show where we pull back the curtain and show it to you, too. So if you want to build wealth through real estate or you just love learning about it, you found your home. What's going on? Real talkers. Welcome to the David Green Show. I've got a good interview for everybody today. I'm going to be speaking with Elijah Underwood, a real estate broker and attorney about something that you may not have heard about before, but there's a good chance you'll need. If you've ever heard about partnerships, you've been told that if you don't know how to invest, you should find a partner. Are you scared to invest? You should find a partner. Do you have no money, no experience, no clue what you're doing? Just find a partner and you can buy real estate. Well, what happens when that partnership doesn't work out and needs to be dissolved? Elijah is here to share with us something that he specializes in, which is dissolving partnerships that have gone bad or people just want to go their separate ways. Elijah, welcome to the show.
B
Hey, great to be here, David.
A
Yeah. Did I miss anything in the intro about what you do? Do we need to add anything about what you specialize in?
B
I think it's a really nice introduction. I think it, you know, it's not just people who buy real estate together, but also people who inherit real estate together. You know, people who may have acquired real estate from family, things like that, or other people who are looking to get into real estate and see its benefits, but probably need to think about some of the downsides. Right. I think every. All of us go into these relationships, you know, whether it's a partnership or, you know, an investment, with the best of hopes. But as a lawyer, unfortunately, what I see is when they. When they break down and when they don't work out. And so it's about thinking through how not only to get into the relationship, but, you know, ways things could not work out. And then if you find yourself in a relationship like this, how you can find an exit, because a lot of people, they'll get in the relationship with best intentions, and they say, oh, my gosh, I got in, but I don't know how to get out. So I really enjoy helping people escape from really bad Real estate relationships.
A
So you're like a divorce attorney, but only for real estate deals.
B
I'm a real estate divorce attorney. That's basically it. You hit the nail on the head.
A
All right, well, in most podcasts, people hear about ways that they can get into real estate. It's always about acquisitions, how to get a deal, how to find a deal. You rarely hear people talk about what to do once you got it. And even more rare, do you hear people talk about what to do when the deal starts to stink. But that happens a lot. It just isn't talked about. So why don't we start off by you explaining maybe some of the different types of partnerships that you see and some things that people should be aware of if they're going to get into a partnership with somebody else?
B
Yeah, 100%. So I think just to kind of set the table, you know, what we've seen in the last 25 years, not only in real estate, but kind of more broadly, I'm based in California, is, you know, the baby boomers are moving on, and there's been this huge transfer of wealth that's happening, you know, across generations, inherited wealth. There's also this. This big trend where people are not getting married as frequently as they used to. In like, 1980, like 85% of people are married. And, you know, 20, 24, it's like 40%. It's basically half. And then the third thing is, with all of the run up in housing prices across the country, lots of people are looking for unique ways to invest in real estate together. And so the sum total of all those things, whether it's, you know, brother and sister inherit mom and dad's house, or boyfriend and girlfriend buy a house together. You know, they're not husband and wife, but boyfriend and girlfriend buy a house together. And then, you know, or there's these real estate development relationships. People find themselves trapped, things go south. You know, somebody is maybe not totally ethical or somebody is abusive, or you just. Life changes and you begin to have different ideas about what to do with the real estate. So in these different instances, inherited property, property purchased with a significant other, or investment property, people need to know about ways to escape when it gets south. Cause unfortunately, not everything works out like we always intended. And so in California, where I practice law, the only legal method, if there's not an LLC or specific partnership agreement or trust, the only way, is something called partition law.
A
Okay, what's partition law?
B
Yeah, so it's very simple. It's kind of like the word suggests.
C
Right.
B
So Partition comes from the word parts. And it used to be back in old England when you inherited property with your brother, you know, 80 acres of farm, you could go to a judge and say, hey, listen, I don't really get along with my brother anymore. I'd like you to cut the property in half, give me the front 40, give him the back 40, I don't care. I love him, but I just don't want to be in business with him anymore. Well, in 2024, most of us don't live on farms. We live in single family detached ranch style houses. So a judge is not going to physically divide the property in half. But what the judge will do is say, hey, listen, you two are not getting along. You inherited, you know, mom and dad's house. We're going to sell the property and we're going to divide the equity into parts. We're going to partition the equity in different parts as an exit from this relationship and take your money, take your half the inheritance and go your own way, you know, whatever that is. But that way you guys don't have to fight anymore over this asset.
A
Now, is that mean the property has to be sold in order for them to capitalize on that equity?
B
Not necessarily. There is a provision under the law, depending on how title is held, that does allow for one of them to purchase the other one's interest.
A
Okay.
B
And that's, that's traditionally been the state, the state of the law in California. There was an update in 2023 to make that a little bit more specific. But basically there is a buyout provision that's allowed once one of these actions is begun.
A
All right, so there is going to be some form of a dissolution of the partnership through either selling the property or one person buying the other out. The judge decides each person's equity. So now you know how much to buy somebody out for. What about when you're getting into the deal? Is there any advice you have for people that are like, no, we still want to go the partnership route to where they can maybe plan ahead so that you don't end up in a mess where somebody has to come in and try to clean it up and get a literal judgment?
B
Yeah, definitely. And again, you know, my firm comes into play and we help people not only where there's not an agreement in place, but also where the parties can't get along. Right. There's differing ideas about what to do with it or how to resolve the differences. Sometimes there's, you know, strong personalities. But to your. To answer your question, yeah, the simple answer is a partnership agreement. And it's. And it's sitting down and thinking through in a very adult manner. You know, what does an exit look like? You know, if we can't get along, sometimes it's. And it's not necessarily a personality issue. It's, hey, listen, two guys buy some property together for development.
C
They.
B
One of them gets divorced, you know, from his wife, and then he, you know, his plans change financially, and he needs an alternative, you know, because of how his life has changed. And so, you know, that's also a facet of this life. Life just affects us all.
A
All right, so what's it typically like when somebody comes to you? Give me some stories of people that have come your way. I can imagine that they're probably colorful.
B
Yeah, there's. There's all sorts of issues from, you know, couples who get together in anticipation of marriage. You know, some may even have kids. People who invest in real estate thinking that they've got a great idea for, you know, like, some sort of vacation rental that doesn't work out. Some individuals who just. They inherit mom and dad's house, and maybe there's dispute about an ancillary issue. And so they come to me and they say, hey, listen, this other person. And maybe it's personal reasons, right? They, you know, my sister's mad at me because I got the big bedroom growing up, or, you know, my. My boyfriend's mad at me because, you know, I'm keeping the dog or whatever it is. And. And there's these little sticking points that prevent people from reaching agreement. And. And so generally, when they come to me, it's progressed, you know, to. To a very hot point. And I. I really enjoy helping people get out of these situations so they can move on with their lives.
A
All right, so if somebody comes to you and says, hey, I bought a house with my girlfriend. We broke up. I want to keep it. She wants to sell it. I want to invest into it. She doesn't have any money to invest into it. It doesn't look like this is going to work. What steps would you take with these people to help figure out how you're going to dissolve it?
B
Yeah, so the first thing always is, you know, a lawyer is a tool of last resort. You know, lawsuits are not fun for anybody. They can be very expensive. So I always say to people, hey, listen, have you talked to them? You know, what is the state of things? Do you think talking more would help instead of just, you know, hauling off and firing and hiring a lawyer? Can you Guys, work it out. Even if, you know, maybe it's not precisely what you would like or what you have entitled the law, is there something that can break the logjam? So trying to work through this at a lower level is always encouraged. But if they can't, you know, I'll have a frank conversation about, you know, what the law provides. So, for example, I'll see situations when one person says, hey, listen, I provided, you know, all of the down payment, but she insists that we split everything 50, 50. That feels very unfair.
C
Right?
B
So I'll say, hey, listen, you know, this is how the law reads in terms of claims for contribution, for reimbursement and outline, you know, what they're likely to recover if they're comfortable with that recovery given, you know, the time and stress of litigation. And, you know, really, people generally proceed only when it doesn't make sense not to proceed. In other words, that they would be giving so much up and leaving so much on the table, not to say, you know, not even to consider how embarrassing they would feel to totally give in to their ex that they say, hey, listen, let's. Let's get this started. Hopefully this, you know, just filing a lawsuit itself will break the logjam and bring people to their senses.
A
So when they come to their senses, are you usually kind of acting as a mediator? Are you hearing about who brought in how much money and recommending. I think you guys should split it up this way.
B
Generally, I am an advocate for my clients. And so what I'll try to say to the other side, we start every lawsuit with a letter to them that says, hey, listen, you can stop the lawsuit right now. You can get out of this right now. We don't need to litigate this. Let's work out a settlement that is reasonable based on what the law provides. You know, you're asking for X, but the law says, really, you know, you only have a right to Y. Let's not spend any more money on this than we have to. And, you know, when that offer isn't accepted, we say, okay, you know, if we can't talk to you, if we can't get you to be reasonable, will go to the judge and we'll ask him or her to just enforce the law and provide for, you know, this sale of the property, and. And you'll get what you have an entitlement to. But at the very least, our clients are able to get relief. You know, they're not many times, David, they've. They've been in these situations not for three months or six months, they said, I've been talking to my ex girlfriend about this house for like, five years, and I can't. I can't get her to budge. So, you know, now I kind of have to do this. Especially if, you know, that house is necessary to buy another house. If they're stolen the mortgage for that house, they can't qualify for another house. Even if the ex girlfriend is paying the mortgage every month, they're not going to qualify with their credit to maybe buy another house with their new wife or whatever it is. So by selling this house and enforcing this buyout, it kind of allows them to move on.
A
Okay. I get a better understanding. So you're not someone that people come to as a pair or together. This is where one of the partners says, hey, I need to get out of this thing or I need to get my money out. They're fighting me. I need counsel on my side to protect me here 100%. Okay, so you're sort of speaking to the other partner on behalf of your client, trying to offer a solution that your client's going to be happy with. If it doesn't happen, it's going to go to court, and you're going to be representing your client and representing their stake in this partnership.
B
100%. I was in court this morning in LA representing a sister who inherited an apartment building with her brother in Santa Monica. And there's lots of questions about, well, the brother's been managing it, where's the rent going, you know, who's living there, where are the records for everything that's happening? You know, has everything been done on the up and up with this apartment building they inherited, you know, like seven years ago?
C
Right.
B
Because it's easy to think about, well, there's. There's just mom and Dad's house, but there's all sorts of different types of inherited real estate. I mean, I've. I've represented people who inherited, you know, warehouses, you know, thousands of square feet of warehouse space in Northern California. So it's all different asset classes. You know, single family, multifamily, commercial, industrial, where things are, you know, kind of messy. And. Yeah, when you're talking about $20 million in warehouse space, you know, it's. It's of a different flavor than, you know, mom and. Mom and Dad's house in San Mateo or whatever it is.
A
All right, Elijah, I am getting ready to buy a property with a partner. I've listened to this podcast, and I don't want to make the mistakes that I'VE heard people talking about. I come to you and I'm like, hey, I'm thinking about putting this partnership together. What are some of the things that you're going tell me and help me do? Is it going to be put into the operating agreement? Are you going to have the articles of incorporation drafted up differently? Tell me, like, what should I know before I get into this? And when I come to and Elijah, to help me draft up the partnership, what are we going to talk about?
B
Yeah, 100%. It's a good question. Well, I think there's. I would probably start by asking you a few questions. So, for example, what type of property are we discussing? Are we talking about like a just a single family home that maybe is in San Francisco we're going to rent as an Airbnb? Are we talking about a commercial office space that we're going to use to house an operating business? Who's going to manage that business or that property once it's purchased? What are the contributions going to be? For example, let's say you're going to purchase an old apartment building in San Francisco and you're going to fix it up. What happens if somebody, you know, you have the purchase money, but what happens if somebody fails to make the contributions?
C
Right.
B
Your plan is, okay, we're going to buy this apartment building for, I don't know, let's say, $4 million, $2 million a piece. Right. You know, assuming no financing, what happens if it turns out the plumbing is really bad or that there's some dry rot in the walls between the units? How are those contributions going to work? If somebody, you know, what I see a lot of is somebody saying, okay, well, I'm going to be, you know, the capital partner. Another person is going to be the operating partner.
C
Right.
B
What is the value of the operating contributions?
C
Right.
B
How are we going to value that? If you say, well, I'm going to put in sweat equity, well, what's the value of that? What happens if the capital partner can't make their capital contributions? What does that mean for the operating partners? Share the equity. Right. If they're continuing to perform and the capital partner is not, how does that affect things between them?
C
Right.
B
You know, how is that going to be calculated?
C
Right.
B
So it's not just. It's not just necessarily documenting everything that's going to be done, but coming up for a system to resolve it to a system, a process to resolve how things will be calculated further in the future that no one may be able to anticipate. So I Think, just thinking through some of those things, and if there's a need for an exit on one side or the other, the capital partner says, hey, operating partner, I haven't seen you working for the last six months. You're supposed to show up every day and make sure it's swept or whatever it is, you know, figuring out a way to handle, to handle those, those issues. So those would be just a, you know, off the top of my head, a few of the things that I.
A
Think are relevant now. Are you going to help the person who comes to you structure it in their advantage? Like, is there a way that they can say, hey, if, if you don't do X, then Y will occur and I'll be protected with this provision.
B
Generally what I do is I work on, I work on the exit side of things, but I think in terms of protecting, protecting yourself, I think the biggest thing is just accuracy.
C
Right?
B
Like, they'll be, they'll be just. Because people will say, well, let's invest in this property and let's say everything goes great for years, for 20 years, but then later on there's a dispute, you know, and there's. As our memories all fade, well, how much did you put in in, you know, 2000 or 1999, right into the building. What was your initial investment? Well, who did pay for the improvements to the sewer or to the roof? And bank records typically go back only seven years. I mean, our documents now are a lot better than they used to be. But I mean, if we're talking about something that was 15 years ago and exactly how everything was going to shake out, it's really just a matter of keeping good records. And maybe if you're talking about $50 here, $75 there, it doesn't matter. But when you're talking about 25,000 or 75,000, you know, you'd be surprised how, how many people just, they do it on a handshake and, and that becomes a problem much later on when people remember things differently.
A
All right, that's a great point. So we know that we're not supposed to do it on a handshake, but that's going to happen because when you do it, you have a good relationship with the person. The assumption is it will stay good. So is this a thing where people need to create like maybe a Google Document and every time they pay for something, write something in that Google Docs so that they now know what date it was paid for and they can find it in their bank records easier?
B
Yeah, Google Docs are a Great tool. The only, the only issue with those documents that I've experienced is that they can be edited very easily.
C
Right.
B
So the question is, has this document been edited later? And is somebody going to say, well, no, no, no, they changed it to alter the contributions. And so it's really just about, you know, I don't know, make putting it into a format that everybody has access to that is, that is locked in a sense.
C
Right.
B
So Google Docs are great for collaboration, but at least from my experience, there's other formats that I would prefer for making sure that everything is written in stone, as it were.
A
So what formats do you prefer?
B
You know, I'm a big fan of PDFs, although obviously those can be, can be edited. You know, it's nice to have copies of checks. I mean, even though a lot of us, you know, don't use checks anymore, you can have bank records from your own personal bank account to show transfers. If there's a bank account for the partnership, making sure that that's, you know, that those records are maintained. And that can be, you know, that could be one of the person's jobs, right, the operating partner. Hey, your job is to make sure that there's good records every single year of everything. You could also leave them with an accountant or some sort of tax professional as like a neutral third party that everybody agrees on, you know, to make sure that everything's on the up and up.
A
Good, good. All right, so what are some of the common things that you've seen that people have screwed up, that when you were like, hey, I'm trying to represent you, but you're not doing yourself any favors with the way you went about this?
B
Yeah, a hundred percent. Well, I think that it starts often with, you know, parents who are thinking about leaving real estate to their children. I'm a really. As a result of this podcast I used to listen to that you were in. You know, I went out and bought an apartment building a number of years ago and I hope to have that for many, many years and maybe leave it to my family. But, you know, if you're talking about investing in single family homes, it turns out that only one family at a time can live in a house. And, you know, whereas before maybe a house in, I don't know, Pasadena, you know, you could buy it for 100 grand. Now that house is worth like 3.1 million.
C
Right.
B
And if you leave it to son and daughter, 50, 50, only one family is going to live in that house, realistically. And so thinking through, okay, if I Leave this asset. How does that work out? Is there an asset I can leave to son and then an asset I can leave to daughter? So that's the biggest thing that, where people have an opportunity to handle this better. Also with, you know, a boyfriend and girlfriend situation, just making a simple agreement. Hey, if we break up, here's how the buyout will occur, here's what we'll do when we're no longer in the honeymoon phase, and here's how we'll handle it. So really just making a plan. But to the earlier point, the biggest problem I see is people not keeping records of anything and saying, well, they know, ask them. They'll tell you that I spent X, Y and Z and you ask that other person and they have a very different history to go on.
A
So when it comes to keeping these records, you said you don't like the Google document because you feel it could be edited and you said you like a PDF. Is there a particular software that you like to use for that?
B
I mean, look, I'm, I'm not your tech savvy guy. I'm, I'm your lawyer. You know, I was very comfortable with pen and paper until recent, recent years. But, but just, you know, Adobe, Adobe PDFs are good. Any, anything that can be locked, you know, Adobe, this is not an Adobe advertisement. But there's certain softwares where you can see that it's been locked and you can't alter it anymore. And I think things like that, they just indicate a lot of reliability and consistency. So then, you know, even before it gets to somebody like me, it makes the discussion with that partner easier. Hey, I didn't alter this. This is a locked document and hopefully we can, you know, get rid of all this disagreement without, you know, needing to evolve a lawyer.
A
Okay. All right. Do you have any cool stories? Obviously we're going to change the names of the people involved to protect the innocent or not so innocent. But tell me about some nasty ones, some ugly ones, or some complicated ones where you're like, man, how am I going to untangle this ball of yarn?
B
Yeah, I mean, it's, look, it's, it's as varied as life itself.
C
Right?
B
So you know, when people, they call on me. I don't know. One of the more interesting ones involved a co op. You had some people in the Bay Area and they were kind of into less traditional lifestyles and they wanted to buy a co op and own it as friends. I thought that was really interesting. And there wasn't necessarily the best agreement. And then There was parents involved investing in the money or investing in the property. And it's like, wow, you have all these different parties involved and not a clear way to work through it that doesn't involve a lot of time and expense. The co op, I think, is kind of the most interesting as an approach. But you have people who. People talk about the crazy ex girlfriend. I had a client and his girlfriend literally, you know, had. Had kind of a mental health issue. And he's like, I can't live with you anymore, and I can't really talk to you. You know, you're super unreasonable. And we had to get, like, the sheriff involved, you know, and the sheriff came down and had to evict her from the house. And she kept breaking in. She broke it. She broke into this house in the Bay Area three different times after the sheriff had evicted her. And we just had to keep coming back with the sheriff because she was adamant that, you know, that she was never leaving. So it's things like that that keep us busy over here and really show the need to get away. You know, that guy didn't want to bring a lawsuit. He kind of really had no choice but to involve the legal system because you had somebody so far out on one limb that they couldn't figure it out.
A
Yep, that makes sense. So we don't want to look into any of these New agey. Let's get 10 people together that are all friends, and let's go start a compound. We're going to grow our own foods, and we'll own the property 10 different ways, and it's all going to work out. And then somebody sleeps with somebody else's girlfriend or somebody eats somebody else's tomato, and the next thing you know, it's bad and they're calling you and you're like, oh, what did you guys. This is so messy. Why'd you put it together this.
B
This way? I mean, that was. That was a fully organic tomato, David. Like, that's. That's. Everybody knows that's a no.
A
No. Absolutely. You should expect to have somebody sue you if you eat their tomato without asking first. Yeah. Any other cool stories or horror stories that you can share with us?
B
Yeah, I mean, it's just, I. I think the. You know, as a lawyer, I'm gonna. I'm gonna urge caution and just say, you know, that none of us know where life is headed, and so just try to be thoughtful about it. I know there's. I think, actually probably the coolest story is one going on right now in the media There's a. You know, on this reality show, Vanderpump Rules, there's a partition going on because of this cheating scandal that's, you know, been kind of fun to observe from the outside. You know, you had a boyfriend and girlfriend, bought a house together, thinking they're gonna end up happily ever after, and then what do you know, someone, you know, is alleged to have not been faithful, and you just have fireworks and you get the popcorn. So it's. It's situations like that that are. That are very common that, you know, keep us. Keep us working hard over here.
A
Yeah. When you get hurt by somebody, which is gonna happen when there's infidelity, a lot of people will turn to anything that they can to hurt them back. So sometimes that's bringing up secrets, sometimes that's bringing up things that were told and confident. Sometimes that's physical harm throwing things. And oftentimes it's money. It hurts when you hit somebody in the pocketbook. And if you buy a house with your partner thinking you're helping out your boyfriend, who's a struggling jazz musician living with you, and you put them on title to get him going, and then, you know, the guy cheats on you, and you end up breaking up with them, you're thinking, he put no money into this house. He did nothing. I was just being nice. And he's like, I got a legal right to this. I want 50% of it because we're breaking up and you're stuck. I mean, this stuff does happen. Nobody wants to go on a podcast and talk about it. Nobody wants to go out there and say, I got ripped off. I made a bad decision. But it happens, right? You deal with this all the time. You're sort of the lymph node cleaning up the garbage that goes your way after what you've seen. Elijah, would you recommend people to have partners?
B
Yeah. I mean, I think, like, look, as people, we all need each other.
C
Right.
B
It's just about, you know, having an adult conversation about the way that the relationship is going to. Is going to work if things break down.
C
Right.
B
And you, you know, there's many people, they have relationships that. That go on great for decades, and I think that's the ideal for all of us. But the other side of that is, hey, listen, let's be adults and realize the divorce rate is what it is. People have been suing each other since time began. And so, as a result, if it doesn't work out, let's not use lawyers or money or real estate to punish each other. To beat each other over the head. Let's talk about how we can go our separate ways so that everybody, maybe the relationship didn't work out, but it doesn't permanently scar you financially for the future.
A
That's a great way to put it. I've noticed with investing, there's often a fear of loss or a fear of risk because the two are associated with each other. But you can't get reward without risk. It's guaranteed if you don't go lift weights because you don't want to get hurt, you might not get hurt, but you're going to be weaker. You're going to have other kind of health issues. You can't have reward without some kind of risk. The idea is not to avoid all risk. The idea is to mitigate your risk so that you don't have any disaster that takes you out of the game completely. There's no poker player that wins every hand. You can't play only the hands that are 100% guaranteed to win. You'll never win. But you do want to make it so that you're not going all in on the wrong hand. You want to be. If you lose, you're in the game still. You learned from your loss. You're a better player than you were before. You can continue buying, you can continue investing, and you continue in the game. So thank you. That was a great point that you put out there for people that want to reach out to you, they're in a bad partnership. Maybe they're trying to get ahead of it. I think if you're in a situation that's getting ugly, don't wait until it's really bad before you reach out to legal counsel. Talk about it before it gets bad. Maybe talk about some changes that can be made so that when you get to that crossroads, you're in a better position. Where can people find you?
B
Yeah, the best way to find us is at Underwood Law. We practice law only in California, but, yeah, to piggyback on your analogy, here's one for you. It's kind of like a car, right? You go in a car, you have an accelerator, but you also have a brake.
C
Right.
B
And so knowing how to use both of those tools when to get out, that if things, if the car starts accelerating away, that's kind of unmanageable. You have a way to stop it and make sure that you, you know, make yourself safe. But otherwise, yeah, Underwood Law is the best place to find us. We have offices throughout California, you know, Louisiana, San Francisco, San Diego, Sacramento, Orange County. But Underwood Law is probably the, you know, the mothership for contacting us.
A
Any social media that you want people to check out?
B
You know, right now we have a YouTube channel. I think it's called, you know, the partition lawyer on YouTube. But we're still. We're still kind of building that out. I think we only have a handful of videos right now. We're getting ready to ramp that up.
A
All right. If you're in a position where you think he could help you, reach out to Elijah and protect yourself and hit the brakes if you think you're going too fast. Elijah, thanks for joining us on the David Green Show.
B
Pleasure to be here. Thank you.
A
Thanks for listening to Real Talk Real Estate. If you would like to be featured on the podcast, I'd love to have you visit davidgreen24.com Ask and submit your question there. Also, please do me a huge favor and share the show with someone that you love, that you think would benefit from its message. And make sure you're subscribed to get notified for future episodes. If you want to reach out directly, you can also DM me on Instagram or social media and check out davidgreen24.com.
The David Greene Show: Breaking Up Bad Partnerships | Episode 28
In Episode 28 of Real Talk Real Estate with David Greene, host David Greene engages in a profound discussion with Elijah Underwood, a seasoned real estate broker and attorney specializing in dissolving troubled real estate partnerships. This episode delves into the complexities of real estate collaborations, the legal mechanisms available for resolving disputes, and practical advice for both aspiring and current real estate investors to safeguard their interests.
David Greene opens the episode by introducing Elijah Underwood, highlighting Elijah's expertise in handling the dissolution of real estate partnerships. Greene emphasizes the often-overlooked aspect of partnerships in real estate—what happens when collaborations falter.
David Greene (00:00): "If you want to build wealth through real estate or you just love learning about it, you found your home."
Elijah Underwood explains that real estate partnerships can stem from various scenarios, including inherited properties, investments between romantic partners, or joint ventures among friends. He underscores the importance of anticipating potential conflicts when entering such partnerships.
Elijah Underwood (01:13): "It's about thinking through how not only to get into the relationship, but, you know, ways things could not work out."
Elijah likens his role to that of a divorce attorney but specifically for real estate deals. He elaborates on how he assists clients in navigating the often emotionally charged process of dissolving partnerships, ensuring a fair and legally sound resolution.
Elijah Underwood (02:22): "I'm a real estate divorce attorney. That's basically it."
The discussion moves to the various forms real estate partnerships can take, influenced by generational wealth transfers, changing relationship trends, and escalating housing prices. Elijah highlights how differing interests and circumstances, such as ethical disagreements or life changes, can necessitate the dissolution of partnerships.
Elijah Underwood (02:57): "Whether it's brother and sister inheriting a house or boyfriend and girlfriend buying together, things can go south for numerous reasons."
A significant portion of the episode focuses on partition law, particularly within California. Elijah explains that partition law allows for the equitable division of property when a partnership cannot be mutually dissolved. He details the two primary methods: selling the property and dividing the equity or facilitating a buyout where one partner purchases the other's interest.
Elijah Underwood (04:40): "Partition comes from the word parts... a judge is going to sell the property and divide the equity into parts as an exit from the relationship."
Elijah emphasizes the critical importance of having a comprehensive partnership agreement. This agreement should outline each partner's contributions, responsibilities, and the mechanisms for resolving disputes or handling unforeseen circumstances. Additionally, meticulous record-keeping is paramount to prevent future disagreements over financial contributions and property management.
Elijah Underwood (06:10): "The simple answer is a partnership agreement... thinking through in a very adult manner what does an exit look like."
When partnerships become untenable, Elijah advocates for litigation as a last resort. He prefers encouraging clients to seek amicable settlements that reflect legal entitlements before resorting to court interventions. Elijah describes his role in negotiating settlements and representing clients' interests vigorously if disputes escalate.
Elijah Underwood (10:48): "I am an advocate for my clients... let's work out a settlement that is reasonable based on what the law provides."
Elijah shares anecdotes illustrating the diverse challenges encountered in dissolving partnerships. From couples dealing with infidelity to friends entangled in co-op ownership, these stories highlight the emotional and logistical complexities involved. One particularly intense case involved a partner repeatedly breaking into a property post-eviction, underscoring the sometimes volatile nature of partnership dissolutions.
Elijah Underwood (23:40): "I had to involve the sheriff because she was adamant that she was never leaving."
For listeners considering entering real estate partnerships, Elijah offers pragmatic advice. He stresses the necessity of clear agreements, accurate documentation, and predefined strategies for potential exits. Establishing roles, contributions, and dispute resolution methods upfront can mitigate risks and prevent partnerships from devolving into contentious legal battles.
Elijah Underwood (14:26): "If you're going to purchase an apartment building... how are those contributions going to work?"
Elijah concludes by reiterating the importance of thoughtful partnership arrangements and proactive legal planning. He encourages listeners to consult with legal professionals early in their investment journeys to ensure robust agreements and safeguard their financial interests.
Elijah Underwood (28:25): "Let's talk about how we can go our separate ways so that everybody, maybe the relationship didn't work out, but it doesn't permanently scar you financially for the future."
Listeners interested in seeking Elijah's expertise can reach out through Underwood Law's multiple California offices or follow their growing YouTube channel, The Partition Lawyer. David Greene wraps up the episode by inviting listeners to engage further with the podcast and share its valuable insights within their networks.
Key Takeaways:
Anticipate and Prepare: Establish comprehensive partnership agreements detailing contributions, roles, and exit strategies.
Legal Mechanisms: Understand partition law as a tool for equitable property division when partnerships dissolve.
Documentation is Crucial: Maintain meticulous records of all financial transactions and agreements to prevent future disputes.
Seek Amicable Resolutions: Aim for settlements outside of court to save time, reduce stress, and protect relationships.
Consult Professionals Early: Engage legal counsel when forming partnerships to ensure all potential issues are addressed upfront.
This episode serves as an essential guide for anyone involved in or considering real estate partnerships, offering invaluable insights into safeguarding investments and navigating the complexities of collaborative property ownership.