The Quill – April 2018

ARTICLE:
Partnerships

Partnerships

At one time, Partnerships were a preferred entity for holding real property. When the limited liability company laws were created, LLC’s became the norm and Partnerships generally fell out of favor. Notwithstanding that, on occasion, you may have a closing where the Selling entity is a General or Limited Partnership. To that end, it’s helpful to know how the Deed should be signed when the seller is a Partnership. North Carolina law recognizes four types of domestic business partnerships: (1) General Partnership; (2) Limited Partnership; (3) Limited Liability Partnership; (4) Limited Liability Limited Partnership.  Generally all four types of partnerships may acquire, hold, mortgage, and otherwise encumber real property in North Carolina. For the purposes of this article, we will focus on the first two kinds of partnerships only.

General Partnerships

General partnerships are created by agreement among two or more general partners. Unlike limited partnerships, a General Partnership does not typically file an organizational certificate with the North Carolina Secretary of State to come into existence; however, you may find a certificate of assumed name with the register of deeds in the county where the General Partnership does business. A General Partnership does not need to have a written agreement to exist, however, if the Partnership does have a Partnership Agreement, YOU MUST REVIEW IT. Similar to Operating Agreements for Limited Liability Companies and By-Laws for Corporations, the Partnership Agreement represents the “rules” that the General Partnership must play by. If there is a Partnership Agreement, you must insist on strict adherance to it. Absent a Partnership Agreement, the general rule is that any general partner may convey real property owned in the partnership name in the ordinary course of partnership business. (More about this is found below). However, it can be more complicated than that. You will need to examine the vesting Deed which will help to determine who needs to sign the Deed to convey valid title. Property vested in the partnership name may be conveyed by the partnership, by and through one or more of the General Partners. However if the property is vested in some or all of the named partners, then the property must be conveyed by both the vested or named partners and the partnership.  So for example: If the property is vested in the Kim Kardashian and Kanye West General Partnership, then either Kim K or Kanye can execute the Deed conveying the property to the Buyer. However, if the property is vested in Kim Kardashian, Partner of the Kim Kardashian and Kanye West General Partnership, then Kim HAS to sign the Deed. While her signature alone binds the Partnership, the better practice is to have all the Partners sign the Deed if at all feasible. Alternatively, a Resolution signed by all of the Partners nominating a specific Partner to execute the Deed is also a good idea.

Now. . .what is this in the ordinary course of partnership business stuff, you ask? If, generally speaking, any of the Partners can sign the Deed of conveyance when the property is being sold in the ordinary course of business, when is a sale of real property NOT in the ordinary course of business? A sale of real property is in the “ordinary course of business” when the Partnership is in the business of buying and selling real estate. If the Partnership is in the Music and Entertainment business and it happens to own real estate, then the sale of that real estate would not likely be in the ordinary course of its business. Typically, a sale of real property that is outside of the ordinary course of business occurs when the assets of the partnership are being sold. . .such as the building where the partnership operates its business. If the sale of real property is outside the ordinary course of the Partnership’s business, then all of the partners in the General Partnership must sign the Deed.

Property held in the partnership name is not subject to lien interests of creditors of the individual partners, or the marital interests of the partners’ spouses. Each partner holds a personal property interest in the partnership itself, not a direct interest in the real property.

Limited Partnerships

Limited Partnerships are statutory entities. A Limited Partnership has legal existence only when it files a certificate of limited partnership with the North Carolina Secretary of State. Conveyances are executed by the general partner(s), and should not be executed by any of the limited partners. It is extremely rare for a Limited Partnership Agreement not to be in writing. You should review the Limited Partnership Agreement and all amendments, or at least such portions of the agreement and amendments as deal with the authority of the partnership to acquire and convey real property. If the Limited Partnership has more than one general partner, you need to determine whether all the general partners must sign a conveyance, and whether the approval of all or some of the limited partners is required.  It is not unusual for the General Partner of a Limited Partnership to be another entity. If that is the case, you will need to examine the governance documents for that entity to determine the identity of the proper signatory for said entity.

Like a General Partnership, property held in a Limited Partnership is not subject to lien interests of creditors of the general or limited partners, or the marital interests of the partners’ spouses. Each partner holds a personal property interest in the partnership itself, not a direct interest in the real property.

MEET THE FAMILY 2.0

Maria Houghton

1. What is your favorite family tradition.

Going to Holden Beach for summer vacation. That’s my happy place! 

2. What was the last movie you saw in the theater?

I haven’t been to the movies in so long! I think it was Jack Reacher:
Never Go Back.

3. Who is your favorite band/type of music?

Maroon V is probably my favorite band, but I enjoy a very broad range of music – classical, country, classic rock, pop, alternative – just depends on my mood.

4. What is the one food you could never give up and why?

Pizza – do I really have to explain that?

5. What show have you seen on NetFlix or Amazon Prime recently that you would recommend?

Godless on NetFlix. I haven’t finished it yet, but it’s so good!

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