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Jenny, Solicitor
Category: Law
Satisfied Customers: 6464
Experience:  Qualified Solicitor specialising in Employment Law and general legal matters. Please start your question For Jenny Only
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How can I exit from an ordinary partnership following a dispute

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How can I exit from an ordinary partnership following a dispute with the other two members of the partnership? There is no partnership agreement in place. Will I be liable for ongoing debts or liabilities of the business?
Hello my name is ***** ***** I am happy to help you today. Have you discussed your intention to leave with the other partners and are they in agreement?
Customer: replied 2 years ago.
Yes I have told them verbally that I want to leave the partnership, however they are not happy with me exiting the partnership. However, I have had no dealings with the business since September and conversations with the other partners are hostile.
To be clear there are absolutely no written agreements at all? How long has the partnership been in place?
Customer: replied 2 years ago.
There is a lease for a business premise which is in the names of the 3 parties, but no partnership agreement. The partnership was created in May 2015 for the purpose of purchasing a lease for a cocktail bar and subsequently running the business.
The only way for you to exit the partnership is for you to give notice to the other partners under s.26 of the Partnership Act 1890. The notice should be in writing and will have the effect of dissolving the partnership altogether. With regards ***** ***** question of whether you will have ongoing liabilities this will depend on the terms of the lease that was purchased. It may be that you have been required to give some form of personal guarantee. It is worth checking the terms of this before giving any notice.
Customer: replied 2 years ago.
Thank you, ***** ***** The lease was purchased from the previous leaseholder for a sum of £92,500 for the remaining term which expires September 2019. There are no more payments being made to the previous leaseholder. We do, however, have to pay £7,000 quarterly as rent for the property which I think continues for the term of the lease. So, will I be liable for a portion of this rent payment going forwards? Is there any way I can exit completely?
You need someone to look at the terms of the lease. If it is the partnership (as a legal entity) that has contracted to pay the rent then the effect of dissolution of the partnership is that the contract is void (unless you have given any personal guarantee to pay the rent). What happens in practice if no personal guarantee is given is that a new partnership is likely to be formed without you. The key issue to any ongoing liability is whether you have given a personal guarantee, if you have then you will not be able to avoid this without the consent of the other partners.
Customer: replied 2 years ago.
For clarity, if there is a personal guarantee, will it be stated in the lease agreement? I can check the lease to identify whether this is the case.
Yes it would be in the lease agreement.
Customer: replied 2 years ago.
Thank you. One last question, is there any specific wording I need to include in the formal notice to the other partners when I notify them that I want to exit?
I am really sorry but I am concerned that in spite of my initial response you may be liable to continue to pay the ongoing rent, even without a personal guarantee. In the event that the contract was taken out prior to the dissolution the partnership will be liable for the debt between the disolution and the eventual winding up of the partnership. My colleague has just pointed this out to me. In any event given the level of potential liability you need to take specialist advice. To give notice, which you can do either way there is no special form of words. It just needs to state that you give notice under s. 26 of the Partnership Act 1890.
Customer: replied 2 years ago.
I think I understand. So what you're saying is that, if it takes perhaps another few months to dissolve and wind up the partnership, I would be jointly and severally liable for the rent payment for that period?
Customer: replied 2 years ago.
If the other two partners decide to create a partnership without me and continue the lease and the business, would the remaining rent payments then fall to them?
Yes in the absence of another agreement you would be jointly and severally liable.
Customer: replied 2 years ago.
Can you just confirm that if the remaining partners created a new partnership themselves and took over the lease and the business, I wouldn't be liable for the ongoing rent? I assume this is the case as I'd no longer be involved either contractually or personally. This would then answer all my queries and we can finish the conversation. Many thanks.
Yes, that's right. The danger is that they may not do so and the original partnership (including you) will be liable for that contract entered into before the partnership was dissolved.
Jenny and 2 other Law Specialists are ready to help you
Customer: replied 2 years ago.
Thank you for all your help Jenny. Really happy with the service today.
Thanks all the best with this.