Owning commercial real estate with a partner can be a lucrative venture, but it can also pose several challenges. Disagreements may arise that could threaten the success of partnerships or joint ventures involving commercial real estate investments.
Washington law provides avenues for resolving conflicts, but understanding common disputes beforehand can help co-owners protect their interests. Here are three major disputes that frequently arise between commercial real estate co-owners.
1. Decision-making conflicts
One of the biggest sources of tension is disagreements over property management and operational decisions. Issues such as lease agreements, renovations or tenant selection can spark conflict, especially if co-owners have differing investment philosophies.
Without a clearly defined governance structure, disputes can become roadblocks, delaying crucial decisions and negatively impacting profitability.
2. Financial disputes
Money matters often lead to friction between the various owners in commercial real estate projects. Unequal financial commitments or disputes over revenue distribution can strain partnerships, particularly if one party feels they are carrying more of the burden.
Having a well-structured ownership agreement with clearly outlined financial responsibilities can help to mitigate these risks.
3. Exit strategy disagreements
Real estate investments are long-term commitments, but not all co-owners have the same timeline or financial objectives. When one partner wants to sell while another prefers to hold onto the property, tensions can mount.
Disagreements over pricing, timing or buyout terms can lead to legal battles if the exit strategy is not well-documented in the partnership agreement.
Proactively addressing potential conflicts through well-drafted contracts and open communication helps co-owners protect their commercial investments. If disputes do arise, legal support can help you explore resolution strategies that may help preserve your relationship as co-owners.