Practical Guy
Junior Member
What is the name of your state (only U.S. law)? Illinois
My partner and I have a dispute. We could settle it through legal channels, but we'd rather work it out and I'm seeking advice as to which side of this dispute you folks find more reasonable.
Rental property business owned 50/50. Building bought five years ago with equal cash from both partners and commercial ballon note. Note is coming up for renewal in a couple of months with a balance of $200,000. One partner (partner A), who has spare cash, would like to pay-off the note. The other partner (partner B), wants to conserve his cash and simply renew the note.
Partner A would like each party to loan the business $100,000 (A from cash and B from a loan) and then have the business disburse monthly repayments to the partners in the amount of partner B's monthly note. Partner B would use the money to make his monthly payment and partner A would pocket that money.
The advantage to partner A is that he does not pay mortage interest on his $100,000 ($10,000-$15,000 over five years). The disadvantage to partner B is that he assumes 100% personal risk for his $100,000.
Partner B finds partner A's proposal offensive, asserting that the continuation of the loan arrangement as it already existed is a normal business practice and the shifting of the mortage risk from the business to the individual is wrong. Partner B believes that partner A is taking advantage of his better financial position to change an existing business arrangement.
Partner A sees not difference in the arrangements from a cash flow perspective and from a total cash perspective. Partner A also asserts that the risk argument is moot because, as the theoretically more solvent partner, he is already assuming a greater degree of risk with the commercial loan. Partner A believes it is perfecly proper to re-evaluate the building's mortage funding, given its upcoming renewal.
One of these partners is writing this posting, and will modify his position based upon considerations learned from this posting.
If both came to you, how would you advise?
My partner and I have a dispute. We could settle it through legal channels, but we'd rather work it out and I'm seeking advice as to which side of this dispute you folks find more reasonable.
Rental property business owned 50/50. Building bought five years ago with equal cash from both partners and commercial ballon note. Note is coming up for renewal in a couple of months with a balance of $200,000. One partner (partner A), who has spare cash, would like to pay-off the note. The other partner (partner B), wants to conserve his cash and simply renew the note.
Partner A would like each party to loan the business $100,000 (A from cash and B from a loan) and then have the business disburse monthly repayments to the partners in the amount of partner B's monthly note. Partner B would use the money to make his monthly payment and partner A would pocket that money.
The advantage to partner A is that he does not pay mortage interest on his $100,000 ($10,000-$15,000 over five years). The disadvantage to partner B is that he assumes 100% personal risk for his $100,000.
Partner B finds partner A's proposal offensive, asserting that the continuation of the loan arrangement as it already existed is a normal business practice and the shifting of the mortage risk from the business to the individual is wrong. Partner B believes that partner A is taking advantage of his better financial position to change an existing business arrangement.
Partner A sees not difference in the arrangements from a cash flow perspective and from a total cash perspective. Partner A also asserts that the risk argument is moot because, as the theoretically more solvent partner, he is already assuming a greater degree of risk with the commercial loan. Partner A believes it is perfecly proper to re-evaluate the building's mortage funding, given its upcoming renewal.
One of these partners is writing this posting, and will modify his position based upon considerations learned from this posting.
If both came to you, how would you advise?