Selling a Property During a Partnership Dispute in NYC

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First Question: How Is the Property Actually Owned?

Before strategy, pull the deed and the entity documents from ACRIS and your files. How title is held determines which legal tools you have, who must sign a contract and what a buyer’s title company will require. Brooklyn properties held by families and small partners tend to fall into four buckets.

Tenants in common

Each owner holds an undivided share, which can be unequal and passes through that owner’s estate. It is the default when unmarried people take title together, common for siblings who inherited a brownstone. Each tenant in common can bring a partition action.

Joint tenants and tenants by the entirety

Joint tenants have a right of survivorship, but either can still seek partition. Married couples who take title together are presumed to hold as tenants by the entirety, which cannot be partitioned while the marriage lasts. Those disputes are handled through the divorce; our guide to selling a house during a divorce in Brooklyn covers that path.

An LLC, partnership or corporation

Most investment buildings in Brooklyn, from Bushwick walk-ups to Gowanus warehouses, are owned by a single-purpose LLC. The members own interests in the company, not the real estate, and the operating agreement decides who can sell, who can block a sale and what happens in a deadlock. Partnerships and corporations work similarly under their own agreements and statutes.

An estate that has not been settled

If the dispute is really among heirs and the deceased owner’s estate is still open, the executor or administrator usually controls the sale under the authority of the Kings County Surrogate’s Court. See our guide to selling inherited property in Brooklyn before you file anything in Supreme Court.

The Agreement

What Your Operating or Partnership Agreement Probably Says

For entity-owned buildings, the agreement is the playbook, and the answer to a dispute was often written down years ago. Have your attorney look for these provisions.

• Management and major decisions. Who is the manager, and does a sale of the property require a majority, a supermajority or unanimous consent?
• Transfer restrictions. Whether a member can sell an interest, and whether the others get a right of first refusal or first offer.
• Buy-sell provisions. Shotgun clauses, put and call rights, and the valuation method, often an appraisal or formula.
• Deadlock and dispute resolution. Mandatory mediation, arbitration, a tie-breaking member, or a forced sale after a deadlock persists.
• Capital calls and dilution. What happens when one partner funds taxes or repairs and the other does not.
• Waivers. Some agreements waive the right to seek judicial dissolution or partition. New York courts have enforced such waivers in many cases.

If the agreement gives a manager authority to sell, a title company will usually accept that manager’s signature with proper resolutions. If it requires unanimous consent, one holdout can block a sale, and the conversation shifts to buyouts, the agreement’s deadlock remedies or court.

A practical note: when we make an offer on an entity-owned building, our attorney’s first request is the operating agreement and evidence of who is authorized to sign. Having that ready shortens any sale, whichever buyer you choose. If you just want to see what the building would bring, request a confidential written offer; it costs nothing and commits no one.

Partition

How a Partition Action Works in New York

Partition is the court process that ends co-ownership for owners who hold title directly. It lives in Article 9 of the Real Property Actions and Proceedings Law and is filed in State Supreme Court, which for Brooklyn property means Kings County Supreme Court.

The basic steps

• Complaint. The plaintiff names every co-owner and every party with an interest, including mortgage holders and lienholders, and typically files a notice of pendency against the property.
• Interlocutory judgment. If the court finds the plaintiff is entitled to partition, it determines each party’s share and decides whether to physically divide the property or sell it.
• Referee. The court appoints a referee to take an accounting, report on whether division is practical and, if a sale is ordered, conduct it.
• Sale and distribution. The referee sells the property, usually at public auction, pays liens and costs, and distributes the balance by share, adjusted for credits the court allows.

Division vs. sale

New York law prefers physical division, but a court will order a sale when division would cause great prejudice to the owners. With Brooklyn row houses, two-families and small apartment buildings, you cannot split one building into fair halves, so sale is the usual result.

The accounting

This is where most of the fighting happens. A co-owner who paid more than their share of taxes, insurance, the mortgage or necessary repairs may receive a credit; one who lived in the property or collected rents may be charged, depending on the facts. Keep records of every payment.

Equity can change the outcome

Partition is a strong right but not an absolute one. Courts weigh equitable considerations and have refused partition where the owners agreed not to partition or where a sale would be unjust. Since 2019, New York’s version of the Uniform Partition of Heirs Property Act, RPAPL Section 993, adds protections when property passed within a family and there is no partition agreement, including a mandatory settlement conference and a good-faith negotiation requirement before a forced sale.

This is general information, not legal advice. Partition practice is technical, and the right strategy depends on your facts, so talk to a New York real estate litigator before filing or answering a complaint.

LLCs & Entities

When an LLC Owns the Building: Dissolution and Its Limits

Because the LLC owns the property, a frustrated member cannot partition the building. The statutory remedy is judicial dissolution under Section 702 of the New York Limited Liability Company Law. A member asks the Supreme Court to dissolve the company because it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.

Why it is hard to win

New York appellate courts have made clear that disagreement or bad feelings between members are not enough. The question is whether the management is unable or unwilling to promote the company’s stated purpose, or whether continuing is financially unfeasible. A single-asset LLC whose building is still being operated and paying its bills can survive a dissolution petition even when the members detest each other. Agreements that waive dissolution rights can also block the petition.

Other entity types

• General partnerships. Under the Partnership Law, a court can order dissolution, for example where a partner’s conduct makes it not reasonably practicable to carry on the business together.
• Closely held corporations. Holders of at least 20 percent of a non-public corporation’s shares can petition for dissolution on grounds such as oppressive conduct, and the other shareholders can elect to buy those shares at fair value instead.
• Related claims. Accounting and fiduciary-duty claims often ride along and lengthen the case.

If dissolution is granted, a single-building LLC usually winds up by selling the building and distributing the proceeds: the same sale you could negotiate today, only later and after legal fees.

Buyouts

Buying Out a Partner, or Being Bought Out

A buyout keeps the property out of the market and out of court, and it is often the best result when one owner wants to keep the building and can fund the purchase.

Setting the value

Use an independent appraisal, or two, with clear instructions about how to treat rent-stabilized units, vacant units, deferred maintenance and development potential. A building’s value to a long-term owner and its value to a developer can differ, especially on lots with unused floor area; our guide to air rights and development sites explains why. Agree in writing on how credits for past payments are handled before anyone sees the appraisal.

Lender consent

Most mortgages restrict transfers. The lender usually has to consent, and the departing owner may stay liable on the loan or a guaranty unless released. Build lender approval into the timeline.

Transfer taxes and taxes on gain

In New York City, transferring a deed interest is generally subject to state and city transfer taxes, and transferring interests in an entity that owns real property can also be taxed when the transfers add up to a controlling interest, generally 50 percent or more. The departing owner may also face capital gains tax. Ask a CPA and your attorney to model the after-tax result before you sign.

Costs of Waiting

What a Deadlock Really Costs a Brooklyn Building

While owners argue, the building keeps running up bills, and those costs come out of the eventual sale price.

• Unpaid carrying costs. Property taxes and water charges keep accruing; unpaid balances can become liens. See our guide to property tax and water liens in NYC.
• Violations. Deferred repairs turn into HPD and DOB violations and civil penalties. Our guide to selling a building with violations explains how they affect a sale.
• Loan problems. A maturing mortgage that the partners cannot agree to refinance can push the property toward default. See what to do when your loan is maturing.

On a regulated building the squeeze is sharper. The 2019 Housing Stability and Tenant Protection Act limited ways to raise regulated rents, and the Rent Guidelines Board’s 2026 order set zero percent increases for one- and two-year leases beginning October 1, 2026. See our guide to the NYC rent freeze.

Selling Together

How to Run an Agreed Sale When Partners Do Not Trust Each Other

Partners who cannot run a building together can often still sell one together, if the process leaves little room for suspicion.

• Sign a short sale agreement first. Agree on a floor price or appraisal-based price, who can negotiate, how offers are shared and how proceeds and credits are split.
• Share every offer. Give all owners copies of every written offer at the same time, through counsel if needed.
• Use an escrow for disputed money. If the parties cannot agree on credits, close the sale and hold the disputed amount in escrow with an attorney until it is resolved.
• Pick the route that fits the property. A clean, vacant two-family may do best on the open market. A building with tenants, violations or development upside may draw more certain value from direct buyers.

The honest trade-off: broad broker marketing can surface the highest bidder for a straightforward property, but it means showings, inspections and more decisions to agree on. A direct sale means one negotiation and a fixed closing date. Our guide to off-market sales compares both.

Where We Fit

How Red Hook Development Handles Jointly Owned Buildings

We are a Brooklyn developer that buys property directly, all cash and as-is. Disputed ownership does not scare us off. Here is what we can and cannot do.

• One written offer for everyone. We put our offer in writing so every owner and every attorney sees the same terms.
• As-is, with tenants and violations. No repair fights and no arguments over who pays to fix the boiler before a sale.
• Flexible closing date. You choose it, which helps when a buyout, an escrow or a court approval has to come first.
• We respond within one business day and keep the conversation confidential.
• We buy across the borough, from North Brooklyn to brownstone Brooklyn and Central Brooklyn.

What we cannot do is override your agreement or a court. Everyone with authority still has to sign, and if a partition or dissolution case is pending, a sale may need court approval or a stipulation between the parties. We will work with your attorneys on that. There is no obligation, and if listing would serve you better, we will say so.