Relationship separation; how do we un-structure our portfolio?

Question from Sandra updated on 5th August 2009:

I have been in a de-facto relationship with my ex partner for more than 3 years. We set up an LAQC owned 50% each to buy properties that we have decided to assign as not the right moment to sell: what's the best way to go with regard to the valuation of the properties? A shareholders agreements witnessed by a lawyer or a registered valuation and simple shareholder resolution? My ex partner owned some other properties before we met through a LAQC: I have the right to claim 50% of those properties even if I have not contribute to their purchase?

Our expert Mark Withers responded:

Ok, in a seperation circumstance there are a lot more issues to consider than just the value of the properties in the LAQC. It is in fact necessary to value the shares in the company as these are the assets that you are holding personally. The valuation of a property owning company is generally done on a net asset basis ie, you begin by getting a registered valuation of the properties and subtract all liabilities from these asset values. Company liabilities will include the mortgages, bank overdraft and even your shareholders current account balances. These current account balances are also personal assets in their own rights.

A small point to note, if your seperation is to be effected by sharelolding change it may also be appropriate to factor in the tax liability that the company has accrued on accumulated depreciation as the recovery is not triggered as a result of the shareholding change and the shareholder buying shares will effectively assume this liability. Make sure that if you are selling your shares you arrange to be removed as a guarantor of the company mortgages.

Yes, it is possible that your ex partners LAQC shares could be considered relationship property if you have been together 3 years. Your question highlights the importance of entering a relationship agreement early in a relationship if these types of claims are to be avoided in the event that a relationship doesn't last.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.



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