Management of the Syndicate's Property

What are your rights to participate in the management of the syndicate and in the major decisions? The brochure will state all that. You may be reasonably sure that you will have no voice in the management. That is probably what you want. Anyhow, it would be rather difficult to manage a building, if you have to call a meeting of all the investors, each time a decision has to be made.
There is, however, one decision on which you would like to be consulted. The decision on whether or not to sell the property. After all, this is a decision, whether you stay in business or not.

May the Sndicate Sell or Mortgage Its Property Without Your Consent?

Whether the syndicator may sell or mortgage the property of the syndicate without your consent or even without consulting you depends entirely on the agreement. Very often the management has the power to make these decisions. In other cases, the brochure states that the management will not sell unless it obtains the consent of a stated percentage of the investors, for instance, one-half or two-thirds of the investors. Such a clause is important where the syndicator gets a substantial percentage of the profits on a resale. If he gets 50% of a $200,000 profit, that would be $100,000. If the object is a large one, the remaining $100,000 divided among a large number of investors may be peanuts. The investors may want to retain a building which yields a good income and promises future growth. The syndicate manager may wish to sell because he sees a fast profit. If the syndicator gets a substantial part of the profits of the sale, it is particularly im portant to ascertain whether the sale must be approved by a majority or two-thirds of the investors. Examine the following clause:

The general partner has all the rights and powers as provided in the Partnership Law of the State of New York. Nothing is said about the specific power to sell. Yet under the law pertaining to limited partnerships the general partner may have the right to sell property of the syndicate without even consulting the limited partners. The following provision will offer you protection against an unwise sale:

The general partner has represented in the partnership agreement that he will not sell the property without the consent of 66¾% in interest of the limited partners.

Next: Can You Sell Your Unit If You Want "Out" : What Price?