Where an asset is partnership property, the partner’s interest is not a proportionate share of that asset, but an interest in partnership capital. This can lead to problems in formulating wills. If John and Jane Farmer introduce Rose Cottage as an asset of the partnership which they run with their son, then the legacies in their wills whereby they each give half of it to their daughter will fail.
If a house owned under a joint tenancy becomes partnership property, then the joint tenancy is severed and becomes, like all partnership property, held as a tenancy in common. If an unmarried couple buy a house as joint tenants and one dies intestate, then there will be startlingly different results depending on whether the property is a partnership asset. If it remains outside the partnership, the right of survivorship continues and the survivor of the couple becomes the owner of the entire property. If it is partnership property then the deceased partner’s family, entitled under the intestacy, will inherit half of the property wrapped into the value of the share in the partnership.
The legal starting point is the Partnership Act 1890, sections 20 and 21. These provisions state that property originally brought into the partnership stock, or acquired on account of the firm, are to be held as partnership assets and the same applies to property bought with partnership money. These general principles are not enough to determine any but the most obvious cases. The following seven principles should assist.