Quick answer
Buying out a business partner with property equity means the remaining owner borrows short-term against real estate, such as their home, the business premises or an investment property, to pay the departing partner their agreed price in one settlement. A private first or second mortgage can fund quickly, interest can be capitalised to protect cash flow, and the loan is later refinanced to a bank or repaid from a sale.
Key points
- Pays the departing partner in one clean settlement
- Security can be your home, the premises or another property
- Jointly owned property can be refinanced and the partner released in the same settlement
- Share transfers must be reported to ASIC within 28 days
- The usual exit is a bank refinance once the new ownership has a track record
- Amounts
- $20k – $5m
- Term
- 1 to 24 months
- Repayments
- Interest can be prepaid or capitalised
- Speed
- 24–48 hours possible once documents are in
Partnerships end for ordinary reasons: retirement, a move interstate, a falling-out, a health scare, a different vision for the next ten years. Once the price is agreed, the hard part is usually not the negotiation. It is finding the money fast enough that the deal doesn’t sour while a bank takes its time.
If you, or the business, own property with equity in it, that equity can fund the buyout in one settlement. The departing partner gets paid, you get full control, and the long-term finance can be sorted once the dust settles.
How can property equity fund a partner buyout?
The remaining owner borrows against real estate and uses the funds to pay the agreed price. The property might be:
- your own home or an investment property, offered as security for a business-purpose loan;
- the business premises, if the company or a related trust owns them;
- a property you own jointly with the departing partner, refinanced into your name at the same settlement;
- a family member’s property, offered as third-party security where they are willing.
The lender looks at the equity, what is already owed, and how the loan will be repaid. It does not need years of financials under the new ownership, which a bank would usually want to see before lending to a business with a changed shareholder base.
Which structure fits a buyout?
| Your property position | Structure | What happens at settlement |
|---|---|---|
| Debt-free property | Private first mortgage | Funds released; partner paid |
| Property with a bank loan you want to keep | Second mortgage behind the bank | Bank stays in place; partner paid from the new loan |
| Jointly owned property with a bank loan | Refinance into a private first mortgage | Bank paid out, partner released from title and loan, partner paid their share |
| Premises owned by the company or trust | First or second mortgage by the entity | Entity gives security; directors usually guarantee |
Comparing keeping the bank against refinancing everything? Our second mortgage vs refinance page walks through the costs. If the property is held in a company or trust, see company or trust owned property for what the lender checks.
What paperwork does a partner buyout involve?
More than a straight loan, because two transactions are happening at once: the buyout and the borrowing.
For the buyout:
- a signed agreement setting out the price, what is being transferred and the completion date;
- share transfer forms for a company, or the deed of variation or retirement for a partnership or trust;
- any releases of personal guarantees the departing partner gave to suppliers, landlords or the bank.
For the loan:
- ID for every borrower and guarantor;
- entity documents (company extract, trust deed);
- property details and statements for any loans on it;
- the exit plan.
After completion: ASIC says a company must notify it of a share transfer within 28 days, using Form 484 and choosing the change to members register. Your accountant or solicitor usually handles that lodgement.
Can stamp duty apply to buying a partner’s shares?
It can, and it catches people out. In NSW, Revenue NSW explains that landholder duty may apply when someone acquires a significant interest in a company or unit trust that holds NSW land with an unencumbered value of $2m or more. Interests can also be aggregated over time, so a small final purchase can trigger duty on a larger holding. Every state has its own version of these rules.
Before you sign, have your solicitor confirm whether duty applies, and if so, include it in the amount you borrow. A loan sized without the duty is a loan that comes up short.
What does a property-funded buyout look like?
Illustrative example: two Melbourne plumbers each own half of their company and half of the warehouse it operates from, worth around $1.6m with $500k owing to a bank. One partner is retiring, and they agree on $700k for his shares and his half of the warehouse. The remaining partner arranges a $1.25m private first mortgage over the warehouse, with a second mortgage over her home for extra support. At settlement the bank is paid out, the retiring partner is paid and released from the title and the bank’s guarantees, and the warehouse is transferred into the continuing owner’s structure. Interest is capitalised for 15 months. After a full financial year under single ownership, she refinances the warehouse with a bank and releases her home.
The retiring partner walked away paid in full on the agreed day, and the business never missed a job.
Agreed on a price already? Ask a specialist how your property could fund it.
How quickly can a partner buyout settle?
Faster than most people expect, provided both sides are organised. Funding is possible within 24–48 hours for up to $5m once documents are in. What usually sets the pace is not the lender but the buyout itself:
- The agreement. Until the price, the assets and the completion date are signed, no lender can finalise a loan.
- Both solicitors. The departing partner’s solicitor needs to be ready to hand over signed transfers and releases on the day.
- The existing bank. If a jointly owned property is being refinanced, the bank’s discharge and payout figure must be lined up in advance.
- Guarantee releases. Landlords and suppliers sometimes take time to release the departing partner from guarantees.
Start the lender conversation while the agreement is still being drafted. A specialist can confirm what the property supports, so both partners negotiate knowing the money is there.
What exit works after a buyout?
Every private loan needs a clear exit. After a buyout, the usual paths are:
- Bank refinance once the business has a period of trading under the new ownership.
- Sale of a non-core property, such as an investment unit, to pay down the loan.
- Business cash flow, where the business can comfortably clear the balance within the term.
Interest can be prepaid or capitalised, so there may be no monthly repayments while the business adjusts to one owner instead of two. Our guide to the exit strategy for a short-term mortgage shows how to evidence each path.
Key terms
- Buy-sell agreement: the contract setting the price and terms of a partner’s exit.
- Form 484: the ASIC form used to report changes to a company’s members register.
- Landholder duty: NSW duty that can apply when acquiring a significant interest in a land-rich company or unit trust.
- Release: removing a departing partner from a title, loan or guarantee.
Partner leaving? See if you qualify
You can enquire without a credit check, because none is run at the first step. A real specialist reads the whole picture, including the buyout terms, and your details aren’t distributed to a long list of lenders. Our lending partner fundU lends directly and assesses the property itself.
Share the agreed price, the property you can offer, what is owing on it and the completion date. Precise detail on the property and its debts means the first answer is the one you can plan around. Check your eligibility now.
Frequently asked questions
Who should borrow: me personally or the company?
It depends on who is buying the departing partner's interest. Often the remaining owner buys the shares personally, but sometimes an entity buys them. Your accountant and solicitor should settle the structure first, because it affects tax and who signs the loan and guarantees.
Can I use property that my partner and I own together?
Yes. A common approach is to refinance the jointly owned property into your name or entity at the same settlement that pays your partner out. Their name comes off the title and off any existing loan, and the new loan is secured on the property.
Do I need to tell ASIC about the change in shareholders?
Yes. ASIC says a company must notify it of a share transfer within 28 days, using Form 484 and selecting the change to members register. Your accountant or solicitor usually lodges it.
Is stamp duty payable when I buy my partner's shares?
Sometimes. In NSW, landholder duty can apply when someone acquires a significant interest in a private company or unit trust that holds NSW land with an unencumbered value of $2m or more. Other states have their own rules, so ask your solicitor before you sign.
What if my partner and I haven't agreed on a price?
Settle the price first. A lender can give you an early read on how much the property could support, which often helps the negotiation, but the loan can only be finalised once a signed agreement sets the amount and the date.