Separation of Interest Law and Legal Definition

A separation of interest agreement seeks to avoid a conflict of interest between an individual and an entity they are associated with. For example, an employee may be required to disclose and divest themselves of a financial investment or connection in order to safeguard the entity and its employees against charges of favoritism. It may also refer to a debtor's obligation to pay interest as a general rule, so that a debtor still remains liable for interest payments even if his default is due to an impediment beyond his control and he is, therefore, not liable for general damages.

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The following is an example of a condominium separation of interest agreement that seeks to assure the united ownership of a unit of property:

SEPARATION OF INTEREST AND PARTITION PROHIBITED

Section 1. Each of the Owners of a Condominium, whether such ownership is in fee simple or as a tenant in common, is hereby prohibited from partitioning or in any other way severing or separating such ownership from any of the other ownerships in the Condominium Property, except upon the showing that such partition is consistent with the requirements of California Civil Code Section 1354.

Section 2. No Owner may sell, assign, lease or convey (i) his interest in the Common Area, separate and apart from his Living Unit and Garage, nor (ii) his Living Unit, separate and apart from his Garage, nor (iii) his interest in any Exclusive Use Area separate and apart from his interest in the Common Area, his Living Unit and Garage.