<PAGE>
 
                                                                   EXHIBIT 10.40

                             SECOND AMENDMENT OF 
                       AGREEMENT OF LIMITED PARTNERSHIP
                                      OF 
                   NATIONAL GOLF OPERATING PARTNERSHIP, L.P.

          THIS AMENDMENT OF AGREEMENT OF LIMITED PARTNERSHIP (this "Amendment"),
dated as of July 29, 1996, is entered into by National Golf Properties, Inc., a 
Maryland corporation, as the general partner (the "General Partner") of National
Golf Operating Partnership, L.P., a Delaware limited partnership (the 
"Partnership").

          WHEREAS, the General Partner and the limited partners of the 
Partnership (the "Limited Partners") are parties to that certain Agreement of
Limited Partnership (the "Partnership Agreement"), dated as of August 18, 1993
and as amended on July 25, 1996;

          WHEREAS, Section 8.6 of the Partnership Agreement grants to each 
Limited Partner certain exchange and put rights with respect to such Limited 
Partnership's Partnership Units (as defined in the Partnership Agreement), which
rights are subject to specific limitations on the number of Partnership Units 
that each Limited Partner may exchange or put in any Twelve-Month Period (as 
defined in the Partnership Agreement);

          WHEREAS, Section 8.6.G of the Partnership Agreement specifically 
provides, among other things, that each Limited Partner (i) may not effect an 
exchange for more than the greater of 75,000 Partnership Units or one-third of 
the number of Partnership Units owned by such Limited Partner on August 18, 
1993, less the number of Partnership Units made subject to a put during the same
Twelve-Month Period, and (ii)  may not effect a put of more than one-third of 
the number of Partnership Units owned by such Limited Partner on August 18, 
1993, less the number of Partnership Units made subject to an exchange during 
the same Twelve-Month Period;

          WHEREAS, Section 11.3.A of the Partnership Agreement provides that 
each Limited Partner may pledge its Partnership Units as collateral to a lending
institution not affiliated with such Limited Partner in a bona fide loan 
transaction, and that such pledged Partnership Units may be transferred to such 
leading institution in connection with the exercise of its remedies under such 
loan;

          WHEREAS, Section 11.3.A of the Partnership Agreement also provides 
that any transferee of Partnership Units may exercise the exchange and put 
rights provided in Section 8.6 of the Partnership Agreement;





<PAGE>
 
          WHEREAS, the provisions of the Partnership Agreement are ambiguous as 
to the maximum number of Partnership Units that a transferee of pledged 
Partnership Units may exchange or put in any Twelve-Month Period under Section 
8.6 of the Partnership Agreement;

          WHEREAS, the General Partner desires to amend Section 8.6 of the 
Partnership Agreement to eliminate such ambiguity;

          WHEREAS, the General Partner has obtained the written consent to this 
Amendment of Limited Partners representing at least the minimum number of 
Partnership Interests (as defined in the Partnership Agreement) required to 
amend the Partnership Agreement pursuant to Section 7.3 and Article 14 of the 
Partnership Agreement, which written consent is attached as Exhibit A to this 
Amendment.

          THEREFORE, pursuant to Section 7.3 and Article 14 of the Partnership 
Agreement, the General Partner hereby amends the Partnership Agreement as 
follows, effective as of the date of this Amendment. Defined terms used in this 
Amendment and not otherwise defined herein shall have the same meanings as such 
terms have in the Partnership Agreement.

          1. Section 8.6.G of the Partnership Agreement is hereby amended by 
adding the following at the end the last paragraph of such section:

          "In addition, (i) each lending institution, if any, to which
          Partnership Units are transferred upon the exercise of 
          remedies in respect of a Pledge (as defined in Section 
          11.3A(iii) hereof) as contemplated by Section 11.3A(iii) 
          hereof (each such lending institution a "Lending Institution
          Transferee") shall be entitled to exercise all rights of a 
          Limited Partner under this Section 8.6 as if such Lending 
          Institution Transferee were a Limited Partner hereunder, 
          provided, however, that (a) such Lending Institution 
          --------  -------
          Transferee shall not be deemed to be a Substituted Limited 
          Partner for purposes of this Agreement on account of 
          exercising its remedies against Partnership Units, and (b) 
          all Lending Institution Transferees of all or any portion of 
          a Limited Partner's Partnership Interest, together with such 
          Limited Partner, shall have no greater rights under this 
          Section 8.6 than are available to such Limited Partner, 
          whether or not such Lending Institution Transferees act 
          individually or jointly with each other or such Limited 
          Partner; (ii) any two or more Lending Institution Transferees
          to which Partnership Units were pledged by the same Limited 
          Partner or any of such Limited Partner's Affiliates may act 
          jointly in exercising the rights of a
<PAGE>
 
          Limited Partner under this Section 8.6; and (iii) for 
          purposes of determining compliance with the restrictions set 
          forth in this Paragraph G, all Partnership Units of a Limited
          Partner or any of its Affiliates transferred to Lending 
          Institution Transferees shall be considered to be owned or 
          held by such Limited Partner or such Affiliate, such that the
          maximum number of Partnership Units as to which an Exchange 
          or Put may be effected by any Lending Institution Transferee 
          (or any two or more Lending Institution Transferees acting 
          jointly) at any time shall be the maximum number of 
          Partnership Units that such Limited Partner would then be 
          entitled to effect if such Partnership Interests had not been
          pledged."

          Except as modified by the preceding paragraph, the Partnership
Agreement shall continue in effect in accordance with all of the terms and 
conditions contained therein.

          IN WITNESS WHEREOF, the General Partner has executed this Amendment as
of the date first written above.

                                             NATIONAL GOLF PROPERTIES, INC.


                                             By: /s/ Edward R. Sause
                                                 -------------------------------
                                                  Edward R. Sause
                                                  Executive Vice President
                                                   and Secretary
<PAGE>
 
                                   EXHIBIT A
                                   ---------

                                WRITTEN CONSENT
                            OF THE LIMITED PARTNERS
                                      OF
                   NATIONAL GOLF OPERATING PARTNERSHIP, L.P.

          This undersigned, as the limited partners (the "Limited Partners") of 
National Golf Operating Partnership, L.P., a Delaware limited partnership (the 
"Partnership"), hereby consent to the proposed Second Amendment of Agreement of 
Limited Partnership of National Golf Operating Partnership, L.P., to be entered 
into by National Golf Properties, Inc., a Maryland corporation, as the general 
partner of the Partnership (the "General Partner").

          This Written Consent may be executed in two or more counterparts, all 
of which shall be considered one and the same agreement and it being understood 
that all parties need not sign the same counterpart.

                                             /s/ David G. Price
                                             -----------------------------------
                                             David G. Price

                                             The Joan P. Anawalt Revocable Trust
                                             dated July 29, 1985, as amended


                                             ___________________________________
                                             By:
                                             Its:

                                      A-1
<PAGE>
 
                                   Exhibit A
                                   ---------

                                WRITTEN CONSENT
                            OF THE LIMITED PARTNERS
                                      OF
                   NATIONAL GOLF OPERATING PARTNERSHIP, L.P.


          The undersigned, as the limited partners (the "Limited Partners") of 
National Golf Operating Partnership, L.P., a Delaware limited partnership (the 
"Partnership"), hereby consent to the proposed Second Amendment of Agreement of 
Limited Partnership of National Golf Operating Partnership, L.P., to be entered 
into by National Golf Properties, Inc., a Maryland corporation, as the general 
partner of the Partnership (the "General Partner").

          This Written Consent may be executed in two or more counterparts, all 
of which shall be considered one and the same agreement and it being understood 
that all parties need not sign the same counterpart.


                                        /s/ David G. Price 
                                        ---------------------------------------
                                        David G. Price


                                        The Joan P. Anawalt Revocable Trust
                                        dated July 29, 1985, as amended


                                        /s/ Joan P. Anawalt
                                        ---------------------------------------
                                        By:
                                        Its:


                                      A-1
<PAGE>
 
                                             The Joan P. Anawalt Income Trust
                                             dated August 23, 1988, as amended

                                             
                                              /s/ Joan P. Anawalt
                                             -----------------------------------
                                             By:
                                             Its:


                                             The Joan P. Anawalt 1993 Annuity 
                                             Trust dated August 3, 1993


                                              /s/ Joan P. Anawalt
                                             -----------------------------------
                                             By:
                                             Its:


                                             AMERICAN GOLF CORPORATION,
                                             a California corporation


                                              /s/ James M. Stanich
                                             -----------------------------------
                                             By:  James M. Stanich
                                             Its:  Executive Vice President


                                             SUPERMARINE AVIATION, LIMITED,
                                             a California corporation


                                             ___________________________________
                                             By:
                                             Its:


                                      A-2
<PAGE>
 

                                             RSJ GOLF, INC.,
                                             a California corporation

                                             /s/ James M. Stanich 
                                             -----------------------------------
                                             By:  James M. Stanich
                                             Its: Secretary

                                             /s/ Richard C. Price
                                             -----------------------------------
                                             Richard C. Price

                                             /s/ Sheri L. Price
                                             -----------------------------------
                                             Sheri L. Price


                                             /s/ Edward R. Sause
                                             -----------------------------------
                                             Edward R. Sause

                                             /s/ Barbara M. Colton
                                             -----------------------------------
                                             Barbara M. Colton

                                             /s/ Richard Bermudez
                                             -----------------------------------
                                             Richard Bermudez

                                             /s/ Ernst C. Burns
                                             -----------------------------------
                                             Ernst C. Burns

                                             /s/ Robert H. Williams
                                             -----------------------------------
                                             Robert H. Williams

                                      A-3