Owning property with another party can be like a marriage. It may be long-lasting, and despite some ups and downs, a beautiful thing. But not all marriages last, and when they break up, it can be angry, amicable, or somewhere in between. We represent property owners involved in disputes and help them resolve their differences so they can move on with their lives in a better position.
Co-ownership means that there’s more than one person or party who is either on the deed or has a vested interest in a piece of property. Even if your name isn’t on the deed, depending on the facts, if a named person or entity is acting as a trustee for your benefit, there may be a constructive trust that provides you legal rights.
When co-owners may want to go their separate ways
Common circumstances leading to disputes among co-owners include:
- Benefits and costs of ownership aren’t fairly shared
- The parties want to do different things with a property. Before they took ownership, they may not have thoroughly thought through or planned the property’s future.
- The co-owners may be investors who “fix and flip” properties. One owner may supply cash to buy a property, another may provide labor and material to repair it, and they disagree on what to do with the property
- Multiple lenders may co-own a property after a foreclosure
- The owners may have inherited the property. One may occupy a building in exchange for maintaining it. That party may stop doing so and exclude the others from the property
A partition action is like a divorce for property owners
If co-owners can’t reach an agreement amongst themselves on what to do with the property, a legal action in state court known as a partition can be filed. If it proceeds to trial it is typically decided by a judge. However, most of these cases are resolved through a settlement agreement.
It’s a remedy that can apply to all types of real estate with multiple owners. The first issues are determining who the owners are and what kind of ownership they have. Partitioning by sale is the most common approach because most properties can’t be physically divided.
Usually, the parties agree to a sale, but disputes can arise on accounting for the parties’ costs, the sales process, or how the property’s listed. Properties are normally sold by:
- One party buying out the others
- The parties agree to list and sell the property
- The parties don’t agree, and the property is sold through the partition action
In a partition action, a judge can order that the property be sold and an accounting will be made to decide each owner’s financial contribution to the property and share of the sale’s proceeds. This can be simple with co-owners equally sharing the costs and profits. Partitions may get more complicated, depending on the number of owners, how much they originally invested in the property, and how the title is held. A court can also find that a party has waived their right to bring a partition action depending upon the circumstances.
Partition action costs (filing fees, referees fees, surveyor fees, and title policies) will be divided between the parties by the court. This is generally in proportion to the ownership interests, but a judge could take another approach if it’s more equitable. The court can also order one of the parties’ attorney’s fees be paid if the action is mutually beneficial to both parties.
As in all relationships that may end in a legal fight, a written agreement between co-owners can tell the parties what to expect, what will happen to the property, their rights and obligations, spell out how disagreements can be resolved, and a mechanism for a party to end the relationship. A written agreement is not always required and oral agreements can be enforced as well.
Property co-owner rights and obligations
Without such an agreement:
- Co-owners have equal rights and responsibilities. If one co-owner excludes others from the property, they can recover the property’s rental value from the excluding co-owner
- If one owner can’t or won’t pay expenses, others may do so and preserve the investment. If you’re paying more than your fair share of costs, you’re entitled to a lien against the other co-owners’ interests and or a bigger share of sale proceeds after a partition
- If a co-owner pays to improve the property without the consent of the others, that co-owner isn’t entitled to reimbursement. If there’s a partition action, the owner paying for improvements is entitled to any extra proceeds from sale due to the improvements
- If the upgrades were necessary, they increased the property’s value, and the improving owner gives notice of the cost to the other owners, they need to contribute proportionately or surrender their claim to the increased value of the property and rentals
How we can help you with a partition action
If you’re considering owning property with others, we can create an agreement that will protect your interests. If you already co-own property, but there’s a dispute with fellow owners, you need to know about your legal rights and duties before you can decide what to do next. We can help you through negotiation, using a mediator to reach a resolution, or litigating the matter. Call Anthony Burton at (949) 244-4207 today. We can discuss how we can put our knowledge and experience to work for you or your business.
