PROPERTY SHARING: YOURS, MINE AND OURS
Many times property ends up having some form of shared ownership. Sometimes it is simply in the form of joint tenants or tenants in common, but sometimes more complex forms are involved such as life estates, ownership through entities or even by agreement (such as a co-habitation agreement).
Over the years, statutes and common law have often resulted in certain rules for dealing with common co-ownership and sharing issues. But those rules may not be the best for a particular situation, and may not address all issues that needed to be resolved.
As a result, various agreements between parties are created to deal with what is mine, what is yours and what is ours to document the respective bundle of property rights that each party may have.
Here are some important issues that should be defined between co-owners of property, no matter the style or form of the shared ownership:
Define the type of sharing or ownership. Is it a partnership, a current co-ownership or sharing, or a split ownership where perhaps one party is entitled to future rights but not current ownership rights.
Responsibility for capital contributions. When funds are needed for the property, does each party have an obligation to contribute equally or in different percentages, and what happens when one party refuses to make their contribution.
Maintenance and improvements. If a repair is needed, a yard needs to be mowed, something needs to be repainted, who is responsible for paying for and coordinating such work? And what happens if that is not done?
Transferring the ownership interest. Does a co-owner have the right to sell or transfer his or her ownership interest? Must that be offered to the other co-owner? And what happens at the death of a co-owner? Is that ownership interest transferred by a survivorship right, or is it conveyed through probate?
Rights of occupancy and use. Do the sharing parties have equal rights of occupancy and use and how is that coordinated? In situations where one party is entitled to sole occupancy, a written agreement should make it clear the extent to which they are also obligated to pay all expenses of the property. If there is going to be shared use, sometimes formulas and priorities are developed to determine the rights of the parties to use at various times of the year.
Authority to make decisions. Is one of the co-owners in “control” of the property and entitled to make sole decisions? Are there certain situations where all parties have a voice in decision-making?
Participation in revenue. If the revenue is not going to be split in accordance with the ownership interests, how are those rights defined? Is one of the owners entitled to a larger distribution or a fee for management?
Rights and authority to convey the property. Must a property interest be offered to a party before it can be sold? Must a co-owner approve of a sale or transfer by another co-owner? A situation that always creates difficulty is when there are parties that have some form of co-ownership right (for example, the right to inherit homestead), and their approval and consent may be required by a title underwriter before marketable title can be conveyed.
While some of these issues are addressed to some extent by presumptions imposed in the law, a written agreement which defines the rights of co-owners and/or sharers must be entered into so that there are no misunderstandings or disputes between them. It is important that an experienced real estate attorney be consulted to document the complete agreement and understanding between all of the parties that may have an interest.
Berlin Patten Ebling, PLLC
Article Authored by Christopher Caswell, Esq., email@example.com
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