Co-Owning Property and Stuck in Disagreement? Here Are Your Options

Inheriting a home or investment property may feel thrilling at first. But problems often pop up when family members can’t agree on what to do with the property, especially when money is tight or everyone has different plans.

One owner may want to sell the house while the other wants to stay. One owner may not be able to afford their share of the mortgage or taxes anymore. Or perhaps siblings inherit a parent’s home, and one wants to live there while the others already have their own homes and can’t afford to chip in.

And inheriting a home is just one of many possible scenarios when it comes to individuals co-owning a home or property, all of which can quickly become stressful.

Before running to court, the best first step is usually to sit down with the other co-owners and try to work out an agreement. Mediation — where a neutral third party helps you talk through the issues — can also help avoid a legal battle.

But sometimes, even after trying everything, the co-owners still can’t agree. When that happens, the next step may be something called a partition action.

Here, New York State Real Estate Law Attorney Anthony A. Nozzolillo, Esq. breaks down a partition action and the ways a property can be divided through a partition case. 

What Is a Partition Action?

A partition action is a lawsuit that lets a co-owner ask the court to end the shared ownership of a property. Anyone who owns part of the property must be included in the lawsuit, and the court decides the fairest way to separate everyone’s interests.

There are three main ways a property can be divided through a partition case:

• Partition by Sale: This is the most common action, and exists where the court orders the property to be sold.  After paying off any mortgage, taxes or liens, the remaining money is split among the co-owners based on how much of the property each one owns.

• Partition by Allotment/Appraisal: The court will mandate a formal appraisal of the home to determine the exact fair market value of the home. One or more co-owners can then buy out the others based on that price.

• Partition in Kind: This is the most atypical kind of partition action and occurs where the court will physically divide the land among the owners. This scenario occurs where undeveloped or vacant land is the subject of the dispute, not a house or condo.

How Does the Court Decide Who Gets What?

In a partition action, there are many factors and variables that need to be taken into careful consideration as far as dividing up the expenses and net sale proceeds.

Here are some key considerations during a Partition by Sale scenario in which one co-owner is seeking to buy out the other owner.

• Who lived in the home? – If one co-owner lived in the house while the other did not, the occupying resident should not expect to have financial contributions offset the equity interest of the non-inhabitant owner. “Afterall, the home resident was paying to utilize and reap the benefits of occupancy, use and control of the home,” Nozzolillo explained.

• Who paid what during the purchase? – The court will do an analysis of who contributed to the financing when the home was initially purchased.  Anyone who contributed more upfront may be entitled to a reimbursement or credit before the final amount is split.

• Did anyone pay for improvements or renovations? – Any improvements, upgrades or renovations made by any owner is also considered, as these items not only need to offset the other owner’s net financial payout, but also take into consideration the increased future market value of the home. The successful owner will now own the home free and clear, without any mortgage or lien burdening them. They will also now be in a position to sell the home at the higher value as a result of the added benefit of the upgrades/renovations.

Special Rules for Inherited Property

Nozzolillo highlighted that the right to partition can sometimes be restricted by a pre-existing written agreement in the form of a memorandum, a trust or will, or pre-nuptial agreement. 

New York follows the Uniform Partition of Heirs Property Act (UPHPA), a law that helps protect families from being forced to sell inherited property too quickly.

Under this law, the court must hold a settlement conference first to encourage agreement. Heirs may get a right of first refusal, meaning they have a chance to buy the property before it’s sold to someone outside the family.

If a will, trust, or agreement includes special instructions about selling or transferring the home, those terms may limit or delay a partition action as well.

The Bottom Line

Co-owning property isn’t always easy — especially when financial stress, family emotion or inheritance is involved. While most people think the biggest property headaches involve bad tenants, disputes between co-owners can be just as challenging.

“In summation, owning real property is not always a ‘joyous experience,’” Nozzolillo said. “Co-ownership and inheritance present the most potentially perplexing scenarios that can ‘taint’ the superficial ‘happiness façade’ when it comes to property ownership, so be sure to consult a seasoned attorney if you are ever placed in a situation where co-ownership or inheritance creates a problematic situation.”

Discover more about New York State Real Estate Law Attorney Anthony A. Nozzolillo, Esq online.

THIS ARTICLE IS FOR INFORMATIONAL PURPOSES ONLY  AND IS NOT TO BE CONSTRUED AS LEGAL ADVICE. NO ATTORNEY-CLIENT RELATIONSHIP IS CREATED BY THE CONTENT OF THIS ARTICLE.