What can be done when a piece of real estate has two or more owners and one owner wants to sell and the others don’t? This happens frequently in families when real estate is left in a will to heirs, but it also happens when a couple divorces. How do you divide the property? What steps should be taken?
A Petition to Partition may be the answer — once you’ve become familiar with the legal device.
The number of cohabitants in America has been increasing and this has driven the petition to partition to become more common as a remedy to split real estate and personal property.
There are three ways in which property can be owned by more than one individual:
- Joint tenants
- Tenants in common
- Tenants by the entirety (not an option in all states)
The decision of which category to be placed in is made when the property is purchased. With all three types, each owner has the right to occupy the whole. That means that one person is not allowed to choose some rooms and make them off-limits to others living there. Every spot in the property is fully available to everyone who owns the property.
Petition to Partition
Petitioning to partition is a legal right and the process starts with filing a petition with the Clerk of Court. Petition rules vary from state to state. The idea though can be generalized according to the type of existing deed to the property. The owners of Tenants in Common (TIC) and Joint Tenants with Rights of Survivorship (JTWROS) can file.
When dividing up a JTWROS property, all proceeds are divided, equally, among the co-owners. JTWROS deeds give each owner equal stakes — or shares — in the property. No credit is given to either party for any excessive contribution to the purchase price. Credits may be given though for utilities and maintenance costs. Improvements which result in a higher property value may be eligible for credits as well.
When a TIC deed is partitioned, owner shares are reviewed. If a property is owned by three people A, B, and C as tenants in common and A owns 50 percent while B and C each split the other 50 percent down the middle, then a sale of the property for $200,000 would mean A gets $100k and B and C each get $50k. The judge may look at other contributions by the property owners. If A made reasonable renovations and was never reimbursed, the judge may decide to give A a few extra dollars from the award which is given to B and C.
A few states give one tenant the legal option to buy out the other tenant(s) to forestall a forced sale. Other states also allow multiple tenants to merge their shares, forming a majority ownership, which could prevent a forced sale.
When Property Owners Can’t Agree
When someone owns real estate with another individual, or several individuals own property together, a disagreement can come up at selling time. This frequently happens when an individual dies leaving their real estate to several owners.
Utilizing a “Petition to Partition” may solve the standoff to solve this situation. When the process is started, a notification is delivered from the court and given to all owners of the property in addition to anyone who may have a legal interest such as lien or mortgage holders.
The process can be expensive and consume a lot of time. Many owners will retain their own lawyer as anyone who doesn’t want the petition to move forward can file with the probate court seeking to stop the process. Usually, objects are overturned as the other owners maintaining the right to force a sale.
When a family can’t agree on the terms of the sale itself, the petition to partition can force the co-owners to sit and negotiate. This makes a petition to partition the last resort when there is no cooperation among co-owners. Everyone involved must understand that there will be unnecessary time and delay and the final sale price may be considerably lower.
One option many co-owners are turning to is mediation. Working with a disinterested third party, the co-owners sit and try to reach a compromise that is acceptable to everyone. Normally less costly, mediation will have the full force of law behind it once a decision is reached and the documents are filed with the Clerk of Court.
As with many life events where the courts are called to become involved, there can be an upside — as well as a downside.
Pros and Cons
- Beneficial when the co-owners can’t agree to terms
- Possibility of recovering unreimbursed costs of major renovations conducted by one of the owners
- Potentially expensive
- Property is normally lost through re-sale and the proceeds are split
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