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2010-06-22 23:43:32

Property Co-Ownership Disputes

When property is owned by more than one owner, and the owners disagree, how is the parties’dispute resolved?

Disputes between co-owners may involve any of the following issues (or others):

· One owner has sole possession of the property but refuses to pay rent or otherwise
compensate the owner who is not in possession;
· One owner refuses to pay his or her share of the property expenses;
· The owners disagree regarding management issues; or
· The co-owners can’t agree about how to handle the property in the future (e.g. whether
to continue to hold it for investment or to sell it, or whether the property should be
improved).
In these situations, property owners often contact Kimball, Tirey & St. John LLP attorneys for
advice.
If the parties formalized their agreement regarding the property when they bought it (whether in
the form of an LLC’s operating agreement, a partnership agreement, a tenancy in common
agreement, a corporate buy-sell agreement, or other agreement), the parties can look to their
agreement, and California law, to determine their rights and obligations to one another1.
In the absence of an agreement to the contrary:
· Co-owners have equal rights to possession of the property, and equal rights and
responsibilities. If one co-owner excludes the other from the property, the excluded coowner
can recover the property’s rental value from the excluding co-owner.
· If one owner can’t or won’t pay property expenses, the other owner may be forced to pay
the property expenses to preserve the investment. A co-owner who pays more than his
share of operating and maintenance expenses is entitled to reimbursement from the
other co-owner. However, a co-owner who has paid to improve the property is not
entitled to reimbursement.
· If the parties cannot resolve their dispute (either directly, with the assistance of attorneys
or others or through a form of alternative dispute resolution), the parties can apply to a
court to determine the parties’ rights and obligations. In a co-ownership situation, this is
done through a partition action2.
A partition action is a lawsuit in which a co-owner requests that the court divide the property or
its sale proceeds. There are two different types of division:
· Physically dividing the property between the co-owners; or
· Ordering the property sold (either by private sale or public auction) and the proceeds
1 Ideally, when co-owning property (whether with family, friends, or others), owners should decide before acquiring the property how decisions
will be made, how disputes will be resolved, rights of first refusal (if any), what will occur if one owner does not pay his or her share of the
property expenses, etc. Attorney assistance may be helpful; an attorney can help identify the issues to be decided, and document the parties’
agreement.
2 If the co-owners were married, and are now divorcing, the family law courts will decide the property issues.
Kimball, Tirey & St. John LLP is a full service real estate law firm representing residential and commercial
property owners and managers. This article is for general information purposes only. Before acting, be
sure to receive legal advice from our office. If you have questions, please contact your local KTS office.
For contact information, please visit our website: www.kts-law.com. For past Legal Alerts, Questions &
Answers, and Legal Articles, please consult the resource library section of our website.
© 2010 Kimball, Tirey and St. John LLP
split between the co-owners.
Partition action costs (such as filing fees, referees fees, surveyor fees, and title policies) will be
allocated between the parties by the court. The costs are usually allocated in proportion to the
ownership interests, but a judge may order differently if the judge feels that a different allocation
is more equitable. The court will also allocate attorney’s fees incurred by the parties.
Partition actions are usually time consuming, emotionally draining and expensive for both
owners. The threat of a partition action should cause both owners to carefully consider
alternatives. Partition actions should be filed only when discussions and/or mediation cannot
resolve the disagreement.
Co-ownership disputes may be settled through one owner buying the other out, or an
agreement to sell the property. A knowledgeable attorney can advise about the advantages and
disadvantages of partition actions and other options available to feuding co-owners.
Kimball, Tirey & St. John LLP specializes in landlord/tenant, collections, business and real
estate law, with offices throughout California. This article is informational only and should not
be used as legal advice. Check with your attorney before acting. If you have any questions
regarding this article, please call 1-800-574-5587.
 

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