PREVENTING AND ADDRESSING DISPUTES BETWEEN TENANTS-IN-COMMON

Tenancy-in-common is one of the riskier forms of legal title by which real property interests can be held in the State of California unless the co-tenants enter into a clear written agreement before purchasing the property. A co-tenancy agreement should clearly detail the owner’s respective rights, duties, intention for use of the property, obligations for costs, distribution of proceeds, outline decision making methods, and dispute resolution options. If a co-tenancy agreement is not in place, the parties may become deadlocked on issues such as whether or not to lease the premises, rents, insurance, and parameters for sale of the property, resulting in waste of the property and/or the need for costly and timely litigation.

Each co-tenant has the theoretical right to use the whole of the property, as long as it does not interfere with another co-tenant's equal right to use the whole of the property. This rule leads inevitably to conflicts over the ownership, management, use, leasing, development, maintenance, repair, marketing, mortgaging and disposing of the property in an orderly fashion.

Each owner can freely transfer its undivided interest in the property, but no other owner's undivided interest, without any other owner's consent, whether inter vivos, will or intestacy, whether by sale, gift, lease, voluntary lien, involuntary lien or any other transfer, whether in whole or in part, at any time, thereby saddling the remaining owners with unwelcome strangers as co-tenants.

A co-tenant has a right to earn profits from his or her use of the land and need not account generally to his co-tenants for their ratable share of such profits nor reimburse them for the rental value of such cotenant's exclusive use of the land. A co-tenant may compel his other co-tenants to pay their respective proportionate share of certain costs, such as paying taxes and mortgage installments encumbering the whole property, or truly necessary repairs to preserve the property; he may not compel any co-tenant to pay any costs incurred toward improvement of the property.

The only way out of this unmanageable situation, once the co-tenants lock horns, is filing an action for partition: an expensive equitable remedy, requiring the parties to incur legal and expert witness fees and costs. In an action for partition, the court will either physically divide the land among the co-tenants, if feasible, or force the public sale of the property to the highest bidder and split the net proceeds among the co-tenants, after all administrative costs of the partition action and sale are paid.

In the event a co-tenancy agreement is not in place, a potential solution to avoiding an action of partition is to transfer the real property to unitary ownership through some entity, whether a corporation, a general partnership, a limited partnership or a limited liability company, which will provide mechanisms, whether by statute or better yet by written agreement of the parties improving upon the outcomes dictated by the real property law of tenancies-in-common.

Please contact us if you need assistance resolving a dispute between tenants in common, preparing a co-tenancy agreement, seeking to transfer ownership held in a co-tenancy to an entity, filing an action for partition, or with any other real estate matter. You can reach us by phone at (858) 523-8221 or by email at christy@blakelawca.com.