Many people find themselves in joint ownership situations by accident, or without a substantial amount of the pitfalls. They imagine that owning real estate with a relative, or someone they know well, will all work out. After all, everything with that person has worked out in the past without substantial problems. In a way of speaking, what could go wrong? The Answer, unfortunately, is many things.
And those things could be not only very time-consuming and stressful, but expensive. They can find themselves in a real estate hostage situation they never imagined. When people find themselves in a such a real estate hostage situation, the only thing to do is call the hostage negotiator: a partition lawyer. This Article will describe how joint ownership situations go wrong, and the escape hatch from the situation of which most people are unaware.
Challenges To Joint Ownership of Property
There are many problems that can arise from joint ownership of property that relate to control, cost, and potential liability.
Losing Control & Exposure to Risks
The control of jointly-owned property often turns into a contest of tug of war between two people with co-equal rights. In a co-ownership situation, one person technically has the right to make decisions over control of the entire property.
For example, one person can decide to refurbish the property in any way they like without consulting the other owner. As long as the rehabbing owner does not engage in “waste”—a legal term that means the destruction or objective de-valuing of the Property—then there is nothing that the other owner can do to stop them. They do not get a veto.
As another example, one owner can decide to rent out the entire property to another third-party without the other owner’s consent, or even their knowledge. Once that property is rented to a third-person, the renter may be protected by rent control or other tenant protections, which can provide the other owner from doing anything with that property. To make matters worse, the renting co-owner often keeps the rent without letting the other person know, or finding the time to give the fair share to the other co-owner. This can lead to a situation where an owner not only is not able to use their own property, but is not able even to get a money from the rental from their own property they cannot use.
As yet another example, any owner of property has the right to take out a loan against the property without the other owner’s consent. An owner of property can find themselves in a situation where they believe that it’s owned free and clear, but actually a third-party has found a way to obtain a mortgage interest, which applies to the whole property. Once there’s a loan on the property, this can make get another loan for the property—for example to finance the purchase of the other owner’s interest—even more difficult.
As is easy to see, control over the property can really make a difference in the co-ownership relationship. A well-meaning owner can find themselves behind the 8-ball in their contest for control over property they own with another person, or even a third-party. Anyone who has found themselves in these situations should consider consulting with an experienced partition lawyer.
Financial Implications & Taxing Issues
The cost of jointly-owned property can often become an overwhelming problem as time goes on. With co-owned property, while one may think there would be many advantages that would make things easier, instead there are often many disadvantages with respect to cost that can make the life of a co-owner more difficult.
For instance, frequently people in romantic relationships who are not yet married buy real estate together with the idea that each will pay their share of the mortgage. Unfortunately, these plans can often end poorly. When one person loses their job, they may stop contributing altogether, thus forcing the entire burden on to just one party. Or, when their romantic relationship ends, then one person may just stop paying for their share of the property—even if they continue to live there! All of a sudden, the mortgage that is supposed to be paid by two persons, is unfairly the burden for just one. The cost of co-owned property is suddenly a huge problem.
As another instance, even when there is no mortgage on the property, all owners of the property are responsible for payment of its taxes. With taxes increasing every year, this can become an annual chore for an owner who may not have visited the property for years, such as an heir who inherited the property from their parents with a sibling. In that instance, the sibling is living in the property rent-free while the other sibling has to either pay the taxes or forfeit all of the equity in that property that may represent their entire inheritance. This is just another way that costs of co-owned property are a problem.
Increased Liability
In addition to costs that go with property ownership, there is also a separate issue of liability. Many people think of real estate as just sitting there to be used by an owner for their enjoyment. While this is true, another facet of property is that things also happen on it, like people tripping and falling, things falling off the property, or a fire on the property, which causes someone to be hurt in the process.
When someone is hurt on property owned by several owners, all property owners in California may be jointly liable for that persons’ injuries. In other words, even if one owner is in charge of the property and taking care of it, the other owner can be sued and have to go to court, simply because something happened on property that they own and even if that other owner is far away.
Get Help To Plan Your Estate
As all these examples demonstrate, there are many downsides to joint ownership of property that one may not realize before buying the property. In life, things happen and take a turn that many of us do not expect. As co-ownership situations can be unsteady, it may be best to end the real estate relationship, which may actually help the personal relationship to heal. When it is time to end an unhealthy real estate relationship, then a partition lawyer is the best solution for that problem.