Co-ownership of real estate can lead to divergent visions. Some siblings may inherit a home from their parents. While some treasure it as sentimental property, others would prefer to sell. It is possible that business partners co-own the same commercial building but have diverged in their careers, requiring them to separate ownership. Real estate division is a way to solve the problem in these situations.
This comprehensive guide will help you make informed decisions about real estate division.
Understanding Real Estate Partition
Real estate partitioning is a legal process overseen by a court that allows property owned jointly by several parties to be divided or sold. This is a good solution for co-owners who need to reach a consensus about the management of their property. Conflicts can arise from inheritance, new business ventures or changing personal needs.
The partition action ensures that each co-owner gets their fair share of property value. Two primary methods can be used to achieve this:
- Partition by Kind: The physical property is divided proportionally between the co-owners. It is only appropriate if it can be done fairly without affecting the value of the property. Splitting acreage might be possible, but dividing a home for one family would not.
- Partition by sale: The sale of property at a public or private auction, through an agent, or via a real estate agent. Proceeds are distributed in accordance with each owner’s share. When the property cannot physically be divided, this is the most common result in real estate division cases.
Partitioning a property
A co-owner who feels that a peaceful resolution is not possible can file a complaint in the court of the jurisdiction where the property resides. The complaint will outline the details of the property and co-owners, as well as the reason for partition.
The court will issue a summons notifying the other co-owners of the action. The court will then begin a legal procedure that could include:
- Discover: The co-owners of the property may be required by law to share information regarding its financial status, as well as any offers that have been made.
- Mediation: A court may encourage mediation as a way to reach an agreement between all parties outside of court.
- Trial: In the event that mediation is unsuccessful, the case will proceed to trial. The court will examine arguments, evidence and appraisals in order to determine what is the most equitable option – a partition of goods, a partition by sale or a partition by appraisal.
Partition: Its Advantages and Negatives
Advantages:
- When co-owners are unable to reach an agreement, this is a way forward.
- Fair Division of Value – This process ensures that each co-owner gets their fair share of the value of the property.
- Clarity in Ownership: The partition eliminates the potential conflict and ambiguity associated with co-ownership.
Disadvantages:
- Legal fees, court costs and possible appraisal expenses can add up.
- Time: Depending on the complexity, it can take several months or years to complete the partition process.
- Loss of sentimentality: When dividing inherited property by selling it, you can lose a sentimental asset.
- Uncertainty in Partitioning by Sale: Market fluctuations may impact the final sales price and affect the proceeds received by co-owners.
Consider Alternatives to Partition
It is wise to explore alternatives before launching a partitioning action. Consider these options:
- Negotiation: An open and honest dialogue with the co-owners may lead to an agreement that is mutually beneficial, avoiding a legal solution.
- Buyout agreement: A co-owner may purchase the remaining interests in the company from its other owners, thereby consolidating ownership. This depends on the co-owners’ financial capability and willingness to sell.
- Remainder interest and Life Estate: In certain cases, structuring the life estate allows a co-owner the lifetime use of a property. Ownership eventually passes to the other co-owners.
Divide the property in kind
Physical partition is another name for the method of resolving co-ownership disputes in real estate. The property is physically divided between the co-owners. This option is only viable if it’s possible to divide the property fairly and proportionally without affecting its value.
The pros and cons of dividing land in kind:
Advantages:
- Cost-Effective – Partitioning in kind is a cost-effective option compared to selling the property. This avoids realtor commissions, and other selling costs.
- Retain ownership: The co-owners can retain ownership over a portion of their property that may have sentimental value. This is especially true for land inherited from a relative.
Disadvantages:
- Only certain types of property are suitable for partition in kind. It would be impossible to divide a single family home, but it might be possible to split acreage or commercial buildings into clear sections.
- Divided value: Dividing a property can reduce its overall worth. A large parcel with shared amenities may be worth more than two smaller plots without these amenities.
- Complexity of division: The division process is complex and requires professional surveying, as well as legal agreements that outline access rights and maintenance obligations for shared elements.
Property that is suitable for partition in kind:
- Undeveloped land in large tracts
- Multi-unit building with separate entrances, utilities and entrances
- Commercial buildings with clearly divisible sections
Partitioning in Kind:
Consult a professional if you are considering a partition in kind. Consider these factors:
- Property Evaluation: To determine the property’s divisibility, and its potential impact on value, a thorough evaluation by a real estate appraiser or surveyor is required.
- Legal Considerations Legal counsel can provide advice on the legal aspects involved in dividing ownership. This will ensure that there is a clear, enforceable agreement among co-owners.
- Access and Maintenance: To prevent future disputes, agreements that outline access rights to elements shared (e.g. driveways, utilities, etc.) and maintenance responsibilities of shared spaces may be needed.
Explore Other Options Besides Partitioning in Kind
Other options exist to resolve co-ownership issues. Consider these alternatives:
- Negotiation: An open and honest dialogue with co-owners may lead to an agreement. One co-owner could buy out the other’s interests, establish a buy-sell contract outlining future options to sell the property or even coownership management strategies, if both parties agree.
- Buyout Agreements: If one of the co-owners has the financial means and the desire to own the entire property, they may consider a buyout contract. The remaining ownership interest is purchased from the co-owners. All parties will negotiate the terms of the contract, including the price.
- In certain cases, the use of a structure that combines a life estate with a remainder interest can be advantageous. The life estate allows one coowner to use the property for the rest of their lives (remainder interests). This can be a good option if there is a sentimental attachment to a property and if transferring ownership gradually is what you want.
The Right Way to Move Forward
The best way to resolve a dispute over co-ownership depends on a number of factors. These include the type of property, the financial situation and goals of the co-owners, as well as the emotional attachment they have to the property. A qualified lawyer from Bonardi & Uzdavinis LLP who is experienced in real-estate law can guide you through the complexities of partitioning and help you explore your options. They can help guide you through the process and advise you on the financial implications.
Real estate partition does not have to be an intimidating experience. You can successfully navigate this process with professional guidance and open communication.
This article was written by a Bonardi & Uzdavinis professional. Bonardi & Uzdavinis LLP, a boutique full-service law firm, provides its clients a variety of legal representation. Our main areas of practice are real property attorney sarasota, commercial litigation, construction, personal injury and probate. Contact us for a free case evaluation if you need a personal injury or real estate attorney in Tampa Bay.