Due to various circumstances, many of us can find ourselves as co-owners of real estate. Sometimes, multiple siblings will inherit a house from a parent. In other instances, more than one person may purchase property with one or more other people. Of course, houses are often owned by married couples.
Generally, I frown on co-ownership of real estate, except for married couples. Frequently, co-ownership occurs without any problems whatsoever. In other instances, co-owners can argue about everything and anything involving the property, including whether to rent out the property, what rent to insist upon and how the rent proceeds should be divided. Seldom is property without need for improvement or maintenance, and co-owners can disagree about what is reasonable or appropriate in that context. Even for bare farmland, nutrient management and the need for subsurface drainage tile (informally called ditching) are bound to be evaluated differently by different co-owners.
If co-ownership is practically necessary, I usually recommend the use of a limited liability company or shared ownership agreement. Although liability may not be an issue for the property, an LLC can provide guidelines for dispute resolution and effectively organize competing interests and priorities for co-owners of real estate.
Any co-owner of real estate may file a lawsuit to have co-owned property fairly divided up between or among the co-owners in proportion to their respective ownership. That property division lawsuit is called a “partition.”
A partition lawsuit must be brought in the county within which the property is located. If the person filing the partition lawsuit has a right to any proportion of the property, even as little as 1 percent or less, the judge will appoint a partition “commissioner” to analyze the property size, configuration, value and other characteristics to determine a fair separation of the property. Anybody who has an ownership interest in the property may ask the judge to add up to two more partition commissioners to assist the initial partition commissioner in his or her work.
Once the partition commissioners separate the property into proportional parts for each co-owner, the judge decides who gets what part. Sometimes, judges will take testimony from co-owners who ask for certain parts. Other times, judges decide independently or make the assignments of parts among co-owners through a lottery process.
Sometimes, the partition commissioners cannot separate the property without seriously decreasing the value of the property, which is usually the case if the property is a house. In those instances, the partition commissioners report that conclusion to the judge. In those cases, the partition commissioners must also appraise the property.
If one co-owner wants the “indivisible” property at the appraised price, that co-owner can buy the property. Otherwise, the judge can order the property to be sold by either the county sheriff or a private auctioneer, and co-owners can bid at that auction.
Any co-owned real estate is subject to partition, which is why I usually recommend avoiding co-ownership of real estate except for married couples or people using LLCs or co-ownership agreements.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.