Legal-Ease: Rights as a property co-owner


By Lee R. Schroeder - Guest Columnist



Lee R. Schroeder

Lee R. Schroeder


Many people own real estate with another person or people. This often occurs when a group of people purchase some property together or inherit property together.

Co-ownership of real estate is usually “undivided” meaning that even if a parcel of property has two owners and consists of only two acres, neither acre is specifically owned by either co-owner. Although there are various types of co-ownership of real estate, there are specific, unique laws that govern most types of undivided co-ownership of real estate.

First, when multiple people co-own undivided property, any one of those people is legally allowed to possess the entirety of the property, almost in a “first-come, first-serve” fashion. However, if one co-owner uses the entirety of the co-owned property, that using co-owner is required to fairly pay proportional rent to the other co-owners. This means that any co-owner can also rent out (to non-owners) the co-owned property as long as the renting co-owner proportionally shares the rent with the other co-owners.

For example, if I own an undivided one-third of a certain farm field, I can farm that field, but I must pay two-thirds of the fair market rent to the other two co-owners.

Similarly, if I am not a farmer but own an undivided one-third of a certain farm field, I will likely be able to rent that field out to a tenant (and effectively block out the other co-owners from doing so) as long as I pay two-thirds of the fair market value rent to the other co-owners.

Second, undivided interests in real estate can legally be sold or transferred, if a buyer can actually be found. Thus, if I inherit a one-seventh interest in a house, I can usually sell or transfer that one-seventh interest to almost anyone else, and there is no ability of the co-owners to stop or preclude that transfer.

Third, any co-owner of property can file a specific type of lawsuit to have the property divided into shares proportional to the co-ownership. In that lawsuit, if it is determined that the property cannot be divided fairly in proportion to ownership (as is the case with a house that cannot be “divided”), a co-owner can force a public auction of the property.

The unique rules regarding co-ownership of real estate are sometimes inconsistent with the hopes and wishes of property co-owners or other people who created the co-ownership. For instance, a parent may give property to more than one of the parent’s children with the expectation that the children will not sell their interests or subdivide their interests in the real estate.

Usually, the easiest way to create co-ownership of real estate while modifying or eliminating the rules and mechanics of co-ownership that are explained above is for the co-owners to own an entity (like an LLC) that owns the real estate. The LLC’s operating agreement can then prohibit subdivision of the real estate and can limit or prohibit the sale of the undivided interests. The LLC’s operating agreement can also regulate and organize access to and use of the property by the co-owners.

Lee R. Schroeder
https://www.limaohio.com/wp-content/uploads/sites/54/2021/10/web1_Schroeder-Lee-CMYK-2.jpgLee R. Schroeder

By Lee R. Schroeder

Guest Columnist

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.

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.

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