When real estate is inherited, ownership typically passes to multiple people. Parents often pass property to their children as part of their estate plan, not only to protect their investment but also to pass wealth down to the next generation. But many fail to include directives in their estate plan that indicate what should be done with the property. This can create a highly complex situation, especially if the new owners cannot agree on the future of the property. If one owner wants to sell and one owner wants to keep the property, conflict can ensue. As an experienced real estate attorney, George Veitengruber, Esq, is uniquely positioned to offer advice on these difficult situations. Here are some tips for getting through co-owner property disputes.
There are certainly ways that this situation can be solved outside of legal action. The owner or owners that want to keep the property as a primary residence or secondary property have the option to buy out the owners that do want to sell. By offering to pay the other owners their portion of the fair market value of the home in exchange for sole property rights, everyone wins. Another solution is for the co-owner residing on the property to pay rent to the non-resident co-owners at a fair market price. However, if the sibling or owner that wants to keep the home cannot afford the house, cannot qualify for a mortgage, or cannot buy out the other owners, turmoil can persist.
In New Jersey estate law, something called partition action can be used to resolve the dispute. When a co-owner of a shared property refuses to sell the property or provide compensation for the other co-owners interests, a partition action can be used to separate the interests of one co-owner from the other co-owners. A partition action cannot be used when the co-owners are spouses.
To initiate a partition action, the action must be filed in the Superior Court of New Jersey in the county where the disputed property is located. The Court will then review the action and determine the best course of action to satisfy the ownership interests of each co-owner. The Court does have the authority to physically divide the property and distribute the split ownership rights amongst the co-owners. A commissioner will oversee the division of the property to ensure that everyone gets as even a split as possible. Typically, this option only happens when the property in question is vacant land instead of a property with a structure.
When a property contains a structure, like a home, it is not realistic or possible to physically divide a property in this way. If physically dividing the property is not possible due to size, configuration, special features, or structures on the property, the Court does have the right to order that the property as a whole be sold. The proceeds of the property sale will then be split evenly between the co-owners. The Court will authorize the sale of a property if and only if it is determined that a division of the property cannot be made without infringing on the equal property rights of the other co-owners.
If any of the co-owners paid to cover repairs, maintenance, taxes, insurance, or other ownership obligations, the Court will consider these costs when determining how to divide the proceeds of the sale. The Court will adjust the credits to account for co-owners that have invested more into the property. Directives in an estate plan that account for different levels of ownership rights will also be considered when determining the fair distribution of proceeds from the sale of the property.
Veitengruber Law has worked with many families to settle co-owner disputes. We emphasize to our clients that while partition action is a legal recourse when no other solution can be found, it should never be the first course of action. Negotiating between co-owners to find a solution everyone is happy with is typically the best course of action. Especially with inherited property, sentiment, and heightened feelings can make it difficult for those involved to make practical decisions. An attorney like Veitengruber Law can assist with these negotiations to find an agreeable solution for everyone involved. And if a solution cannot be agreed upon, we can also assist clients in bringing about a partition action.
Real estate law and estate law each have vast complexities that make it difficult for the average person to navigate. Veitengruber Law is experienced in both. We can help you traverse these difficult situations to find a solution that is acceptable to everyone involved.