The Real Estate Law Podcast

24 - Breaking Up With Your Real Estate Co-Owner

October 06, 2021 Jason Muth + Rory Gill Season 1 Episode 24
The Real Estate Law Podcast
24 - Breaking Up With Your Real Estate Co-Owner
Show Notes

Some of the nastiest cases we have ever handled involved real estate co-owners going their separate ways. Married couples can get a divorce through the courts, but what happens when unmarried co-owners can’t agree? What happens when unmarried couples, siblings, or business partners can’t resolve their differences?

Today, we are going to talk about how these breakups get resolved, how to avoid them, and how to prepare yourself to get a bigger slice of the pie.

When do these non-marital breakups happen?

More often than you think. Most frequently, and with the most conflict, we see unmarried couples fight over their shared property and siblings fighting over an inheritance. However, this can also happen with investors, friends, and other family members.

How is the conflict resolved?

Any co-owner has the right to force a sale of the property. When they insist on forcing the sale, they can sue in court in an action called a “petition to partition.” This is an adversarial process that will ultimately end with a court order compelling the sale, the appointment of a commissioner to oversee it, and the division of proceeds.

This process is expensive. When court costs and commissioner expenses are added, this can – and often does – exceed the total equity in the property.

In Massachusetts, the court will require everyone to attempt formal mediation. This is also expensive. Then, all sides will need to prepare and present their cases at trial. Most of the court case involves showing the parties’ relative contributions to the property.

How can this extreme case be avoided?

By having a “property prenup,” you can agree in advance how a breakup would happen. I encourage unmarried co-owners to always draft an agreement in advance. For individuals, this can be a cotenancy agreement. For investors, these terms would be in a partnership agreement or operating agreement.

If you’re heading toward a petition to partition, what should you do?

Document and gather everything! The more you can show you contributed to the property – in terms of money and effort – the better prepared you will be for mediation.

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