Joseph G. Ballstaedt
801.365.1021
joe@snjlegal.com
In Utah, a person can hold title to real estate with other people in a variety of ways, including as joint tenants with rights of survivorship or tenants in common. Spouses regularly share ownership of a property, but friends, business partners, roommates, or anyone can also own property jointly. Joint owners have rights and duties to a property. For example, they generally have the right to occupy and use the property along with other owners, and they also have duties ranging from simple maintenance (such as yard care) to more expensive maintenance (such as replacing a deteriorated roof). Owners’ duties also include paying property taxes and insurance. If the owners fail to maintain a property, the property can be damaged or lost.
What happens in Utah if one owner of real property refuses or fails to participate in the common and expected maintenance of the property? What if one property owner leaves the other owners to foot the bill? This article discusses a few options, including selling the property and bringing a claim of contribution in a court to force other owners to pay their fair share of property expenses.
Sell the Property Voluntarily
If co-owners are not equally contributing to the property’s care and maintenance, it may not be a beneficial relationship in the long-term, and the owners may want to consider selling the property. All owners can sell the entire property to a buyer, so long as they all agree. But even if some owners want to hang on to the property while others do not, those who do not can almost always sell their interest in the property without a court’s permission and without a court order.
Sometimes, when one owner sells his or her interest, this act changes the form of ownership in the property for all owners. For instance, if the owners hold title as joint tenants with rights of survivorship, and one owner sells his or her interest, the remaining owners and new owner become tenants in common without any right of survivorship. (A right of survivorship means that each owner’s interest, when he or she dies, passes equally to the remaining, living owners.)
Sell the Property Through a Court Order
In some circumstances, if the joint owners do not agree to sell the property (or if one owner is unable to sell his or her share of the property alone), they can ask a court to force a sale, which the court will often do, especially if an equal division of the property between the owners is not possible. Utah statutes outline the procedures for such sales, which often occur by auction.
Divide the Property by Agreement
Another possible solution when owners are not equally caring for real property is to divide the real property. Once co-owners divide the property, each owns and cares for a single portion of that property, no longer having any shared rights or duties. Such a division can be accomplished through agreement by the owners. It might be a relatively simple agreement. For instance, if two owners own a large rectangle of 100 acres of farmland, and each acre of land is roughly the same, it would likely make sense to split the land in half in any way that allowed both owners reasonable access to their remaining half of the property. The two owners could then maintain and use their 50 acres independently of the other.
However, splitting a property is often not easy or feasible. If the property contains a structure, the parties cannot easily split the structure in half, and it would be difficult if not impossible to fairly divide the property. An equal division may also not be feasible for other reasons, such as a unique shape of the property or a shape that would leave one parcel unusable if it were divided. Perhaps the lot is narrow and borders a street on the short side. If that property were split, the party receiving the portion on the back side of the lot may not be able to access the property. And if a portion of the property is especially beautiful (e.g. it borders a river) or has valuable resources (e.g. trees for harvesting or mineral rights), a 50/50 split would also not likely be fair.
Divide the Property Through a Partition Action
Sometimes a division would be fair and feasible, but the owners simply cannot agree to a division. If this occurs, the owners can ask a court to divide the property for them. In this type of lawsuit, called a partition action, a joint tenant or tenant in common can have the property divided if doing so does not harm the other owners—if it can be done fairly.
Sometimes, to make the division fair, the court can order one party to pay another party to account for an inequality in the division. For instance, if one party receives a portion of land along a beautiful river, he may have to pay the other owners for that benefit because it is a benefit the other owners will not enjoy moving forward with their non-river parcels. What types of adjustments are necessary to create an equal division is left to the discretion of the court.
As stated above, if a court determines that a partition is not feasible or fair, it can order that the property be sold.
Bring a Contribution Claim
If the owners do not wish to sell the property or cannot sell the property, they can still force other owners to pay their fair share. It would be inequitable for one co-owner to use, rent, or otherwise benefit from the property (including enjoying appreciation over time), without helping to preserve the property. It is well established in Utah that an owner of real property “is entitled to contribution [from co-owners] for expenditures which were necessary for the preservation of the common property.” For example, if one co-owner pays taxes, he or she has a right of contribution against other co-owners who have not contributed in that expense.
Let me provide you an example of how a contribution claim might work. Roommate A and Roommate B are friends who rent a property together, but they decide they want their monthly rent to be converted into a real estate investment. So, they buy a residential property together for $500,000, agreeing that each party will pay half the monthly mortgage (which includes taxes and property insurance) and any expenses that arise. As part of the purchase, both parties are placed on the deed and are liable under the mortgage, but while Roommate A pays a down payment of $50,000, Roommate B has no money and contributes nothing. When the roof starts to leak a few months later, Roommate A pays $20,000 to have the roof repaired. Moreover, over the first year, Roommate B fails to pay the monthly mortgage, so Roommate B pays the full mortgage to avoid a foreclosure. These payments total $30,000. In the meantime, the property’s value has increased $50,000. Roommate A is fed up with the relationship, and although he considers a sale, he wants to hold on to the property for its investment value.
If Roommate A wants to bring a lawsuit against Roommate B for contribution, what amounts is he entitled to seek from Roommate B? Mostly likely, Roommate A is entitled to payment of half of the expenses he has paid: $25,000 of the of the $50,000 down payment, $10,000 of the $20,000 for the roof repair, and $15,000 of the $30,000 in mortgage payments (which include taxes and property insurance). Roommate A may also have a strong claim for interest on these amounts, accruing from the date he paid them. Roommate A probably cannot claim half of the appreciation of the property ($25,000 of the $50,000 increase). More likely, if and when the property is sold, Roommate A and Roommate B will divide the equity equally, after accounting for all expenses each party has contributed to the property.
Help with Real Property Co-Ownership Issues and Disputes
This article only touches on a few key points with respect to contribution claims, partition claims, selling methods, and other issues related to common ownership of real property. If you have questions about any of these or other related issues, I am happy to help. I offer a free consultation. My direct dial is 801-365-1021, and you can e-mail me at joe@snjlegal.com.
