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It's The Law: Equal Ownership Usually Means Equal Obligation

Question: My partner and I own a vacation condominium. He uses it a lot more than I do, but he wants me to pay half of all the expenses. What are my rights?

Answer: Joint property owners are generally considered to have equal rights and obligations with respect to property. That means each owner has an equal right to use the property and equal obligation to pay the expenses. They are also entitled to a proportional sharing of income or profit from the property. But, unless one of the owners is using the property and takes steps to exclude the other owner, an owner using the property does not have to pay rent.

You might think that where one owner is occupying the property, it excludes the other owner from use. It might be awkward for both to use it at the same time, courts do not view use by one owner as excluding another unless further action is taken to preclude use by the out of possession owner.

In joint ownership, it is not uncommon for one of the owners to pay more than his or her proportionate share of expenses. When that happens, the owner is entitled to reimbursement from the other owners to “balance the books.” If the other owners do not pay voluntarily, they can be sued for the amount they owe. If all else fails, one of the owners can request that the court order the property be sold, an accounting be conducted and the proceeds of sale distributed among the owners in a final “balancing of the books.”

The rules change when one owner takes possession and excludes the others adversely, such as changing the locks and/or prohibiting the others from occupying the premises. If an owner in possession under those circumstances tries to force the other owners to pay ownership expenses, the other owners can recover fair market rent from the owner in possession. Keep in mind, the possession must be clearly hostile and exclusive as to the other owners.

The rules can also be changed when dissolution of marriage is involved. If a former spouse or spouse is given exclusive possession of a home by court order, it does not give rise to a credit for fair rental value to the out of possession owner. That is true even if both owners have to pay the mortgage and other expenses.

The court cases explain that if a person is up by a judgment of dissolution of marriage, terms of the judgment control. If the judgment does not provide for reimbursement of fair rental value, no reimbursement is required. However, the judgment will be strictly construed. In one case, a judgment provided that payment of the mortgage was support and that the spouse ordered to pay the monthly mortgage payments would not receive credit at time the house was sold. The judgment did not address property taxes, so the former spouse paying property taxes was entitled to a credit.

If is not uncommon for one owner to use a property more than the others. It is also not uncommon for one or more co-owners to be slow or uncooperative in paying of property expenses. I always recommend that “partners” purchasing property have an ownership agreement establishing the rights and obligations as to use and penalties for non-payment. These agreements clarify when and how each owner can use the property, how it will be rented (if at all), and include a penalty for failure to timely pay an owner’s portion of expenses. The agreement addresses issues that might develop over time by establishing rules everyone agrees on at the start. And, if an owner fails to follow the rules, action to enforce is easier and cheaper.

Because of the issues that can arise in joint ownership of property, the parties to such an arrangement should always consult with experienced counsel. In many cases, the parties do not want to spend the money to prepare an ownership agreement because they are in a “honeymoon phase” and do not think that anything will go wrong. Often, that decision proves penny wise but pound foolish.

Although it may be too late for you to prepare an ownership agreement, I encourage you to discuss your case with an experienced attorney for advice about your rights, course of action and even expense before proceeding further.

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