Q: I own property with a friend of mine. We are supposed to pay everything 50/50. He has not paid anything toward property expenses for a long time. What can I do to collect my money?
A: This is a tough time to address payment disputes involving jointly owned property. A lot of people have decided to just walk away from their real property investment because of plummeting value and big mortgage payments. It sounds like your “friend” is part of that group, but he is even more abusive. He is letting you pay all of the expenses.
You can sue your friend for the amount he has failed to contribute. If you sue your friend for breach of contract, you would likely be entitled to judgment on the amount your friend owed from the date or dates he failed to pay. The pre-judgment interest rate would be determined by your contract and, in the absence of a provision in your contract, would be set in accordance with statute. Florida Statutes provide that this interest rate is set annually and it is currently8%.
However, suit to collect the debt faces many obstacles. Those obstacles can include:
- Statute of Limitations. The Statute of Limitations can bar claims on an oral agreement in four (4) years and on a written agreement in five (5) years from date of default.
- Statue of Frauds. Most oral agreements to be performed over a period longer than one (1) year are made unenforceable by the Statue of Frauds. The basis of this statute is that oral claims are difficult to prove, as memories and documents disappear over time.
- Attorney fees are not recoverable unless provided by contract or statute. If your agreement with your friend does not provide for award of attorney fees to the prevailing party, you may have to absorb the litigation expenses from whatever you can collect.
- Collection of the judgment. After you get a judgment, you have to find assets that can be used to pay it. Florida provides a lot of debtor protection. Retirement accounts, homestead property, wages of head of a household and most property your friend owns jointly with his spouse will be exempt from your effort to collect. In the process, you could incur additional attorney fees and expenses.
- If you get a judgment and collect it, your friend will still be a co-owner and the cycle may repeat itself.
Partition is your other major option for settling accounts with your friend. Partition is the court ordered distribution of property to the owners in proportion to their ownership interest. It can involve real estate or personal property.
If the property can be distributed in kind, it will usually be divided and distributed. That might be an available remedy with farm land, but would not be suitable for a house or condominium. For property that is not subject to division in kind, the Court will order sale of the property and proceeds distributed proportionally to the owners. The sale can be private or public, cooperatively or by appointment of a receiver. The Court has wide latitude in fashioning appropriate relief.
As part of the partition action, accounts of the parties will be balanced. In your case, you would be credited for all of the payments made by you and your friend would be charged so that your accounts are equalized and paid from the proceeds of sale. The attorney fees and costs of obtaining the partition judgment are also generally paid from the proceeds of sale.
In a partition action, your friend could not rely upon the Statue of Limitations to avoid liability for old expenses. In the recent case of McFall v. Trubey, the Court confirmed that a co-owner paying more than his or her share is entitled to reimbursement, but is not entitled to pre-judgment interest on the amount paid.
The attorney fees and costs of the partition action are born by all of the parties, proportional to the ownership interest of each party. All owners of the property can bid at the partition sale or offer to purchase the property to protect his or her interest.
Additional problems can arise in connection with the partition. If there are liens against the property, there may not be enough generated from sale to pay off the liens. Even if the liens can be paid, there may not be enough money to equalize the accounts of all owners. Options available in this circumstance include a money judgment for the difference a possible settlement among the parties, there is often no easy solution.
Purchasing real property as an investment can be rewarding, but should not be considered lightly. If one is counting on co-owners to pay their portion of ownership expenses, it would be a good idea to review financials prior to purchase. It would also be advisable to prepare a written agreement of the rights, obligations and remedies of the parties.
Your time for pre-investment legal work is passed, but there may still be options available. You should discuss the facts and circumstances of your case with an experienced attorney before proceeding further.