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Steps To Take If You Have A Real Estate Ownership Dispute

Jan 31, 2024 | Real Estate Law

There are many advantages to co-owning real estate property, but this doesn’t mean that it comes without its own set of problems. When co-owners do not communicate well and make poor decisions together, they can result in a number of problems that, if not resolved, can escalate into serious conflicts and be very expensive for all parties. These issues can also occur when there are competing interests or unclear goals.

To prevent issues from occurring, it is important for everyone to agree on the ground rules from the outset and be honest about expectations. Otherwise, a partition action (a legal claim that may result in the property’s division) may need to be filed. Below are some of the things you need to know if you co-own a property and disagree about its usage or future!

What Are The Benefits Of Co-Ownership?

Before discussing some of the potential issues that can arise when co-owners have conflicts, it is important to note that real estate co-ownership can be a rewarding experience for both parties on several fronts. Some of the many benefits of co-ownership include:

  1. Increased purchasing power: Pooling resources with someone else can increase your purchasing power, enabling you to buy a larger or more desirable property that may have been out of reach individually.
  2. Shared financial responsibility: Co-owning property allows you to share the financial burden of purchasing and maintaining the property. This can make it more affordable and manageable compared to owning it alone.
  3. Sharing expenses: Besides the initial purchase price, you can also divide ongoing expenses such as mortgage payments, property taxes, maintenance costs, and insurance among the co-owners.
  4. Diversification of investment: Co-owning property can help diversify your investment portfolio. You can potentially benefit from the property’s appreciation and generate rental income if it’s a rental property.
  1. Shared use and flexibility: Co-owning a property with others means you can share the use of the property. For vacation homes or timeshares, this allows you to have more flexibility and share the property’s enjoyment and cost.

Who Are Real Estate Ownership Disputes Typically Between?

Owning a property is an expensive investment, especially in today’s market, where any type of real estate carries risk. Many people who want to own a second home or investment property believe it will never happen. However, buying with a few friends, family, or partners makes real estate ownership more attainable (though having more people involved also increases the possibility of conflict). Here are the parties who may co-own a property and who may become involved in ownership disagreements:

  • Family members: Parents can own property in joint names with a child or children; siblings or extended family members can own property jointly. They might contribute money to purchase a first-family home, holiday home, a rental, or other investment property.
  • Married or domestic partners: Couples co-own their primary residence as well as many of their investment properties, including their businesses, which are registered under both names.
  • Friends: When friends co-own property together, such as a vacation home or investment property, they share the associated expenses and the right to enjoy use of the home.
  • Business partners: Co-ownership can also function in the context of business partners who are investing in commercial property or office space alongside one another for their business operations.
  • Investment groups: a collection of investors who jointly purchase a property and split the profits. Members might each put in, say, $100,000 to buy a $1 million property. It both diversifies risk and provides the investor with positive returns.
  • Timeshare ownership: Timeshare ownership is commonly associated with individuals who are co-owners of a property and share usage rights (e.g., one or two weeks per year) with other owners for separate time periods each year. For For example, individuals who want to get the full experience of vacationing at a second home without the financial overhead of full ownership can participate in a timeshare model.

Common Co-Ownership Problems And How To Avoid Them

Although there are numerous advantages to co-ownership, there are also some drawbacks that are worth noting. Most problems can be found in one of the following categories:

  1. Dissolution of the relationship: Sometimes, a co-owner may want to end the relationship and sell his or her interest in the property. This is a common scenario in the case of separation or divorce, or when one co-owner wants to live on the property and the other wants to sell.
  2. Unequal financial contributions: if co-owners are contributing different amounts of capital in the beginning or have different financial means, then this can lead to arguments over contributions to ongoing expenses (such as bills, mortgage payments,or taxes), or towards repair expenses. Real or perceived inequality can strain co-ownership relations and create resentment.
  3. Usage needs: Co-owners can have different or even conflicting needs for the property: (1) as a vacation home; (2) as an investment to generate rental income; or (3) as a personal residence. Usage conflicts can arise if the above attitudes towards co-ownership are not clearly communicated in the usage guidelines and are not explicitly stated.
  4. Property upkeep and maintenance: There must be clear responsibilities and costs for maintenance-related issues, especially if various co-owners live in the same building. One or more co-owners’ abuse of their responsibility may affect the condition of the property, and their failure to perform their duties may become a reason for dissatisfaction.
  5. Exit strategies and sale plans: As the years pass by, the current co-owners’ needs or goals might change. If co-owners want to part ways, disagreements over the right to sell the property can arise, especially if one of the owners wants to sell and the other doesn’t. If there is a desire to sell, plans for how the proceeds can be split are necessary.
  6. And More…

It is possible to overcome many, if not all, of these issues by having a legal, binding agreement in place before entering into a co-ownership agreement. The rights, obligations, responsibilities, and liabilities of the co-owners should all be spelled out in the agreement, along with methods for resolving disputes and guidelines for honest and efficient communication.

Steps To Resolving Co-Ownership Disputes

Many times, despite the best of intentions, co-owners become mired in disputes and eventually might need a third party to help resolve the issues. If left unresolved, these disputes can escalate into expensive court proceedings. If you’re having trouble resolving your co-ownership dispute, try these steps:

  1. Talk it out. First, see if you can settle the dispute through mutually open discussion, being as open and courteous to each other as the situation requires, given the nature of the disagreement, namely, why you feel the way you do and why they do. Listen to the other side’s point of view. Once that is done, try to come up with a compromise that both of you can agree on, even if neither party gets completely what they want. Communication in good faith often makes it possible to reach an agreement early on.
  2. Mediation: If communication efforts fail and no compromise is possible, a mediator should be brought in. A mediator is a neutral third party who can help resolve an impasse, lead to an agreement, or find a consensual resolution to the conflict. Mediation can be less expensive and less adversarial than court proceedings. Mediation is designed to provide a different perspective and help the parties find an amicable resolution, though it is not binding on either party.
  3. Arbitration: If mediation fails or is ineffective, you may prefer this option. The parties submit their cases to an independent arbitrator or arbitration panel of three, who will prepare a judgment that is binding on both parties. Compared to litigation, arbitration can be less formal, faster, and less expensive.
  4. Litigation: If open communication or alternative dispute resolution efforts fail, you may need to take your case to court. If you have a strong case and are confident in your position, litigation may be the best option for you. A court may make a decision that is more favorable to your position than you may have expected. It is important, however, to weigh the costs of litigation against the benefits of a favorable outcome.
  5. Partition actions: A partition action is a means of forcing a sale or physical division of property held in joint tenancy by co-owners who cannot agree on how to divide or use the property. The judge typically divides the property fairly based on the rights and interests of each co-owner. The court may order co-owners to physically divide the property by giving each co-owner a particular portion of the property or divest the property through sales and distribution of profit among the parties according to their equitable interests.

Call The Law Offices Of Patel & Cardenas For Trusted Real Estate Legal Advice

As a real estate law firm licensed in the states of New Jersey and New York, we are uniquely positioned to represent you in all matters of real estate. Our firm has a wealth of experience in issues relating to real-estate transactional matters, real-estate contracts, partition actions, and all other issues related to the purchase, sale, or ownership of property. If you are in need of real estate legal advice or representation, give the Law Offices of Patel & Cardenas a call. Contact us today to set up a free consultation and discover how we can help you with your real estate legal needs.

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