Q. I co-own a piece of real property with my two siblings. I would like to sell the property and divide the proceeds, but my siblings are against any sale. What can I do?
New York law recognizes three basic forms in which two or more people can co-own real property. The first and probably most common is that of “tenants by the entirety”, a form of co-ownership reserved to married couples. As tenants by the entirety, each spouse is legally considered to own an undivided 100% interest in the property. One spouse cannot sell or otherwise transfer his or her interest in the property without the other spouse’s consent, and upon the death of one spouse his or his interest automatically vests in the survivor. The second form of co-ownership is that of “joint tenants.”As joint tenants, each co-owner shares an equal percentage interest in the property which can be sold or transferred without the consent of the other co-owners. Upon the death of one joint tenant, his or her interest is automatically vested in the surviving co-owners. Finally, the third form of co-ownership is that of “tenants in common”. Like joint tenants, tenants in common own a specific percentage interest in the property which can be sold or transferred, but that percentage need not be identical to that of the other co-owners. In addition, and unlike the case of joint tenants, upon death, the ownership interest of a tenant in common does not vest in the surviving co-owners but instead is transferred to the decedent’s heirs or beneficiaries.
While the percentage ownership interests of a joint tenant or a tenant in common may be legally sold or transferred without the consent of other co-owners, as a practical matter it may be difficult to find a buyer interested in purchasing that interest. Few people, for example, may be interested in buying a one-third interest in real property that they would effectively co-own with strangers.
What Is Your Can’t Sell or Transfer a Percentage Interest?
If selling or transferring your percentage interest is not a viable option, another alternative would be for you to propose that the other co-owners voluntarily purchase your interest on reasonable terms. The parties could, for example, reach agreement on a fair market value for the property and then pay you a percentage of that value in accordance with your percentage ownership interest in the property, making appropriate adjustments to recognize your financial contributions (if any) toward the cost of acquiring or maintaining the property.If the property’s fair market value is in question, the co-owners could agree to share the cost of an appraisal. While this may be a reasonable approach – and a better alternative to litigation – its success depends on two factors: the ability of all the co-owners to negotiate and reach agreement on several key financial issues, and the financial wherewithal of the remaining co-owners to come up with money necessary to purchase the exiting co-owner’s interest in the property.
If a voluntary buy-out is not possible, a final option would be to commence a legal action to force an involuntary division or sale of the property. Article 9 of the New York Real Property Actions and Proceedings Law authorizes a tenant in common or a joint tenant to file an action for judicial partition of co-owned real property. Under the statute, a co-owner is entitled to an order directing partition simply by establishing that he or she is an owner with a present right of possession of the property.
Partition in Kind or Partition By Sale
The Court may direct a partition of the property in one of two ways: partition in kind or partition by sale. A partition in kind, which is the preferred method, is indicated where the real property is capable of being divided among the owners without causing great prejudice. Assume, for example, that the property in question consists of 10 acres of undeveloped land, with one tenant in common owning a 30% interest and a second tenant in common owning a 70% interest. If the value of the land is generally consistent throughout the acreage and is capable of being subdivided, the Court might direct a partition in kind where one co-owner takes sole title to 3 acres and the second co-owner takes sole title to 7 acres.
Some real property is simply not amenable to partition in kind – think of residential property improved by a home. In such circumstances, the Court can direct a sale of the property by auction, with the proceeds of the sale divided among the owners according to their relative interests. The Court may adjust the disposition of the proceeds to fairly take into account the co-owners’ relative past financial contributions toward either the cost of acquiring the property or the cost of maintaining the property, such as paying for taxes, insurance, and repairs.
Are you in a dispute with the co-owners of a piece of property? We may be able to help. Make an appointment with our Albany real estate lawyers today for a free consultation to learn more about how we may be able to help you achieve a resolution to your case.