I Own 50% of a Property. What Are My Rights

Owning a property is often a significant milestone in a person’s life, but what happens when this ownership is shared? What rights do you have if you own 50% of a property? This blog post will delve into these questions and help you understand your rights and responsibilities as a co-owner.

Understanding Property Co-Ownership

Property co-ownership is a situation where two or more people own property together. This arrangement is relatively common, particularly among married couples, business partners, and friends or family members looking to invest in real estate together. However, it’s essential to understand that there are two primary forms of co-ownership: joint tenancy and tenancy in common, and each comes with its own set of rules and considerations.

Joint Tenancy

In a joint tenancy, all co-owners own equal shares of the property. It means that if you and a partner own a property as joint tenants, you each hold an equal interest in the property, regardless of how much you contributed to the purchase price.

One distinguishing feature of joint tenancy is the right of survivorship. If one co-owner passes away, their interest in the property automatically passes to the surviving co-owner (s), irrespective of what is written in the deceased owner’s will. For example, suppose a husband and wife own their home as joint tenants, and the husband dies. In that case, the wife automatically becomes the sole owner of the house.

Tenancy in Common

On the other hand, tenancy in common allows for more flexibility in ownership percentages. Co-owners can own different portions of the property, which don’t necessarily have to be equal. In this form of co-ownership, each co-owner has an individual interest in the property, which they can sell, mortgage, or bequeath to someone else independently of the other co-owners.

For instance, if you and two friends buy a property together as tenants in common, one of you could own a 50% interest. In contrast, the other two each own a 25% interest. If the friend who owns 50% of the property decides to sell their share, they can do so without the consent of the other owners.

Moreover, unlike joint tenancy, tenancy in common does not feature a right of survivorship. If a tenant in common dies, their share of the property goes to their heirs or, as dictated in their will, not automatically to the other co-owners.

Rights of Co-Owners

Co-ownership of property, whether as joint tenants or tenants in common, comes with specific rights for each co-owner. As a co-owner, it’s essential to understand these rights to ensure that you can make the most out of your investment and protect yourself in case of disagreements or disputes. Here are the fundamental rights of co-owners:

1. Right to Occupancy:

All co-owners have an equal right to occupy the entire property, even if they own less than 50%. Suppose you and a partner each own 50% of a property, you both have the right to use and enjoy the entire property, and neither of you can exclude the other from any part of it. However, this right is subject to any agreement to the contrary, such as a rental agreement in which one co-owner leases their share to the other.

2. Right to Profits from the Property:

If the property is income-generating – for example, if it’s rented out – all co-owners have the right to a share of the profits proportional to their ownership interests. In other words, if you own 50% of a property, you’re entitled to 50% of the rental income, and so on.

3. Right to Transfer Ownership:

Unless restricted by an agreement like a right of first refusal, each co-owner has the right to sell or otherwise transfer their ownership interest to another party. That can be done without the consent of the other co-owners and applies only to their share of the property.

4. Right to the Property’s Title:

Each co-owner has a right to possess the title of the property. That means they have the right to know anything that affects the property’s title, including any liens or encumbrances. As a 50% owner, you are entitled to complete information about the property’s legal status.

5. Right to Sue for Damages or Partition:

If a co-owner harms the property or uses it in a way that harms your interest, you have the right to sue them for damages. Moreover, if co-owners can’t agree on how to use or dispose of the property, any co-owner has the right to sue for a “partition.” A partition action asks the court to divide the property or order it to be sold physically and distribute the proceeds among the co-owners.

Responsibilities of Co-Owners

Just as co-owners have specific rights, they also have particular responsibilities. It’s important to remember that the obligation to maintain the property and ensure its upkeep comes with ownership. The essential duties of co-owners include:

1. Payment of Property-Related Expenses:

As a co-owner, you’re responsible for contributing to property-related expenses in proportion to your ownership share. These expenses include property taxes, insurance premiums, maintenance and repair costs, and utility bills. For example, if you own 50% of a property, you should be prepared to pay for 50% of these costs.

2. Maintenance and Repairs:

Maintaining the physical condition of the property is another key responsibility. This can involve routine tasks like lawn care or more substantial work like repairing a leaky roof. As with property-related expenses, the cost of maintenance and repairs is typically shared among co-owners according to their ownership interest.

3. Mortgage Payments:

Suppose the property is subject to a mortgage. In that case, co-owners are responsible for making mortgage payments on time. The agreement between the co-owners typically determines the responsibility for mortgage payments. In some cases, this responsibility may be divided equally. In contrast, in other cases, it might be divided proportionally based on each co-owner’s interest in the property.

4. Compliance with Laws and Regulations:

Co-owners are also responsible for ensuring that the use and condition of the property comply with all relevant laws and regulations. It includes local zoning ordinances, building codes, and environmental regulations. Non-compliance can result in fines or other penalties.

5. Respect for Co-Owners’ Rights:

Finally, each co-owner has a responsibility to respect the rights of the other co-owners. So, one co-owner cannot take actions that infringe on the rights of the other co-owners, such as denying them access to the property or making unilateral decisions about the property without their consent.

It’s worth noting that while these are typical responsibilities of co-owners, the specifics can vary depending on the agreement between the co-owners. It’s always a good idea to have an explicit, written agreement outlining each co-owners responsibilities to avoid misunderstandings and disputes.

Dealing with Disagreements

Disagreements among co-owners of a property can arise over various issues, ranging from decisions about property maintenance to disputes about whether to sell the property. Here’s how you can deal with disagreements:

1. Open Communication and Negotiation:

The first step in resolving any disagreement is open and honest communication. Discuss your concerns and try to understand the other party’s viewpoint. It may be possible to negotiate a resolution that satisfies everyone’s needs.

2. Mediation:

If negotiation isn’t successful, the next step might be mediation. Mediation involves a neutral third party – a mediator – who facilitates a discussion between the co-owners to help them reach an agreement. The mediator doesn’t make a decision but helps the parties find a solution themselves.

3. Arbitration:

In arbitration, a neutral third party – the arbitrator – listens to both sides, reviews the evidence, and makes a usually binding decision. Arbitration can be faster and less expensive than going to court, and it’s private.

4. Court Action:

A co-owner can go to court to resolve the dispute if all else fails. A standard legal action in co-ownership disputes is a partition lawsuit. In a partition action, the court decides whether the property should be divided among the co-owners or sold, with the proceeds divided among the co-owners.

5. Contractual Agreements:

To avoid disagreements in the first place, it’s wise to have a co-ownership agreement. This agreement, ideally drafted with the help of a lawyer, can outline how decisions will be made, how costs will be shared, and what will happen if a co-owner wants to sell their share. The agreement can also include a dispute resolution clause specifying that disputes will be resolved through mediation or arbitration.

Consider the case of Alex and Bailey, who co-own a property. They disagree on whether to sell the property. They first try to negotiate but are unable to reach an agreement. They then move to mediation, agreeing to sell the property and split the proceeds.

Selling Your Share

As a co-owner of a property, you possess the right to sell your share of the property. Still, the process can be more complex than selling a property owned by a single individual. Here’s what you need to know:

1. Informing Co-Owners:

It’s usually best to inform the other co-owners of your intentions first. They might be interested in buying your share, which could simplify the process.

2. Right of First Refusal:

The co-ownership agreement might sometimes include a “right of first refusal” clause. It means that before you sell your share to an external party, you must first offer it to the other co-owners at a fair market price. If they refuse, you are free to sell to anyone else.

3. Determining Value:

To sell your share, you’ll need to determine its value. It typically involves getting a property appraisal to ascertain the current market value of the whole property and then calculating the ValueValue of your share based on your ownership percentage.

4. Selling to an External Party:

If the other co-owners aren’t interested in buying your share or if there’s no right of first refusal clause, you can sell your stake to an external party. However, remember that finding a buyer can be more challenging because the buyer would be entering into a co-ownership agreement with the existing owners.

5. Legal Assistance:

Selling your share of a co-owned property can be legally complex, so it’s advisable to engage a real estate attorney to help navigate the process and ensure all legalities are correctly handled.

Consider this example: Laura and Ethan co-own a house, with each holding a 50% share. Laura decides she wants to sell her stake. First, she appraises the property and finds out it’s worth $500,000, making her share worth $250,000. Because their co-ownership agreement includes a right of first refusal clause, she offers her share to Ethan for that amount. Ethan decides not to buy, so Laura can now sell her share to an external buyer.

Inheritance Considerations

When a co-owner passes away, what happens to their share of the property largely depends on the type of co-ownership and the deceased’s estate plan.

1. Joint Tenancy and the Right of Survivorship:

In a joint tenancy, the surviving co-owner (s) automatically inherit the deceased co-owners share of the property, regardless of what the deceased’s will says. This concept is known as the right of survivorship.

For instance, if a married couple owns their home as joint tenants and one spouse dies, the surviving spouse automatically becomes the sole owner of the house, even if the deceased spouses will leave their estate to their children from a previous marriage.

2. Tenancy in Common and Inheritance:

Things are different with a tenancy in common. Suppose a tenant in common dies, their share of the property does not automatically go to the surviving co-owners. Instead, it becomes part of the deceased’s estate. According to state intestacy laws, it is distributed according to their will or if they died without a will.

If you co-own a property as tenants in common and you own 50% of the property, you can leave your 50% share to anyone you wish in your will. If you die without a will, your share will be distributed according to the intestacy laws in your state, which usually means it will go to your closest relatives.

3. Planning Ahead:

Given these considerations, planning ahead and considering what you want to happen to your share of the property after your death is essential. A joint tenancy might be the best choice if you want your share to go to the surviving co-owner (s). If you want your share to go to someone else, you might prefer a tenancy in common.

Additionally, ensure you have a valid will that clearly states your wishes. Without a will, the distribution of your share will be left up to state laws, which might not align with your desires.

4. Legal Advice:

Because the laws regarding inheritance can be complex and vary from state to state, it’s advisable to consult with an estate planning attorney. They can help you understand the potential implications of different types of co-ownership and guide you in making the best decisions for your situation.

Conclusion

Owning 50% of a property gives you substantial rights. Still, it’s crucial to understand the responsibilities and potential complications of co-ownership. We recommend seeking advice from a qualified real estate attorney to fully understand your rights and obligations in your specific situation.