• Tyler Happe

Is Co-Ownership Right for You?

Real estate is regularly regarded as a sound investment. For many, owning a primary residence serves as both the home and the person’s largest asset. For others, income-producing real estate (whether residential or commercial) represents a portion of their investment portfolio. However, given the cost of real estate, especially in California, it is very common for real estate to be owned by two or more unmarried people such as parent and child, co-investors, friends, and unmarried couples.

Co-ownership works exceedingly well when times are good and relationships are strong, but there are times when the basic statutory framework of joint ownership leaves much to be desired and several questions arise:

1) What are the parties long term intentions?

2) Who is responsible for paying the bills?

3) What happens if only one party has the necessary funds to pay for maintenance or repairs?

4) How are improvements handled?

5) What happens if there are disagreements regarding the management of the property?

6) What happens if one of the parties dies?

Existing statutes and case law provide some answers to these questions depending on how the property is titled (joint tenancy versus tenants-in-common, for example). And still, other questions are answered if property is purchased in the name of an entity (an LLC or corporation, for example) and the governing documents are well-crafted. But even then, some issues will arise and no solution will be spelled out.

The following co-ownership arrangements warrant special consideration:

A. Parent and child ownership – if only one child owns property with a parent, then ensuring that the remaining children are provided for is important;

B. Friends – a dispute over a co-owned property can easily be the cause of a friendship’s deterioration; and

C. Unmarried couples – unmarried couples often share assets as though they are married, but they do not have the same rights and responsibilities to each other in the event of divorce. Couples with children from prior relationships have their own set of concerns that should be addressed.

For the above reasons, we recommend some form of co-ownership agreement. A co-ownership agreement can take many forms, and may be incorporated into other existing documents: Tenant-in-Common (“TIC”) agreements are relatively common, as are buy-sell agreements for entities that own real estate. Less common, but equally effective, are co-ownership trusts.

In any case, these documents are intended to specifically, and clearly, spell out the procedures to address the most common issues faced by co-owners. These documents, answering each of the above questions, can provide a roadmap, avoid costly litigation, and, ultimately, ensure that the co-ownership of the property doesn’t jeopardize the relationship between the owners.

For more information on co-ownership of real property, call our office at 916-436-5204 or click here to schedule a complementary one-hour consultation.