Can One Co-Owner Of Real Estate Owned As Tenants in Common Force The Other Co-Tenant To Sell His/Her Share?

  There are significant legal distinctions between owning property as tenants by the entirety versus owning property as tenants in common.  Understanding these legal distinctions is important when it comes to purchasing  residential real estate with friends, business partners, or relatives.

A joint tenancy is a form of property ownership where the co-owners own the property equally.  If one joint tenant dies, the surviving joint tenant automatically inherits the entire property.   By contrast, a tenancy in common is a form of co-ownership of property that does not include a right of survivorship.   In a tenancy in common, each co-owner's portion can be passed to beneficiaries named in a will, which may or may not be someone who the surviving co-tenant ever envisioned owning the property with or living with.  In New Jersey, two people, other than married couples, are presumed to own property as tenants in common unless they've otherwise specified in the deed.   

So what happens if one child purchases a home with her parents as tenants in common, with each intending to occupy a portion of the home, and then the parents die leaving their co-tenancy interest to the other children and a dispute arises between all surviving children about whether the house should be sold?   Can the surviving co-tenant who still lives there and wishes to continue living there compel the other siblings who inherited the parents' co-tenancy to sell the estate's co-tenancy interest?   What if out of pure spite the other siblings insist that the house be sold on the open market instead of selling to the surviving co-tenant?

My law firm is presently litigating this exact issue before the Superior Court of New Jersey, Chancery Division, Bergen County, in a matter captioned Chedid vs. Estate of Helewa, Docket No.: C-25-12.   Click here to download a copy of the brief that we filed on December 14, 2012.  The matter is presently scheduled to be heard on January 11, 2013.   

Partition is a legal action recognized in New Jersey that allows for dividing real estate owned by two or more people. If one or more of the co-owners of real estate is or are unwilling to sell the property and divide the proceeds of sale in accordance with all of the co-owners’ ownership interests, it is the only way that a person who owns a share of real estate as a tenant in common or joint tenant can separate his or her interest from the other co-owners.

As explained in our our brief, although it is recognized that partition among tenants in common may normally be had as of course, see Newman v. Chase, 70 N.J. 254, (1976), courts have held that the remedy of partition is not necessarily available as a matter of right in all cases:

It is an established principle that a court of equity, in decreeing partition does not act ministerially and in obedience to the call of those who have a right to partition, but founds itself on its general jurisdiction as a court of equity and administers its relief ex aequo et bono according to its own notions of general justice and equity between the parties.

Baker v. Drabik, 224 N.J. Super. 603, 609 (App. Div. 1988), citing Newman v. Chase, supra, 70 N.J. at 263 (quoting Woolston v. Pullen, 88 N.J. Eq. 35, 40 (Ch. 1917)).

Courts addressing similar situations, wherein one co-owner desires to stay in the property, have denied partition based upon equitable principles and required the co-owner in possession to compensate the other with an owelty. In Leonard v. Leonard, 124 N.J. Super. 439, 442 (App. Div. 1973), the court explained that an owelty is an amount of money that a cotenant will owe to the other cotenant, and which will equalize the partition, if one cotenant “receives property with a value greater than his proportionate share.”  Ibid. 

In fact, several New Jersey courts have liberally applied this concept to allow one co-tenant to purchase the property, with the other co-tenant receiving a credit for this proportionate share. See Baker v. Drabik, supra, 224 N.J. Super. 603(co-tenant allowed to remain as sole occupant of the premises, but required to pay non-occupying cotenant an appropriate amount in compensation for share as cotenant, with credit for her share of principal reduction portion of mortgage payments and capital improvements); see also Asante v. Abban, 237 N.J. Super. 495, 502 (Law Div. 1989)(co-tenant determined to have share of ownership in proportion to financial contribution to purchase price, and entitled to receive proportionate percentage of appraised value of property); and Reitmeier v. Kalinoski, 631 F.Supp. 565 (D.N.J. 1986)(single family property partitioned such that residing plaintiff retained entire property while reimbursing co-tenant with monetary compensation). In each of these cases, the courts allowed the co-owner desiring to remain in possession to purchase the co-tenant’s interest. 

I will report further on this case after January 11, 2013.