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
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.
Labels: compelling co-owner sale of property NJ, NJ real estate attorney, owning property as co-tenants in NJ, pendente lite sale of co-tenancy NJ