Hi, I’m Shawn, an attorney with Macomber Law in Coeur d’Alene, Idaho. I serve clients who have real property issues in Washington, Idaho and Montana. Today we’re talking about the risks of having more than one person on title to real property. Most of us were taught that nice friends share with their friends. (Thanks Mom!) Mom chastised us for taking the doll or the toy sword away from our playmates, and immediately gave the toy back to the playmate in question. This brought us to tears. Now that we are adults, some of us carry that lesson over into the world of real property, thinking that sharing ownership in a piece of real estate with friends or family (or combination thereof) would not only be fun but also would be a nice way to share our mutual good fortune and vacation home.It is not. Your mom was wrong (but probably only on this point). In fact, without understanding the different ways to own real property with other people, and the legal rights of all the owners to that real property, sharing can “only lead to tears.” And very probably big lawyer bills. Merely knowing the legal rights and responsibilities you undertake as a co-owner of real property will not shield you from tears. Instead, you would be wise either to run away from the proposal to buy that piece of property with friends (screaming is optional) or treat the proposition as a business dealing from the outset, setting down the rights and responsibilities of each of the co-owners in a written document that a court could enforce.You think I’m just fishing for more legal cases? Not so. The caseload of good real estate lawyers overflows with untangling former friends from this sticky situation. The sad solution frequently resolves itself after many tears, months and possibly years of litigation, and irrevocably broken relationships. Here are the facts.Whether you’re in Bonner County, Ferry County, Kootenai County or Lake County, the law generally provides two ways to own real property in common: joint tenancies with the right of survivorship or tenancies in common. “Joint tenants” usually describes how the title to real estate is vested in spouses buying property. The instrument conveying the real property (usually a deed) may state that the recipients take title as “joint tenants.” For example, say that Uncle Bob conveys his lake cabin property to his favorite niece Sue and her husband George as “joint tenants.” Sue and George will own the property equally. Each will hold title to 100% of the interests in the real estate. This is not a 50-50 split. The law generally understands that “with right of survivorship” applies to these situations. The legal term “With right of survivorship” means that when one spouse dies, 100% of the interests in the title to the lake cabin property automatically will vest in the surviving spouse.The stickier situation arises when two or more people buy land together, whether as a vacation refuge or an investment. In this case, the conveying deed may not specify how the co-owners will hold title to the property. When this happens, the law generally views the new owners as “tenants in common.” When people hold property as tenants in common, each owner has the right to use and possess the entire property as long as one co-tenant’s use does not exclude any of the other co-tenants.This means that, when Dick and Jane and Lily and Logan by one parcel of bare land together and Lily builds a house on that bare land, ALL four tenants in common have the EQUAL right to use that house even if they didn’t pay for it. Lily may get so tired of Dick, Jane, and Logan using her house without her permission that she wants to sell it, retreating to the solitary life of an RV-dwelling vagabond. However Lily may not be able to do that if a lender financed the property’s purchase. In that situation, the deed of trust or the promissory note may contain a “due on sale” clause. If the bank finds out that Lily sold her interests, it could require Dick, Jane, Lily, and Logan immediately to repay the entire amount of that loan. Without a written agreement between the four owners, nothing prevent Lily from transferring her interests to a complete stranger, instead of to her other three cotenants. Logan could decide to rent out the property to weekend campers, or log the entire property, without asking permission of Dick, Jane, or Lily. As tenants in common, the remaining three generally have no legal way to prevent Logan from doing so. The best that Dick, Jane, and Lily may hope for is that Logan give them an accounting of how much he made by renting out the property or selling the timber.The law usually requires tenants in common to share the maintenance expenses of property they own. Dick may decide on his own, without talking to Jane, Lily, or Logan to “improve the property” by digging a well or paving the road. He does so at his own risk: the law generally will not require ...
