Disposing of real estate when the relationship ends

Posted on July 27, 2011 in Commercial Real Estate, Personal Representation

In May, I posted a blog in which I discussed buying real estate with a cohabiting partner. (If you have not yet read it, it is certainly not too late! Just scroll back through the previous blog posts, making sure to stop on any others that interest you along the way!) In that post, I set out a number of issues that, I believe, should be considered before the property is purchased, including what will happen with the real estate if the relationship ends. This month, after assisting several clients who are in this position, I feel it is time to discuss in more detail what happens if and when the relationship does end and two people are “stuck” owning property together.

In a perfect world, the two owners would sit down and reach an agreement as to the disposition of the property. One owner might agree to buy out the other owner’s interest in the property for a fair and equitable price. Another option would be for the property to be immediately placed on the market for sale, and, once the property is sold, the resulting net proceeds of sale would then be divided between the two owners. Of course, if the second option is chosen by the owners, an agreement will need to be reached as to how the expenses associated with the real estate (including, but not limited to, any mortgages, utilities, insurance, and taxes) will be paid while the property is on the market. The owners will also need to reach an agreement as to which owner, if any, will reside at the property until closing on the sale. With either of these options, cooperation between the owners will be absolutely necessary in order to accomplish the goal of disposing of the property.

Unfortunately, though, we do not live in a perfect world and the two owners are not always able to cooperate with one another. As a result, I am often asked to assist one owner of a piece of real estate in forcing the disposition of the real estate. If two unmarried people own real estate together, and their relationship ends, and they cannot agree as to what to do with the property, it will be necessary to file a partition suit with the circuit court of the county or city in which the real estate is located. This will enable the petitioning party (i.e., one owner of the real estate) to request that the Court order the real estate to be physically divided, if that is practicably possible, or, if that is not practicable, to order that the real estate be sold and the proceeds of sale be divided among the owners. During the course of the proceeding, it may be necessary for one or both of the parties to the lawsuit to obtain an appraisal of the real estate, or to obtain the assistance of other professionals or experts, depending upon the type of property and the particular circumstances of the case.

Of course, partition suits cost money…and, the more professionals who are involved, the more expensive the litigation is likely to be. As a result, I always encourage potential clients to first approach the other owner in an effort to work out the disposition of the real estate before he or she files suit.