PART 4: Default Remedies and How They Can Fail to Capture Original Intent.
Generally, when cotenants have a common interest in property, “either party may have the property divided by an equitable proceeding pursuant to the partition statutes, §38-28-101, et seq.” Young Properties v. Woflick, 87 P.3d 235, 237 (Colo. App. 2003). The court “must not crate new interests in property but must sever the unity of possession of the tenants in common.” Id. This equitable proceeding is referred to as partition and can be effectuated in two ways.
i. Partition in Kind v. Partition by Sale
A partition in kind is the subdivision of disputed property into smaller and separate parcels to be separately owned by each party. There are certain scenarios where this cannot reasonably be effectuated, such as residential real estate. When this is the case, partition by sale is required, which is where the court orders the sale of the property and division of the proceeds, commiserate with ownership rights therein.
In Colorado, partition in kind is favored over partition by sale, and the former should be ordered unless doing so would result in manifest prejudice to the parties. C.R.S. §38-28-107; Young Properties v. Wolflick, 87 P.3d 235, 237 (Colo.App. 2003). Manifest prejudice may be shown when either (1) the physical characteristics of the land make it impracticable to divide into parts that correspond to the parties' respective interests; or (2) the value of the whole parcel is materially greater than the sum of its parts. Wolflick, 87 P.3d at 238. In creating a division commensurate with ownership interest, a few factors become relevant. Percentage of ownership interest, expenditures in improving the property, waste, rights to contributions from other tenants, just to name a few. The court has to determine a way to fairly calculate these amounts in a way that remains fair and equitable, which often proves difficult.
One of the more prevalent arguments in partitions is that one party put in more work and money than the other, therefore an equal split would be inequitable. In a partition action, a cotenant “will be allowed the amount by which the improvements enhance the value of the property, but not the cost thereof or the original amount expended in making the improvements.” Thomas v. Thomas, 352 P.2d 279, 280 (Colo. 1960). If there is no evidence of the value of the land separate from the improvements, or of the extent to which they have enhanced the value of the premises, a court is unable to charge a cotenant with a proportion of the amount which the improvements have added to the value of the land. See 59A Am.Jr. 29 Partition §171 (2003).
There are general statutory and common law rules applied to the dissolution of property rights when disputes arise. However, the general rules of tenancies-in-common will not control where there is a contrary agreement. As we will attach a few forms to our materials, we want to highlight a few important clauses that can address some of the issues we have spoken about above.
The information contained on this blog is intended to be general information only and not legal advice. This blog topic is not intended to be fully comprehensive. For these reasons, we suggest you seek a licensed attorney to help you review and revise your agreements to reflect the current state of affairs, as well as, to assist in current and long-term effects of the COVID-19 pandemic. If you have any questions about the contents of this blog or if you need legal advice as to Property Prenups, please contact the Beavers O'Connell Group at (720)538-0363, [email protected]or fill out a form under our Contact page.