PART 1: Context Of Co-tenancies In A Modern Society.
People are getting creative with their financing options. With this comes greater opportunities for disputes and unique legal conundrums. As we have all been witness to the Colorado real estate market over the past few years, you can imagine the different groups of people that are pooling their funds to get in on the action.
Some of the relationships we have seen in these agreements have been friends, unmarried cohabitants, business partners, businesses, hunting or recreational groups, parents and children, time-share like ownership, siblings owning property together and joint recipients of property through inheritance. These ownership agreements have covered property types from commercial, residential, land, agricultural, condos and multi-unit properties.
Where people are buying properties for such varying reasons (such as personal residence, business use, rental income, AirBnB type rentals, renovation and sale or development) agreements are nearly always necessary, if not required. This is because things are always rosy when people are starting a project or purchase. Unfortunately, it does not always remain so. If and when the relationship sours and the bonds are stressed (and the metaphorical “honeymoon phase” is over), “fair and equitable” separation of the asset is rarely an agreeable calculation. That is why it is important to have a playbook to reference in such a scenario.
Imagining potential scenarios before execution of the contract between the parties allows for those considerations and methods to be agreed to in context of the actual transaction, with cool heads still present. Some of the scenarios that we have seen arise between co-tenants that ultimately led to lengthy (and costly) legal disputes are as follows:
- One wants to sell, but the other doesn't
- Break up or divorce between owners
- Failure of one to contribute/maintain
- Unequal use or work on the property
- Liability of one that affects the others
- Right to rents or profits
- Uninvited guests or cohabitants
Owners find themselves asking all kinds of questions including:
- Who stays?
- Who goes?
- What do they get when they leave?
If one owner paid the down payment, and the other paid all the monthly costs, but there is no agreement, is there equal ownership? Most questions can be addressed in just a few pages a/k/a the playbook. If there is no agreement however, default statutes and case law are put into play. And that is never good, as it normally contradicts the desires and agreements of the parties in a way that hurts everyone.
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 your needs and draft your real estate agreements. If you have any questions about the contents of this blog or if you need legal advice on drafting a Property Prenup, please contact the Beavers O'Connell Group at (720)538-0363, [email protected] or fill out a form under our Contact page.