Co-Owning Property with Others: How to Avoid a Partition Action

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Co-Owning Property with Others How to Avoid a Partition Action
Real Estate

Family members, significant others, and business associates often co-own real estate for business or personal reasons. Co-ownership of real estate may arise voluntarily, such as when business partners jointly purchase property, or involuntarily, such when multiple family members jointly inherit property from a deceased loved one. Unfortunately, all too often, the co-ownership of property can lead to disputes when the familial, social, or business relationship deteriorates. In this situation, filing a partition action and selling the property may be the only viable solution.

Involving an Arizona real estate lawyer from the outset of any intended joint ownership of property is likely the best way to avoid these disputes altogether. In addition, by accounting for the breakdown of relationships in the future in joint ownership of property, you may be able to sidestep the hassle of a partition action if things do not proceed as planned.

Co-Ownership of Real Estate through Inheritance

If you are engaging in estate planning and wish your children to inherit your real estate, you could state in your will that you are leaving the real estate to the children as joint owners with rights of survivorship. Suppose you anticipate disputes between your children over the disposition of the real estate. In that case, you could include a provision in your will that the property be sold and the proceeds from the sale distributed in equal shares, which avoids a separate partition proceeding outside of the estate.

You even could add your intended beneficiaries to the title before your death to avoid probate. However, if you choose this option, there are estate and gift tax implications. In addition, transferring real estate also can have implications for public benefits programs, such as Medicaid. Therefore, consulting with an experienced estate planning lawyer can be crucial to ensure you are not triggering unwanted adverse consequences.

Partnerships and Business Entities

Suppose you and one or more other individuals opt to purchase real estate jointly for business purposes. In that case, you should plan for the disposition of the real estate and any other assets in the legal documents creating your business entity. As part of your partnership agreement, operating agreement, articles of incorporation, or bylaws, you should hammer out your agreement on how you intend to handle real estate should your business entity fail.

You also should include a contingency plan if you become at odds with your business associates or if one or more of you wish to dissolve the entity. By considering these arrangements beforehand, you can avoid disputes over how to dispose of the jointly-owned real estate in the future should the business relationship not work out as expected.

Purchasing Real Estate with a Domestic Partner

More and more people in relationships are choosing not to marry, instead choosing to cohabitate in committed relationships. In many cases, they may purchase real estate together. However, community property laws do not apply because they are not married. As a result, unless the partners specify otherwise, they own the property as tenants in common, meaning they each own one-half undivided joint interest in the property.

When partners own property as tenants in common, if one partner dies without a will, that partner’s share will be distributed to their heirs per Arizona’s intestacy laws. This can result in the surviving partner owning the property jointly with a relative of the deceased partner. If the partners wish to leave their respective halves of the property to one another, they need to take additional steps.

For example, the partners could title the property to own it as joint tenants with rights of survivorship. However, that would prevent any of the partners’ heirs from receiving any ownership of the property. Another option might be for the partners to place their one-half share of the property as a tenant in common in trust for each other but listing their heirs as secondary beneficiaries.

We Are Here to Assist You with Your Arizona Real Estate Matter

Our goal is to help you understand each step of your partition or another type of real estate case and advocate on your behalf throughout the process. Contact the offices of Provident Law today at (480) 388-3343 or online and schedule an appointment to speak with an Arizona real estate attorney about your legal matter.

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