Separating Co-Owned Real Estate

In today’s society, it is not uncommon for real estate to be co-owned by individuals who are not married.

Unfortunately, when one of the co-owners wishes to sell their interest, it is often the case that one of the other owners is not similarly motivated.

In these situations, Pennsylvania law permits the filing of a court proceeding known as a partition action. A partition action may be filed by any individual who wants to end the co-ownership. In every case, it will result in the court ending the co-ownership. Generally, this occurs in one of two ways.

The first way that the court will end co-ownership is by giving the remaining owners an opportunity to buy out the exiting owner’s share at its fair market value.

The second way that the court will end co-ownership is by forcing the property to be placed for sale at its fair market value. Upon sale, the net proceeds will then then divided in a fair manner between the former owners.

In order to determine the fair market value of the property or share being sold, the court will require that the property be appraised by a professional real estate appraiser.

At the conclusion of a partition action, the owners will not necessarily receive equal shares. Rather, there are numerous adjustments which the court may undertake in determining the amount that each owner is to receive.

Generally speaking, these adjustments will only be made for the period of time after the joint use of the property has effectively ended. From that point forward, the owner who remains in possession, and who has paid the ongoing expenses, will very likely be given a credit for expenses he has paid in excess of his proportionate share. This expense credit will increase his share accordingly, while decreasing the exiting owner’s share.

For example, if there are only two owners, the exiting owner’s share will generally decrease, and the owner in possession’ s share will generally increase, by one-half of any expenses which the owner in possession has paid during this time.

Keep in mind that unmarried co-owners not only include individuals who are romantically involved, but also individuals who have jointly inherited, and individuals who co-own real estate for recreational or business purposes.

An example of a recreational co-ownership includes the frequent ownership of a hunting cabin by multiple individuals. An example of a business co-ownership includes the frequent ownership of a rental property by multiple individuals.

By law, a partition action cannot be used by individuals who are married. This is because Pennsylvania divorce laws set forth procedures for the liquidation of real estate in divorce settings. However, these divorce laws do not apply to situations involving unmarried individuals who are romantically involved.

Lastly, it should be noted that the co-ownership of real estate can involve any number of individuals. Therefore, a partition action can be used to liquidate any interest in real estate, regardless how big or small that interest may be.