Recently a person came to me with this conundrum, and its not uncommon as far as questions go. Lots of people get help buying their first home from relatives, who insist on being on the title or put themselves on the title when they said they wouldn’t, and you find out 20 years later. Ok, that’s not that common, you got me, but it does happen. Also, sometimes people just thought it was a good idea to have someone else on the title, but now they’re not speaking. Another similar case is now, years after putting that relative on the title, you have kids and want them on the title, but the original co-tenant takes one look at the appreciation on the property and forget about doing the right thing.
Well, there’s more than one right thing here, there’s a right thing to do for each owner of concurrent interest. The first question is whether its in joint tenancy or tenants in common. Joint tenancy is automatically split equally between all the owners, and when one owner dies the other owners absorb the ownership of the owner who passed away. This is called Survivorship. Tenants in Common can be any amount of ownership, even unequal ownership, and this is the default method of determining ownership. In Colorado where there’s only these two, Joint Tenancy has survivorship, and Tenants in Common doesn’t, and if it’s not put in Joint Tenancy then it’s assumed to be Tenants in Common.
When one owner of a Tenancy in Common dies, their ownership goes to their estate and goes to their beneficiaries, not the other owner. With a will, they choose their beneficiaries, and without a will, the state chooses the beneficiaries. See my other article about needing a will!
So, for Joint Tenancy: A/B own real property and improvements (a house) in joint tenancy: It’s 50/50, and when B dies, A now has 100%. If it were JT in A/B/C, and B died, it would then be A/C 50/50 JT. So, if you own a house with a sibling and its in Joint Tenancy its 50/50, then your kids won’t get any ownership of the house if you pass away first.
That’s a problem if you don’t want your sibling to own the house at all, but there’s an easy solution: Have your attorney draw up a deed to transfer your interest to yourself as a Tenant in Common, with ½ undivided interest. Now you don’t have to hope your sibling passes away first, you’ll each have ½ to pass to your beneficiaries through your estates. That’s the only easy part of wanting your relative off the title.
There’s only two ways to get someone off the title, three if you are divorcing them. If it’s a divorce you have a court order stating who gets the house, or ordering a division into two properties, or partitioning the property which means its sold and you get your interest, they get theirs. If there’s no divorce there are only two ways: An agreement that you’ll pay them to go away and they’ll deed the house to you, or Partition. So, if you want to keep the property the agreement is the only way; Partition means selling the house.
Success in partition is not guaranteed, but if the property cannot be split it is the only way to separate ownership without an agreement to do so. It’s a judicial or court made solution so the case will probably cost you $10,000 or more. The default partition is the proportion of ownership on the deed, which is 50/50 in joint tenancy, and varies in tenants in common, of course. Then equitable concerns come in, so if you paid for the whole mortgage and they did not that’s going to heavily affect the amount % you receive, in your favor.
This can be good leverage when seeking an agreement, first you make it a tenancy in common deed, and since they’re not likely to get much, and it’ll cost them another $10,000 to defend the partition action, they don’t have much to gain and have everything to lose. Using that logic, they should accept an offer of
10% of the value of the improved property to go away, since that will undoubtedly be better for them than months spent in court, and they end up paying their attorney most of their gains from the partition action. Refinance for some cash out to pay them off, and in the refi take them off the mortgage too, if they’re on that as well. Two birds, one stone.
Agreement is always better than a fight, but then I’m mostly a transactional attorney. A litigator may have a different take on things, I’m sure they want to get paid. I’d rather craft an agreement that makes it a win-win for both parties, and maybe they’ll still talk to one another down the road. That’s my recommendation, and if you want help with it, give me a call. My website is www.mcmechanlaw.com