If I co-own rental property with a friend and I would like to have him buy me out, what are my options?
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If I co-own rental property with a friend and I would like to have him buy me out, what are my options?
I want to get a fair payment for the money I have put into the updates/construction and what I have paid toward the mortgage for the 3 years we have owned it. I estimate I have invested about $30,000 over the last 3 years – $15,000 in updates and $15,000 toward the mortgage not including labor costs of $5000 10 X 500 hours 10. To be fair I would take a buyout of $12,500. I do realize I would have to have paid rent/mortgage to live elsewhere this is why I am fine with the buy-out request I have presented. We are also friends and I am not greedy; I think what I am offering is very fair. Before I make the offer I would like to know what my options are and if I am taking the best approach for the situation. I am also concerned if he does not want to my offer or any offer of a cash payout, what options would I have?
Asked on January 1, 2012 under Real Estate Law, New York
Answers:
M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
First of all the terms on which you want to be bought out is really a business, not legal, matter. So all of that is up to you.
As to whether or not your partner needs to legally buy you out, that should be addressed in a partnership or like agreement. If no such agreement exists then your co-owner is not required to buy your interest in the property. However, you could file what is known as an action for "partition". This is a legal remedy employed by the courts in a case in which joint owners can't agree as to ownership matters.
Pursuant to such an action, if a property is capable of being divided the court will so instruct. If it is not capable of being divided (or it is impractial to do so) then the court will order that the property be put up for sale and the proceeds of the sale equitably split among the parties. First, however, if one of the co-owners wants to keep the property, they will have the right to buy out the other co-owners for fair market value.
Since a partition lawsuit is expensive and time consuming, your partner may just agree upfront to a buy-out along the lines that you have presented. If not, it will probably be worth your while to negotiate a deal because it will most likely end up costing less than if you file for a partition.
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