When two parties who co-own real estate cannot agree on how to use it, or when one person blocks the other from use of the property, one of the co-owner, called a co-tenant, can file for a Court ordered process called a partition. Actions for Partition of Real Property are governed by 12 V.S.A. § 5161 et seq. For more about partitions, check out our post explaining it in more detail. If you need help in filing a partition action, or any other real estate transactions, contact Mountain View Law, PLLC today at 802-775-6811 or email us at firstname.lastname@example.org.
What happens when one co-tenant contributes more to the property?
Here is a scenario: A person plans to buy a condo in VT to stay at when coming to ski, snowboard, hike, or otherwise enjoy Vermont’s natural beauty and amazing outdoor recreational amenities. While the person pays 100% of the associated costs of the purchase, he asks his friend to sign on as a co-tenant, perhaps to secure more favorable insurance rates. After a while, then the friendship collapses and the two co-tenants begin arguing and threatening each other with use of the property. The person who buys it files an action for partition. Will each party get 50 percent of the proceeds from a sale of the property?
Short Answer: No.
The standard for apportionment of distributions from a sale, or consideration for assignment, are based on the process as set forth in Whippie v. O’Connor, 2010 VT 32, 187 Vt. 523, 996 A.2d 1154. There, the court found that, absent a compelling alternative approach, once co-tenancy is established, a partitioning court should split the property in half and then consider equitable factors in the following order. First, the court may determine the contributions of each party towards the actual expenses of the house, including mortgage, insurance, taxes, utilities, repairs, and improvements. . . . Second, the court should credit against contribution claims a rental value offset for any period of exclusion of a party ousted from the premises by the cotenants in possession. As stated in multiple cases, courts in partition matters “should consider all relevant circumstances to ensure that complete justice is done.'” Wilk v. Wilk, 173 Vt. 343, 346, 795 A.2d 1191 (2002) (quoting 7 R. Powell, Powell on Real Property § 50.07[a], at 50-40 (M. Wolf ed. 2001)).
To quote Whippie: “[d]espite the presumption of equal contribution and equal interest… when one cotenant pays more than his or her share of property-related expenses, she or he is entitled to proportionate reimbursement, or credit, from the other tenants to reflect the proportionate burden of co-ownership. In calculating any reimbursement due, the court must account for all of the property expenses paid by each party. These include not only the mortgage payments, but also the necessary utilities, taxes and insurance, and maintenance expenses towards the home. See Massey, 186 Vt. 211, 2009 VT 70, ¶ 22, 980 A.2d 768.”
Another factor is if the contributions of a party exceed the fair market value. perhaps one party contributed $150,000 and another part $20,000 but the fair markte value for the house is $115,000. In Hubbard v. Hubbard, 2022 Vt. Super. LEXIS 150, *8, the court found that when the fair market value exceeds the contributions of a single party, that party is entitled to a partition by assignment. Because the difference in the parties’ investments in the property exceeded its fair market value, equity required no payment from Plaintiff to Defendants in consideration of their equitable share in the Property; that share, effectively, was a negative balance.
Call for help today
The professionals at Mountain View Law, PLLC are here to help. If you need help in filing a partition action, or any other real estate transactions, contact Mountain View Law, PLLC today at 802-775-6811 or email us at email@example.com.