DIVIDING UP REAL ESTATE WILL YOU GET YOUR FAIR SHARE?

Written By: Robert L. Buzzendore, Esquire
As Reviewed By: William F. Hoffmeyer, Esquire

A person may own real estate with a significant other or a ‘business’ partner.  Generally, there is no cohabitation or other written agreement regarding their real estate.  Initially, the arrangement may be satisfactory, but what happens when it deteriorates and one owner desires to receive his or her share of the property, or desires to remove the significant other?

A February 2019 appeals court case discussed Partition when the owners’ marriage was annulled. Before discussing this case, some background information is provided on Partition.   

If there is no agreement between the owners, the law decides what happens to the real estate.  A Partition law suit is the method to divide real estate between the owners.  In a Partition Action, each owner receives an equal percentage, so if there are two owners, each receives 50% subject to credits and fair rental issues.  This may not be how the parties intended to divide the property or the proceeds from a sale especially if one owner contributed more than the other owners.

Planning for a potential break-up with a written agreement is less expensive than a Partition Action.  Besides the cost of filing suit, there are attorney fees, appraisal fees, and depending on the county, a master’s fee to pay the master who hears the case.

The court first decides if Partition is appropriate.  This is usually not an issue.  The next step is to determine the real estate’s value, and this requires an appraisal.  An owner may claim a credit for certain, necessary expenses and if an owner does not live on the property, that owner can request a fair rental credit. The owners can agree to a buyout but if there is no agreement, the court will order the real estate sold at a public sale with the net proceeds being divided among the owners, subject to any credit.

In Jacobs v. Stephens, 2019 PA Super 32, husband and wife owned real estate.  They separated in 2013.  Wife filed a Partition Action.  The trial court directed Partition of the property, and it decided the property’s value was $145,000.00 with a 50% distribution to each party, but wife’s share was reduced by husband’s credit for certain expenses be paid.   

Wife filed an appeal challenging the credits awarded to husband.  Husband cross-appealed because he disagreed with the Partition.  Husband claimed the annulment of his marriage to Wife voided the deed and left him as sole owner, and as a result, the court could not order Partition. 

The Superior Court held the trial court erred because it did not follow the correct procedure and it could not rule on the value and distribution issues until the appeal time expired for the Partition order.  However, the Superior Court disagreed with Husband that he was sole owner due to the annulment.  It held the trial court was correct that the annulment of their marriage meant they owned the real estate as tenants in common and the property could be Partitioned.  The Superior Court concluded its review by only addressing the Partition issue and it returned the case to the trial court for further proceedings.

The Jacobs case has unique facts, but it highlights the technical aspects of a Partition Action and how unexpected issues may arise.  We are available to assist you by drafting agreements to protect your interests or by navigating through the technical issues in a Partition Action to ensure you receive your fair share from your co-owner(s).    

© Copyright by Hoffmeyer & Semmelman LLC, June 2019 

Common Problems in Private Real Estate Transactions

How Your Lawyer Can Help in Real Estate Transactions

Why you need a lawyer during a private real estate transaction

Many issues can arise during a private real estate transaction. A lawyer can protect you.

We have previously written about issues that can arise in a for sale by owner real estate transaction. Now we want to tell you about some of the common issues that can arise during any private real estate transaction.

Realtors Use Standard Forms – They May Not Work for You

Since realtors are not attorneys, they often use standard contracts in private real estate transactions. This is likely the case for both the brokerage agreement and the home sale contract. Due to this, it is wise to have an attorney review any contracts prior to signing them.

Realtor Brokerage Form

Realtor brokerage form contracts can contain a variety of terms that may not be in your best interests.

You Have to Pay the Commission Even if the House Doesn’t Sell

If you are the seller, the brokerage agreement may state that you have to pay a brokerage fee regardless of whether the home is sold. For example, the agreement may state that if you receive a full price offer, you have to accept it. If you do not accept a full price offer, the contract may state, you will be responsible for paying the full brokerage fee. Due to such a clause, you could be forced to sell your home when a better offer may come along in the near future, or even if you change your mind and don’t want to sell.

The Agent Can Represent Both Buyer and Seller

The brokerage agreement may allow your real estate agent to represent both sides of the sale. Brokers are supposed to be loyal to either the seller or the buyer. But many brokerage agreements allow the broker to represent both sides. This allows the agent to receive both the buyer’s and seller’s percentage of the deal. This is a clear conflict of interest on the part of the agent. How is an agent supposed to negotiate the best deal for the seller if they are trying to also negotiate the best deal for the buyer? Your lawyer can review the agreement for any clauses which allow this kind of disloyalty.

Alterations to the House – Vague Contracts

Many form contracts do not address the time between when the buyer and seller sign the contract of sale and when the buyer takes possession. For example, if there is landscaping and the seller fails to care for it properly before the buyer takes possession, who is responsible for handling any dead or damaged plants?

Also, during this time the seller may cause damage to the house. This is especially common during the moving process. Things can be banged into walls causing damage to paint or walls. Sometimes houses are left vacant and third parties may cause damage. Who will be responsible under those circumstances?

There also may be confusion about what items are to be left in the home. This could include the refrigerator, draperies, or other items of importance that can cost substantial amounts. Contracts may be vague as to other details as well, costing either the buyer or seller money, time, or unnecessary stress during a very stressful time. A lawyer can make certain that the contract of sale is clear and help you avoid problems that arise due to lack of clarity.

Title Search

In Pennsylvania, a title search is a necessary part of a private real estate transaction if the buyer has a mortgage. Even if the buyer does not have a mortgage, a title search is critical. Making certain the title search is properly performed and understanding any problems is crucial. While a real estate agent may understand some aspects of a title search, they are unable to provide legal advice about the result and how any issues may impact the buyer. A lawyer can explain the results and advise the buyer on whether continuing with the sale is a good idea.

Mortgage Contract

Mortgage contracts are confusing. One of the reasons many people end up in foreclosure is because they do not understand how the loan will work over time. For example, will the rate change and how will that impact you? What happens if the mortgage is sold to a different bank? It is important to make sure that you understand all of the terms of the mortgage agreement.

The Closing

During the closing, both the buyer and seller will be provided with many documents to sign. Even if you do not feel pressured to sign every document quickly, you may not be certain what all of the small print means. In addition, you may be uncertain if some terms were altered from the point at which you agreed to the deal. A lawyer will take the time to review all documents and make sure that everything is correct and your rights are protected.

Your Lawyer Protects You

The key thing to remember is that a lawyer has only one job during a private real estate transaction, and that is to protect you, the client. While most real estate agents are ethical, they want to see the sale go through, are not lawyers, and are unable to advise you on the law. As a result, it is wise to have a lawyer with you during the process of buying or selling a house, so you can be certain that your rights are protected.

Contact Our Real Estate Lawyers for Assistance

If you are thinking about buying or selling, please call the law offices of Hoffmeyer and Semmelman today. Our experienced real estate lawyers in York are here to help. We also have law offices in Shrewsbury and Mt. Wolf.

 

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