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