Our firm is often consulted in situations where a number of individuals have inherited real property. For example, a parent passes away, and leaves a house to her three children. Many legal issues can arise from this type of situation, which will be discussed in this blog post.
The first question when a property owner dies is whether they have a written will. If they do, then their Last Will and Testament should direct the disposition of the said property. For example, the Will may state “I leave my property located at (address) to my three children (names of children). Another possibility is that the property is not specifically addressed, but the testator (the person making the Will), simply leaves all of their property owned at time of death jointly to their children.
If the person dies without a Will (intestate), then the disposition of their property, including any real property, is made pursuant to New York Estate Law. For example, if a person passes away without a Will, and has no living spouse or parents, then their property would be inherited by her living children.
Legal issues may then arise among the surviving children. For example, imagine three “children” who are now adults inherit the “family house” after their mother passes away. One of the three has always lived in the house, while the other two have married and now own homes of their own in other cities. The person living in the house wants to remain there and has no intention of moving or selling the house to a third party, wanting to “keep it in the family.”
In such a situation, the other siblings have the right to bring a partition action to force a sale of the property. Prior blog posts have discussed the details of such an action. To summarize, such an action would result in a court order that the house be sold, and the proceeds divided equally among the owners, in this case, the three children. If the individual residing at the premises wants to remain owner of the house and stay in residence, he would have to “buy out” his siblings by paying them a fair price (agreed upon by the parties) for their ownership shares in the property. He may be able to do this by borrowing against the house (taking out a mortgage with a lender), and using the funds from this loan to pay off his siblings. Such a transaction would result in his becoming sole owner of the house, although of course he would still have to make mortgage payments.
Any of the co-owners would have the right to buy out the others through mutual agreement. It could be that one of the siblings has the liquid assets to purchase the ownership rights of the others. It is up to the parties and their attorneys to attempt to negotiate a resolution. If the parties cannot resolve the issue through negotiations, then a legal partition lawsuit will go forward.
If such an action is litigated to conclusion, the Court will appoint a referee to sell the property in question to the highest bidder, or through a real estate broker. The co-owners will receive the profits, if any, from such a sale, less the expenses of the sale, such as transfer taxes, broker’s fees, and payment of any outstanding loans on the property. In the hypothetical matter being discussed, the three siblings would share the proceeds, each to receive one-third of the proceeds, less the expenses of the sale.
Our firm has has litigated and negotiated solutions for many partition actions over the last twenty-five years. If you are involved in such a situation and wish to consult our attorneys, please contact us.