Co-owning a real estate property in Alabama with a family member, business partner, or a friend can reduce your mortgage burden and maintenance costs. At the same time, like any other legal arrangement, joint tenancy has its own downsides as well. It’s crucial to be aware of these downsides so that if and when an issue comes up, you can be better prepared to handle it.
Here are 9 legal issues you could face with a co-owned real estate property in Alabama:
- Issues with Using the Property
One of the biggest pitfalls of co-ownership is that you as well as the other tenant have the right to use the property at any time. You need to come up with an arrangement wherein you can use the property for a certain period of time and the other owner can use it for a certain period of time. If your schedules collide, you might not be able to use it when you need to.
- Issues with Making Changes to the Property
Under the law, a co-owner can make changes to the property as long as the changes in question benefit the property or increase its value. In order to do so, they do not need to get the other owner’s consent. This could be a problem, if you and the other owner have conflicting ideas about what changes could actually benefit or improve the property.
- Issues with Renting Out the Property
The co-owner is not required to get your consent or permission in order to rent out their share of the property. If they do, you might not be able to use the property whenever you need to – due to the lack of privacy and a number of other reasons.
For instance, if you co-own a vacation home and if the other owner decides to rent out a portion of the home, you might no longer be able to enjoy a relaxing vacation with your family.
- Issues with Mortgaging the Property
The co-owner can also mortgage their share of the property whenever they want – without your consent, permission, or even knowledge. If they fail to repay the loan, the bank might decide to foreclose on the portion of the property that was mortgaged and sell it to someone else. In such a scenario, you might have no choice but to come up with the money yourself so that a portion of your property is not auctioned off.
- Issues with Gifting or Selling the Property
The co-owner can gift or sell their share of the property to a third-party – even if you do not agree to it. If they do, you might no longer be able to use the property whenever you want to.
- Issues with Civil Liability
If the co-owner injures someone in an accident, the victim might decide to file a civil suit against them. If the co-owner does not have third-party liability coverage, the court might order their share of the property to be sold or auctioned off in order to compensate the victim.
- Issues with Tax Liens
If the co-owner fails to pay their taxes, the IRS might decide to place a lien on their share of the property.
- Issues with Incapacity
If you and the co-owner decide to sell the property, and if the co-owner becomes incapacitated due to an injury or illness before a deal can be finalized, you cannot proceed with the sale without their signature. The only exception is that if they had granted power of attorney to an agent before they became incapacitated, the agent can make decisions on their behalf, in which case you might be able to sell the property.
- Issues with Partitioning the Property
If you and the co-owner disagree strongly with each other about what to do with the property or if one of you wants out, filing a petition to partition might be the only option available for you.
Depending on the property you own, you can choose to divide the property physically (partition in kind) or sell the property and divide the proceeds (partition by sale). In case of partition by sale, you can offer to buy the co-owner’s share so that you can become the sole owner of the property. The co-owner might offer to do the same as well.
Having Issues with a Co-Owned Property in Alabama? We Can Help!
At Davis, Bingham, Hudson, & Buckner, P.C., we can help you with all kinds of legal issues related to residential as well as commercial real estate properties. Our Alabama real estate attorneys have over 40 years of experience and have helped thousands of clients with their real estate problems over the years.
If you are planning to co-own a property with another person or having problems with a co-owned property, we can represent you, protect your rights and interests in the property, and try to achieve the best possible outcome – through negotiation or litigation.
To find out how we can help you, call us today at 334-821-1908 or contact us online and schedule a free consultation with one of our experienced lawyers.