Texas real estate can be owned individually or jointly. People who jointly own a property are referred to as “co-owners” or “co-tenants.” In Texas, there are three main types of co-tenancies: community property (property owned between spouses), joint tenants with the right of survivorship, and tenants in common. Of these, the default and most common co-tenancy is tenants in common.
Each type of co-tenancy provides each owner with a non-exclusive right to use, occupy, and possess the whole property. Accordingly, co-tenants cannot exclude other co-tenants from using, occupying, or possessing the property.
Expenses and debts in a co-tenancy
Oftentimes one co-tenant will pay a greater share of the property taxes or spend more money on the property for repairs or improvements. In Texas, each co-tenant is equally responsible for their pro rata share of any necessary expenditures made by one co-tenant for preservation of the property. The co-tenant who makes the expenditures for those purposes is may be granted a lien against the property to enforce repayment from the other co-tenant.
Similarly, co-tenants are equally responsible for common debts, such as property taxes or a mortgage to which each co-tenant is a signatory. A co-tenant who pays more than his or her share of these financial obligations may enforce a pro rata contribution from each co-tenant.
Co-tenants each have the right to improve the property without the other’s consent, so long as doing so does not injure the rights of the non-consenting co-tenants. In general, a non-consenting co-tenant will only be held responsible for his or her share of the cost of improvements if they are necessary and beneficial to the property. Regardless of whether the improvement is necessary and beneficial, the co-tenant making the expenditure may recover the enhanced value of the property in a partition suit.
Terminating a co-tenancy through partitioning
Co-tenants are also generally free to sell their interest in the property. Anew new owner becomes a tenant in common with the remaining co-tenants. Co-tenants have the power to terminate the co-tenancy at any time by partitioning. Partitioning can be accomplished voluntarily by agreement or by judicial partitioning through a court. It is during the partitioning process that each co-tenant should assert all contribution claims that he or she may have for disproportionate expenditures on commonly owned property.
The property is partitioned equitably based on value, not acreage. If a court determines that the property cannot be divided fairly, the court will order that it must be sold and the proceeds divided among the co-tenants.
Distribution of profits in a co-tenancy
Questions often arise regarding profits and accounting among co-tenants. If one co-tenants leases the property to a third party, that co-tenant owes a duty to share the profits with the other co-tenants. However, if the co-tenants is using the property to produce income, the co-tenant in possession will generally not owe a duty to share the profit or account to the other co-tenants. The co-tenant in possession will only have a duty to account if: (1) there is an agreement that the co-tenant in possession will pay rent or share the profits; or (2) the co-tenant in possession has refused to allow other co-tenants to possess the property.
Questions about your co-tenancy?
Co-tenancy can be an excellent means of investing in real estate, but it can sometimes become complicated. If you have questions regarding your co-tenancy, contact the experienced real estate attorneys at The Farah Law Firm to discuss your arrangement and any questions or problems you may be facing.Contact our law firm!