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Real Estate Disputes Between “Tenants in Common”

I just met with a client (lets call him “Mr. Martin”) who was “added to the deed” of some real estate owned by “Mr. Smith”.

The parties’ relationship has since then deteriorated; with that questions naturally arise:

what to do with the property?

Who owns what?

What are each parties’ rights?

In coming to a right solution to this problem, the first question to ask is, how is the property “titled”?

I. The Parties own the Property as Tenants in Common

This Property was titled simply as “Mr. Smith and Mr. Martin.” Therefore Michigan law deems this relationship to be one of “Tenants in Common”.

The other common way to hold a joint title to real estate is by Tenants with Full Rights of Survivorship. To learn more about the unique legal ramifications of that ownership, see my previous article: https://jeshualaukalegalnews.wordpress.com/2013/05/02/lessons-from-trial-the-indestructible-deed-joint-tenants-with-full-rights-of-survivorship/

In my case the individual who first owned the property “Mr. Smith” – claims that he originally purchased it, it is his property and he should be entitled to all of it.

However, Mr. Martin provided significant funds to improve the property, and Mr. Smith claimed that, maybe, he would provide Mr. Martin some of what he put in.

As much as Mr. Smith may think his proposed solution is “common sense”  – it is not the law.

II. Law:

a. Tenants in Common -in General

A tenancy in common is a legal estate, with each tenant having a separate and distinct title to an undivided share of the whole.  Kay Inv. Co., L.L.C. v. Brody Realty No. 1, L.L.C. (2006) 731 N.W.2d 777, 273 Mich.App. 432

When Mr. Smith conveyed the Property to himself AND Mr. Martin, he conveyed an undivided one-half interest in the Property.

Mr. Martin is therefore 50% owner and entitled to enjoyment of the Property as much as Mr. Smith is.

b. Disputes Among Tenants in Common? Partition is an Option.

If the parties’ cannot agree on how to split up their 50% interest in the property, one party can file a lawsuit with the circuit for “Partition”.  There, the court would use its “equitable powers” to order the sale of the Property.

c. Party Who Provided Improvements – Can Recover the added value to the Property

Under Michigan law, the Courts will look to “equity” to permit a co-tenant who has made improvements to  property to recover the value of those improvements.

The Michigan Supreme Court in Fenton v Miller, 116 Mich 45, 74 NW 384 (1894) stated “

[w]hen premises are susceptible of division, the court will award to the party making the improvements the part on which the improvements are situated, and, when the entire premises are sold, it is equitable that the same result should be reached by awarding the increased value of the premises, by reason of the improvements, to the party making them.” Id. “At a minimum, if a tenant in common on his or her own volition improves the common property and seeks to recover from the co-tenants…he or she can recover… the value of the improvements have added to the common property.” Id.

This is also provided under Michigan Compiled Laws § 600.3336.
(1) When it appears to the court ordering partition that partition cannot be made equally between the parties without prejudice to the rights and interests of some of the parties the court may adjudge that 1 party compensate another in such a way as to equalize the partition according to the equities of the case.

 (2) When partitioning the premises or dividing the money received from a sale of the premises among the parties the court may take into consideration the equities of the situation, such as the value of the use of the premises by a party or the benefits which a party has conferred upon the premises.

Therefore, not only is Mr. Martin entitled to 50% of the Property, but also to the added value attributable to his improvements to the Property. In that instance, the Court would necessarily have to value the Property by a separate evidentiary hearing to determine the value of the improvements Mr. Martin made.

III. Lesson:

The lesson is clear: Whenever entering into real estate transactions individuals and businesses need to fully understand the consequences of their actions, including how they legally title ownership of real estate.

Do you have an interesting issue related to business or real estate? I’d love to hear about it.   

Email or call me. Email: Jeshua@dwlawpc.com / Ph: (616) 454-3883.
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