You never thought it would come to this. After all, these were the same people who you used to spend your Sunday afternoons with at your grandparents’ house. You celebrated Christmases with them and went to their birthday parties growing up. They went to your wedding. They went to your children’s weddings. So of course, you were shocked when you were served with a summons and complaint, and you find out that your once-close family members are suing you.
It could be your aunt, you know, your mother’s sister, or a stepfather, or in the most horrible situations, your own sibling. One of the harshest realities that I’ve learned in my time as a real estate attorney is that while blood may be thicker than water, money is thicker than blood. When it comes down to it, your family will sell you out for a few bucks.
I’m thankful that I haven’t yet had the displeasure of being involved with a case of a parent suing a child or vice versa. I’ve seen brothers and sisters sue each other. A few days ago, I received a call from a stepdaughter who told me that her stepmother’s sister, who had power of attorney, was purposely letting the stepmother’s home go into foreclosure because the stepmother left the home to her stepchildren in her will. This story, of course, was much more involved, but you get the gist. People don’t mess around when it comes to their money.
The general facts usually go like this: grandma and grandpa owned a house, and they died without a will, so their interest automatically passed to their kids. Let’s say in this example there are two kids. One of the kids gets married and moves away; the other kid moves into grandma and grandpa’s house. The kid who moves into the house pays the taxes and maintains the property; maybe the kid who moves in is renting out the upstairs. Of course, the kid staying in the property doesn’t share any of this income with the kid who moved out.
At some point, the kid who moved out wants to know what’s up with this house. Maybe the house was located in an up-and-coming neighborhood and is now worth a lot of money. Perhaps the kid who moved in now has his own adult children, and one of the adult grandchildren moves upstairs with his girlfriend, and of course, they’re not paying rent. Even if they were paying rent, Dad isn’t sharing that rent money with his sister who moved out those years ago. Maybe the roof needs to be replaced, and the kid who moved in asks the kid who moves out to help with the expense. Or worse, maybe the kid who moved out gets served with a summons and complaint for a tax lien foreclosure (which means that the kid who moved in hasn’t been paying the property taxes for a while).
All right, so you have a property issue with someone in your family. What can you do?
If you look up a scenario like the one I’ve described above on a website like Avvo.com, the attorneys will always tell you to file a partition action. What’s a partition action?
A partition action is a type of judicial proceeding where parties establish their rights in real property, the property is sold, and the proceeds of the sale are apportioned according to the determinations of the parties’ rights in the property.
For example, in my hypothetical above involving the two siblings, each sibling is entitled to 50% of the property. The analysis doesn’t end there, though. Taxes of $8,000 per year have been paid by the sibling living in the house for the past fifteen years ($120,000 total), the roof was replaced ($20,000), the boiler was replaced ($5,000), the siding was replaced ($10,000), the retaining wall was redone ($7,500), landscaping was completed ($1,000 per year x 15 years) – you get the idea. The party who wasn’t living there still is responsible for half of those expenses. The analysis doesn’t end there, though. The party living there has had the benefit of use and occupancy for 15 years. What was the rental value of that? Maybe a blended average of $1500 per month (or $18,000 per year x 15 years = $270,000). Maybe a fair value is less than actual rental value; maybe you'll fight over that, too. Whatever it is, half that value might belong to the party who wasn’t living there.
Once a partition action starts, the parties will naturally try to downplay their liability. The taxes are easy to figure out. The rental value, not so much. The party who didn’t live there thinks that the average rental value was $2,000 per month. The party living there says that they could only get $800 on the open market. The party who doesn’t live there acts like the party living there should have been mowing the lawn instead of paying a landscaper. The parties are going to bicker about everything.
That means the court will have to step in and appoint a referee to hear and report as to what each party is entitled to. The referee could have a hearing, or a series of hearings. Eventually, after a few years of fighting with your family member and spending thousands of dollars on legal fees, the referee presides over a sale, and the property sells at auction for about 85% of the appraised value. Oh yeah, the parties also have to pay that referee out of those sale proceeds.
That’s why when people have disputes over real estate with their family members that I tell them to WORK. IT. OUT.
Remember the Christmases and birthdays and weddings that you spent together. Think about how upset your grandmother would be to see you two fighting like this; suing each other over a few dollars (or even a lot of dollars). Not to mention the fact that you’re only going to get your share after the referee is paid and after you get less than fair market value because you’re selling the property at auction as opposed to a regular purchase and sale transaction. People are willing to pay more when they can see a property before they make an offer. I would bet that if you get together and go over what the actual expenses were and what the actual value is that you can come to an agreement.
Of course, sometimes you just can’t come to an agreement and you need to fight. When you start to talk about this property, every argument that you've had for the last 30 years gets rehashed and no progress is made. That’s when you need the assistance of an attorney who has done this before, who can take the emotion out of the situation. If you find yourself in the unfortunate position where you’re facing a lawsuit from a family member or you need to protect your rights in property that is being spoiled by a family member, come in for a consultation to discuss your options.
Jason Sackoor is a real estate attorney in Queens, New York concentrating on foreclosure and real estate litigation. You can check out his website, e-mail him, or call his office at (718) 767-3333 to set up a consultation.