Risks of Co-Ownership: If Co-owners own or inherit a rental property (as tenants-in-common), but do not agree on the leasing, what can happen?

By Julia M. Wei

Often times, siblings or cousins will inherit real estate as tenants-in-common. Sometimes, business partners will co-own a property and if one passes away, the surviving partner finds herself or himself in co-ownership with the surviving spouse of the decedent. As a result, co-owners can become estranged or otherwise disagree on the use of the property.

In a lease situation, if Co-owner A leases the rental property to a third party, Co-owner B cannot evict the renter or terminate the lease. The renter however, takes the property subject to Co-owner B’s right to share in the enjoyment and possession of the property.

The renter only has a written lease with Co-owner A, so technically only has to pay rent to Co-owner A, unless the renter tries to prevent Co-owner B from also using the property.

That is because as tenants-in-common, the co-owners each have the right to lease out the entire property. Each co-owner can lease or license his or her right to occupy and use the property to a third person to the same extent that it could be occupied and used by the Landlord cotenant. [Atlantic Oil Co. v. Los Angeles County (1968) 69 Cal.2d 585, 602; Verdier v. Verdier (1957) 152 Cal.App.2d 348, 352; In re Knox Estate (1942) 52 Cal.App.2d 338, 351.]

However, since Co-owner B did not join in a lease, Co-owner B is not bound by its terms conferring the right of exclusive possession to the lessee. [Tompkins v. Superior Court of City and County of San Francisco (1963) 59 Cal.2d 65, 69; Swartzbaugh v. Sampson (1936) 11 Cal.App.2d 451, 459] Co-owner B cannot cancel the lease or license; nor can Co-owner B recover exclusive possession of the entire property (ie, evict the renter)-or else they could be liable for trespass!

This creates the awkward situation where Co-owner B’s has the right to move into the property, despite the fact the renter is there. The end result is usually that if co-owners cannot agree, then a partition action follows for the sale of the property and an accounting of the rents.

For co-owners who are thinking of purchasing a property, it would be wise to have a Tenancy-in-Common Agreement drafted in advance, to clarify the rights of each co-tenants to enter in leases and otherwise encumber the property, and avoid the confusion caused by defaults scenario described above. You can read more articles on this and many other real-estate related topics at the Law Offices of Peter N. Brewer website www.brewerfirm.com and on Julia M. Wei’s Blog – dirtblawg.com.

In the News

On June 2, 2010, The California Court of Appeals interpreted the new foreclosure statutes (also known as S.B. 1137 or the Perata Mortgage Relief Act) and found that the lender is NOT required to offer a loan modification to the borrower and that the only remedy if the lender has failed to contact the borrower as prescribed by California Civil Code Section 2923.5 is a postponement of the foreclosure sale. [Mabry v. Superior Court (Aurora Loan Servicing)] - JMW

Law Offices of Peter N. Brewer News

We are batting a thousand this year on resolving deposit disputes where sellers are unreasonably withholding the buyer’s deposit (refusing to sign the escrow instructions to release the buyer’s deposit) when escrow fails to close for no fault of the buyer—without having to go to arbitration!

About Us

Peter N. Brewer established the Firm in 1995. The Firm specializes in real estate and mortgage lending law. Clients of the firm include homeowners, real estate professionals, mortgage brokers, loan servicers, real estate appraisers, real estate developers, construction professionals and investors. The firm takes pride in its highly successful insurance defense practice on behalf of real estate brokers, brokerages, agents, appraisers, mortgage lenders, title companies and foreclosure trustees. Additionally, Peter and his firm represent clients in creditor’s rights in bankruptcy, breach of contract matters, judgment enforcement and other litigation and transactional work.

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