Either party can bring an action to compel the sale of the apartment.

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Question:

My fiancé and I bought a co-op together and now we are separating. How can we divide up our apartment fairly?

Answer:

“The dissolution of a relationship is a very emotional and difficult time for most couples. However, the law is clear about how the parties need to separate the interests of jointly owned property,” says Bonnie Reid Berkow, a partner at the law firm Wagner Berkow & Brandt with more than 30 years of litigation experience.

Couples "who own a property together are required to share equally in the net proceeds of any sale of the property, subject to any credit for excess payments towards home expenses,” Berkow says. So for example, if one or the other paid more for the down payment or mortgage among other costs, these will be credited back as part of the arrangement.

If the parties cannot come to an agreement on how to deal with the co-op, either of the parties may bring what's called a “partition” action to compel the sale of the co-op and distribution of the net proceeds.  

Right to partition

If you own a condo or a house, you own real property. If you are married you will own as “tenancy by the entirety” or “joint tenants with right of survivorship.” Unmarried persons can also own as joint tenants, or more commonly, as “tenants in common." If you own a co-op, you own shares in the corporation, not real property. However, you are still entitled to bring an action for partition if you want to separate your interests in the apartment.

In an action for partition, the court will determine whether the property can be divided—for example it may be a two-family building, which can be split equally between parties. “If not, a sale of the property will be ordered,” Berkow says. A co-op apartment or condo cannot be divided and so would be ordered sold.  

Each of the parties is entitled to be paid half of the net proceeds of any sale. “Alternatively, one of the parties can buy out the interest of the other,” Berkow says. In order to do this you would have to obtain an appraisal of the fair market value of the property.  

If one of the parties needs to refinance the mortgage to obtain additional funds to buy out the interest of the other, the bank’s appraisal may establish fair market value. “If the parties cannot agree on a buyout by one of the other’s interest, one of the parties may be able to buy at the partition sale,” Berkow says.

Equity between the parties

Berkow points out that although an owner has the right to partition, it is subject to the equities between the parties. 

Each joint owner is required to pay half the expenses of acquiring and maintaining the property. If one person paid all the maintenance payments or all the loan payments, or paid for all the repairs and improvements, that person is entitled to have half those expenses credited against the amount they would owe the other person. 

“Sometimes this is easily established, and sometimes it’s more complicated,” Berkow says. The parties may have commingled their assets, or there may be difficulties in determining who paid for what expenses.  The court may require an accounting between the parties to establish how much is owed.

“If a co-op apartment is to be sold in a partition action the sale would require the approval of the board,” Berkow says.

A lot depends on how long you’ve owned the apartment and how much money is involved but Berkow points out that regardless of these factors the concept is the same: “There needs to be a determination of the credits that can be afforded to one side or the other as to the amount they contributed to the property when they owned it,” she says. 

Issues related to ouster

One issue that might come up is “ouster,” where one person has prevented the other from access to a jointly held property.  

Ouster involves a clear intent to physically prevent the other person from coming on the property. If it can be proven, it affects how the respective net proceeds may be calculated. Changing the locks might not be enough to prove ouster which typically involves physically barring someone from the property. 

A person who is being prevented access or “ousted” from the property does not have to contribute to any portion of the expenses for that time period. Also, the person preventing access may be required to pay rent to the other person. Therefore, preventing your partner from entering the property will affect how the net proceeds are distributed. 

Try to resolve differences 

Berkow says she strongly encourages parties to try to come to an agreement on whether to sell and how to distribute the net proceeds, or whether one person can buy out the other’s interest. “Litigation can be costly and eat into any proceeds that either party may realize from the separation of their interests in the property,” she says. 

It can be particularly difficult for people at an emotionally fraught time to do this themselves without having representation. Having someone with an objective perspective is crucial. “Your attorney can be an impartial arbiter and help you come to a resolution of the financial issues,” Berkow says. 

New York City real estate attorney Bonnie Reid Berkow is a founding partner of Wagner, Berkow & Brandt with more than 30 years of experience litigating in state and federal courts in New York state, including cases involving breach of contract, fraud and breach of fiduciary duty, in addition to real estate disputes and commercial actions. To submit a question for this column, click here. To ask about a legal consultation, send an email or call (646) 780-7272.

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