Real Estate Dispute

[JayJee04]

Jurisdiction

Wisconsin

" Person A and Person B agree to share a piece of real estate, splitting all expenses (taxes, insurance, association fees and utilities) and rental proceeds 50 / 50. Shortly after sale, Person B says "screw it" and stops paying their half of expenses which Person A is forced to assume. Over several years, Person A's extra expenses (paid on behalf of Person A) accumulate to exceed the cost basis of Person B's half of the property (with property value consistent to the sale price). Further, Person A, out of good faith, continued to pay 50% of rental proceeds to Person B the whole time. In the present, Person B is demanding an immediate / on demand payout from Person A for 50% of the property value. Person A refuses, saying that the amount of payments which they assumed on Person B's behalf, now well exceed Person B's basis in the property (with no significant value appreciation). Does Person A owe person B anything?

 

[adjusterjack]

We don't do homework or hypotheticals.

 

[zddoodah]

Person A and Person B agree to share a piece of real estate

I assume this means that A and B jointly own the property. Correct? Did they memorialize their arrangement with a well-drafted contract? It doesn't sound like it, so I'll assume the answer is no.

Person B says "screw it" and stops paying their half of expenses which Person A is forced to assume.

What does "their half" mean? Person B is just one person, right? "Their" is a plural pronoun.

Over several years, Person A's extra expenses (paid on behalf of Person A) accumulate to exceed the cost basis of Person B's half of the property (with property value consistent to the sale price).

I think what you're saying is illustrated by the following example: A and B jointly purchased the property for $200,000, with each contributing $10,000 toward a down payment. Over the years, A's payment of 100% of "taxes, insurance, association fees and utilities" exceeds $20,000 such that the 50% that A paid that B should have paid exceeds the $10,000 that B contributed to the down payment. Is that what you're saying?

Person A, out of good faith, continued to pay 50% of rental proceeds to Person B the whole time.

That seems unwise and has nothing at all to do with "good faith."

Person B is demanding an immediate / on demand payout from Person A for 50% of the property value. Person A refuses, saying that the amount of payments which they assumed on Person B's behalf, now well exceed Person B's basis in the property (with no significant value appreciation). Does Person A owe person B anything?

Of course not. Unless there is a contract between A and B that entitles either of them to be bought out on demand, B isn't entitled to anything just because he/she makes a "demand." On the other hand, if A has the ability to buy out B, that might be an option worth considering.

A is certainly correct that his/her payment of expenses that B should have shared in entitle him/her to offset anything that would be paid to B (whether in a sale of the property or otherwise).

If I were A, I would consult with a local attorney ASAP and specifically discuss whether withholding any portion of future rental payments would be a good idea.

 

[zddoodah]

By the way, are you Person A or Person B?

 

[JayJee04]

Thanks for the detailed reply! I am "Person A" and this is a dispute with a family member (who is a single person). Unfortunately, we didn't do anything in writing with everything informal and verbal (a harsh lesson we have learned).

At the start, we each had a basis in the property of 35,000. Since Person B stopped paying, we've paid approx. 35,000 in extra expenses through the present (on behalf of Person B... essentially, person B's share of the bills that we were assumingly going to split). My position (as Person A) is that we owe nothing because our additional payments assumed on their behalf have now exceeded their basis in the property. Person B still is claiming a 50 / 50 share and thinks that we have an obligation to pay them out on demand (despite no agreements of any kind existing to justify this claim).

We have consulted a lawyer and understand that per the "Statute of Frauds", there really is no legally enforceable agreement here since we didn't do anything formally in writing (and the transaction involves real estate). However, just looking for additional inputs on whether my logic is sound (i.e. my extra costs exceed their basis... so no reason to justify any further money being owed).

 

[mightymoose]

Person A does not owe a penny unless/until a court with jurisdiction declares otherwise. Person B can cry about it all he/she wants until then.

 

[army judge]

A got over on B.
A and B are equal legal owners.
Smart people never go "halfsies" or "sharesies" in real estate transactions with anyone to whom they aren't legally wedded.

 

[zddoodah]

We have consulted a lawyer and understand that per the "Statute of Frauds", there really is no legally enforceable agreement here since we didn't do anything formally in writing (and the transaction involves real estate).

If that's what a lawyer told you, then I suggest you consult with another lawyer who actually understands real estate law.