My in-laws helped my wife and I buy a house for all of us to live in, including my teenage son. They gave us $300,000, and we bought the house for a little over $500,000. All four of us – me, my wife and my in-laws – are on the deed and the loan. I am currently paying my mortgage. We live in a state of equal distribution.
My in-laws now want my wife and I to sign a document stating that if we ever sell the house, now or in the future, whether they are alive or dead, we will give a fixed amount of $125,000 of the initial proceeds to their adult granddaughter – daughter Our sister – who lives in another state. This will reduce their investment in the home to $175,000.
I said we couldn't sign this because it effectively constituted a legal claim, or lien on the property, similar to a lender's claim. Such a claim could be filed with the county and could hurt attempts to refinance or obtain a home equity line of credit that may be necessary for improvements and repairs. I said that perhaps we could set a percentage, after costs, etc., to cash out if we sold, but there are no fixed concessions.
They got angry and threatened to go to a lawyer. This is causing problems at home. This agreement will also take a lot of equity from me and my wife. The in-laws think this is a fair way for them to get back their initial investment and do what they want with it. Our house is now worth $720,000. what should we do?
Husband and brother-in-law
Related: 'I shouldn't be punished': My sister can't afford to buy me out of our mother's $450,000 house. She doesn't have a home. What should I do?
“In general, unless the title deed states otherwise, joint tenants have an equal interest in the property, so it looks as if each of the four parties to the title owns 25% of the house.”
Market watch illustration
Dear husband,
Don't sign anything.
Types of ownership vary by state, but you either have joint tenancy with right of survivorship or you are joint tenants. Joint tenancy with right of survivorship gives all owners an equal share of the property and does not allow one owner to add another person to the title – most importantly, if one owner dies, his or her share of the property goes to the other owners. However, if you are joint tenants, you will no You have the right of survivorship if your in-laws die before you.
Generally, unless the deed states otherwise, joint tenants have an equal interest in the property, so it looks as if each of the four parties in the deed owns 25% of the home, says Brian P. Corrigan, a partner at Farrell Fritz. . “Co-tenants have the right to live in the building without paying rent to other tenants,” he says. “Co-tenants also generally have an equal obligation to pay expenses – taxes, maintenance and repairs. Therefore, if there is a subsequent sale, the co-tenant who paid these book charges may be entitled to a credit.”
“A joint tenant may not sell the entire property without the consent of the other joint tenant(s),” he adds. “Therefore, the in-laws’ concern about selling now or in the future may not be a cause for concern. If they die, they can give their interest in the property to the granddaughter/niece. If the in-laws are alive when the husband and wife want to sell the entire property – not just the husband’s interest And the wife – this can only happen with their consent. It seems that the solution proposed by the in-laws is to look for a problem.
Partition work
So where does this leave you? If they're threatening to call an attorney, they're probably looking into doing a partition — that is, forcing the sale of the property, regardless of what type of ownership you share. “Tenants with right of survivorship are not obligated to continue joint ownership and are not required to sell their interests only to sell themselves out of joint tenancy,” according to Cornell Law School. “Alternatively, the tenant has the absolute right to petition the court to divide the property if both tenants have concurrent possession rights.”
You have two immediate options: Selling the property and buying another home seems like the path of least resistance, especially since 1) there are four people on the deed and only two people paying the mortgage and 2) your in-laws seem skittish – they've surprised you with this demand and are threatening legal action if you don't acquiesce. Alternatively, they can deduct $175,000 from your spouse's inheritance. But this does not solve the immediate problem, which is your legal relations with your in-laws.
The fairest way to sell the house is to reinvest the $300,000 and split the remaining equity 50/50. It's a messy situation that raises other questions: Did your in-laws give you $300,000 as a gift? Did they lend you money with the expectation of repayment? Or do they intend to deduct this money from your spouse's inheritance, assuming you have rights of survivorship? Will your monthly mortgage payments be taken into account when dividing the spoils? Any step you take should be done with the help of a real estate attorney.
Remember, the longer you procrastinate, the more your home will appreciate in value, and the more equity you have to give up.
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Previous columns by Quentin Fottrell:
“I grew up very poor”: I received an annual bonus. After I pay off my credit card, I'll have $10,000. What should I do with her?
“I received a check for an insurance claim for $22,000”: Why does it take five days for my check to cash?
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