Unfortunately some of you will find out someday… Under Minnesota law, if there are multiple owners of real estate, any single owner may unilaterally start a partition action to force the sale of land. This is a very lengthy and expensive process as the Court must appoint referees who first value the land, then list it for sale and finally divide the net proceeds. At each step, there is a hearing for each owner to raise objections. Other owners cannot stop this process, your only rights are to make sure the land is sold at a reasonable price and then often there are disputes about how to split the proceeds as each co-owner usually argues they have paid more than their fair share of real estate taxes, utilities, improvements or other expenses related the land.
These lawsuits are a last resort but often co-owners are unable to agree on how to use or share the land. One wants to cash out and another wants to keep it in the family. And, since these cases often involve inherited land, emotions get in the way of a reasonable solution.
In the lakes area, these cases are more common as parents often leave the lake cabin or hunting land to all their children with the hopes of keeping it for generations. The problem with multiple owners, however, is that it’s uncommon for all the owners to have the same goals and the same budget to properly maintain and pay for this inherited asset. Often some of the children are more local and can use the land more frequently than others. And, with a lake cabin, everyone wants to use it at the same time – Fourth of July or really any Summer weekend. Usually some of the kids can afford to make additions or improvements while others can’t even afford their share of taxes, insurance and utilities. The odds that all kids equally chip in to cleaning, mowing, taking the dock in and out is also a problem – this and money issues can eventually lead to resentment and the odds that a partition action is in your future.
Beyond all these issues, when you own land with siblings, their divorce, creditor issues or death are now your problem as well as these issues lead to liens or probates that affect the title to this real estate. You may be able to get along with your sibling but do you really want to own a cabin with their ex-husband, their children or their creditor? The more co-owners you have, the more likely you will face these issues. A new owner through a death or creditor dispute can then commence this partition action as well.
I hope it’s becoming obvious that ownership among multiple owners is problematic. Your best defense against all these issues is to place the title to this real estate into a cabin trust or limited liability company. Within either entity, you can think ahead and create rules regarding what happens when someone dies (can they transfer title to anyone or maybe just descendants and not their spouse), when someone has creditor issues or simply doesn’t pay their share of expenses or any other issue related to common ownership. Next month, we will have some drafting pointers whenever you are creating a cabin trust or limited liability company.
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