ADVERSE POSSESSION BY A CO-TENANT

 

FizerBeck
Fizer, Beck, Webster, Bentley & Scroggins
a professional corporation
1330 Post Oak Boulevard, Suite 2900
Houston, TX 77056-3022
713-840-7710
www.fizerbeck.com
 

 

  1. Introduction

 

Tenancy in common is a form of co-ownership where two or more persons (or entities) concurrently own undivided interests in property with the primary requirement being one unity of possession. Each co-tenant has an undivided fractional share in the property which may be equal to or different from the amount of the fractional share of the other owners. All co-tenants are deemed to occupy the property in common and all are entitled to occupy the entire property.

Tenancy-in-common is a long-standing, time-honored way of owning real property. In recent years, ownership as a tenancy-in-common has evolved into a valuable planning tool in connection with like-kind exchanges under Section 1031 of the Internal Revenue Code. Section 1031 does not permit tax-deferred exchanges of partnership interests; however, an exchange of an undivided interest in real estate as a tenant-in-common is permitted. See Rev. Proc. 2002-22. Most of the recent focus on tenancy-in-common has centered on syndicated or promoted arrangements commonly called “TICs.” However, more mundane co-tenancy arrangements still abound and seem to be appearing more often these days, perhaps due in part to exchange opportunities as well as local tax considerations where entity ownership may result in higher state or local property or franchise taxes.

This increased use of co-tenancy as a method of holding title raises many issues. One interesting such issue is whether a co-tenant may acquire title by adverse possession against the other co-tenants.

  1. Adverse Possession Against a Co-Tenant.

 

It is often stated that a co-tenant cannot adversely possess the commonly owned property against another co-tenant. This is simply wrong. The burden of proof may be greater, but adverse possession against a fellow co-tenant is not only possible, it is in fact not uncommon. If the right of possession of a co-tenant is repudiated by any other co-tenant (sometimes referred to as "ouster"), the other co-tenant(s) have a cause of action to recover the right of entry and equal possession. Additionally, if possession is repudiated by a co-tenant, and the repudiation is blatant and obvious, time begins to run for establishment of title by adverse possession.

There are a number of ways the "ouster" of a co-tenant could be established. Specific written notice of intent to exclude a co-tenant coupled with actual adverse possession would be the most compelling evidence. In most cases, however, such clarity is lacking. See Russo Realty Corp. v. Orlando, 30 A.D.3d 499, 819 N.Y.S.2d 265 (2d Dep’t 2006), rejecting a co-tenant’s claim of adverse possession because the claimant failed to clearly assert a right hostile to the other co-tenant. In Board of Trustees of the Tecolote Land Grant v. Griego, 104 P.3d 554 (N.M. Ct. App. 2004), the court held that “explicit notice” of an intent to oust is required. However, in the case of Glover v. Union Pacific R. Co., 187 S.W.3d 201 (Tex.App.--Texarkana 2006), the court held that ouster can be shown by long continuous possession or a change in the use or character of possession. In Williams v. Screven Wood Company, Inc., 619 S.E.2d 641 (Ga. 2005), the court stated the co-tenant claiming adverse possession must show acts inconsistent with, and exclusive of, the rights of the co-tenant not in possession, and the non-possessory co-tenant must have actual or constructive notice of those acts.

The issue often arises when a title examiner finds that somewhere back in the chain of title a co-owner failed to join in a conveyance of the property. In theory, the current owner would be a co-tenant with the owner who failed to join in the conveyance (or in most cases, the heirs of that owner). However, it may be possible to use the theory of adverse possession to establish complete title in the current owner. The case of King Ranch, Inc. v. Chapman, 118 S.W.3d 742 (Tex. 2003), illustrates a long-standing but seemingly little known principle of Texas law that a purported conveyance of complete title by less than all of the tenants-in-common acts as an ouster or notice of repudiation to the remaining co-tenants who did not join in the conveyance. In other words, the purported conveyance of the entire title to a third party is constructive notice of the ouster. This principle also is clearly enunciated in Thedford v. Union Oil Co. of California, 3 S.W.3d 609 (Tex.App.--Dallas 1999, pet. denied), where the court stated as follows:

"When a party obtains title to property from one co-tenant through an instrument purporting to convey the entire title to the land, such a conveyance constitutes ouster and amounts to a disseizin of the nonparticipating co-tenant, especially when the grantee is a stranger to the co-tenants."

See also, U.S. v. Stanton, 495 F.2d 515 (5th Cir. 1974); Sadler v. Duvall, 815 S.W.2d 285 (Tex.App.--Texarkana 1991, writ denied); and Parr v. Ratissean, 236 S.W.2d 503 (Tex.Civ.App.--San Antonio 1951, writ ref’d n.r.e.). Although this principle, at first blush, seems inconsistent with the notion that conveyances recorded after one acquires title are not constructive notice, this doctrine rests more on the fact that a stranger to the co-tenants has gone into ownership and possession of the property to the exclusion of all the co-tenants.

The primary use of this doctrine is to clear land titles where the joinder of a co-tenant was lacking in a prior conveyance in the chain of title. However, as the foregoing authorities show, it is possible for a co-tenant to lose title by adverse possession under this and other circumstances. See generally, Annotation, Right of Cotenant to Acquire and Assert Title or Interest as Against Other Cotenant, 85 A.L.R. 1535 (1933, with Cumulative Supplement); Annotation, Possession by Stranger Claiming Under Conveyance by Cotenant as Adverse to Other Cotenants, R.D. Hursh, 32 A.L.R. 2d 1214 (1953, updated March 2000).

  1. Partition

 

The “flip side” of the right of possession is the right of partition. Absent an enforceable implied or express agreement to the contrary the right of a co-tenant to partition is absolute. An action for partition is not barred by the statute of limitations as the right to partition is continuous.

The procedure for judicial partition of real property is governed by the laws of each state. In general, however, a court will determine the interest of each co-owner and all related questions of law or equity affecting the title to that land. A court may adjust equities in a partition suit, although the equities must relate to the common property to be partitioned.

In most jurisdictions, partition in kind is favored over forced sale of the property. The goal is to partition the real estate into as many shares as there are co-owners and in such a manner, giving regard to the situation, quantity and advantages of each share, so that the shares are as nearly equal in value as possible. The court may take into consideration any other relevant matters such as improvements made by one co-tenant or claims for contribution by a co-tenant advancing funds on behalf of other co-tenants. Also, in accordance with its right to decide questions of equity, the court may grant equity in order to equalize the shares and may affix a lien to secure payment.

If the court is of the opinion that a fair “in kind” partition of real estate cannot be made, as is often the case, especially with urban property, the court will typically order that the property be sold for cash. Such a sale generally is made through a receiver or special master appointed by the court; and the proceeds thereof are returned to the court and partitioned among the claimants according to their interests. The court may also take into consideration in distributing the cash other claims such as rights of contribution or improvements to the property by one co-tenant.

  1. Lessons Learned.

 

Given the right of all co-tenants to possession, coupled with the possibility of claims of adverse possession and the threat of suits for partition, in most cases it is advisable for the co-tenants to work out a written agreement among them setting out the rules of occupancy, waiving any rights of adverse possession and partition, and establishing the procedure under which the property will be sold, mortgaged, improved, insured, expenses paid and the like. If mortgages are anticipated, it is advisable to include in the co-ownership agreement language that clearly subordinates all claims for contribution among the co-tenants and all liens securing those claims to the liens of all mortgages placed on the property with the consent of the co-tenants.

           

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