QUESTION
Do I have to consider utility fees and taxes in coming up with a buy out amount?
Asked on Aug 28th, 2012 on Estate Planning - California
More details to this question:
My three siblings and I own a vacation house that was left to us by my father. I do not use the house because I live out of state. Two of the siblings use the summer home for their vacation. The two that use the home pay the utilities and taxes on it. I now would like to be bought out of this house. I got an appraisal and they got their appraisal. I called to let them know I would like to be bought out with an amount halfway between the appraisals, which I feel is very fair. Now they are bringing up the point that they paid taxes and utilities on the house and I did not. Why would I pay anything towards taxes & utilities when I never used the house! If I did use the house I would of been more than willingly to pay my share of taxes & utilities. What is your opinion? We asked to use the vacation house for a week but we were told we could not because they were using it.
15 ANSWERS
Legally, all owners are proportionately responsible for the upkeep and maintenance of property, including utilities and real estate taxes. However, you could argue that your siblings paid these expenses as a form of "rent" for using the property exclusively. You may wish to hire an attorney to assist with the bargaining process. If you cannot agree to a buy-out price, then you can initiate a partition action in court. However, this option is costly and lengthy, and would likely result in damaging your relationship with your siblings.
Answered on Sep 10th, 2012 at 1:20 PM
Business Law Attorney serving Livonia, MI
at
Gerald A. Bagazinski
Update Your Profile
I think you legal need some help to get the transaction done. First, their quiet enjoyment, use and occupancy of the house should offset the utilities and taxes. It is too late to say these things should have been negotiated when the property was first inherited. I think some careful negotiations might be helpful. How is the cabin owned is it Joint tenants with rights of survivorship or tenants in common?
Answered on Sep 09th, 2012 at 4:12 PM
3 Awards
You are really asking for business advice not legal advice. The property needed minimum utilities to exist. So you probably should be responsible for a 1/3 of all utilities that normally occur when no one is there and the increase should be borne by the others. The taxes should be paid 3 by you. Since the utilities and tax payments if unpaid would be assessed against the property, ultimately you could owe 1/3. These details should have been ironed out when you all went on to title, not when you are trying to get off title. That was poor planning on your part. Negotiate the best you can, but these issues should have been addressed before.
Answered on Sep 09th, 2012 at 2:58 PM
Trusts Attorney serving Sacramento, CA
at
Law Office of Victor Waid
Update Your Profile
Good morning. You have some alternatives. If you have a propensity for litigation, then a partition action would be brought in a court of law, to sell and divide the property value, between the three of you. Otherwise, in opposition to your siblings request for a proportion of the utilities and taxes to be deducted from the agreed value, you may want to make a claim back against them for the reasonable value of the use of your share of the property in the form of rent for the time period you were entitled to use the property. The third alternative would be the hiring and use of a mediator at an hourly rate experienced in real estate division and valuation to be paid by the three of you, to have the mediator render a decision, that is enforceable if necessary, by a partition action in a court of law.
Answered on Sep 09th, 2012 at 9:19 AM
Alternative Dispute Resolution Attorney serving Baltimore, MD
at
Whiteford, Taylor & Preston L.L.P.
Update Your Profile
It appears that the owners agreed that the people who used the house would be responsible for paying taxes and utilities. In theory, that should not have anything to do with the sale price for an interest in the house. In lieu of an adjustment in the sale price to take into account the taxes and utilities, perhaps you could agree to base the price on the appraisal obtained by your siblings.
Answered on Sep 07th, 2012 at 5:25 PM
4 Awards
You can seek to be bought out if you own a share according to your percentage of ownership. That is true regardless of who has paid fees and taxes. If they want, they can later sue for reimbursement of the fees and taxes. Does that make sense?
Answered on Sep 07th, 2012 at 5:24 PM
You should share in the taxes but not the utilities.
Answered on Sep 07th, 2012 at 5:10 PM
Thomas Edward Gates
You likely should have paid taxes on the home because it was required to keep the asset. The utilities should be paid by the parties that use the home. Considering useage, those that have already used it for the year, should yield to those who have no.
Answered on Sep 07th, 2012 at 4:57 PM
Probate Attorney serving Arlington, TX
at
Law Office of Eric J. Smith
Update Your Profile
I don't know about utilities, but paying taxes is what keeps the state from either putting a lien on the property or taking it outright. The taxes have nothing to do with the use of the property, just ownership, which you share. The sales price of your portion should be reduced by the share of taxes you have not paid.
Answered on Sep 07th, 2012 at 4:56 PM
Business Planning Attorney serving Livonia, MI
at
Frederick & Frederick Attorneys at Law
Update Your Profile
If they are using the property, they probably should also be paying rent, since all of you are entitled to use it. I would think that that rent that they did not pay would more than offset the utilities that they DID pay...and use. The other thing you can do is simply take the higher appraisal rate. The flip side to this is that the utilities are probably very nominal. If every one of you pays their "share" of this, we are likely not talking about very much.
Answered on Sep 07th, 2012 at 4:53 PM
Agriculture Attorney serving Fresno, CA
at
The Law Offices of Tres A. Porter
Update Your Profile
Legally, as an owner, you are obligated for your portion of taxes and upkeep of the property. However, since you are discussing an "amiable" settlement between family members, a fair solution would be to reduce the agreed upon price by your 1/3 share of the property tax bill. I personally would disagree with paying any portion of utilities for a property that I did not use. A question I would ask is: did the property generate any rental income? If so, then the sale price should be increased by adding the 1/3 of rental income that was not paid to you. If you can't reach an agreeable amount, the matter can be resolved through a lawsuit, but you will all likely be much better off in terms of time and legal expenses by reaching an agreement between you. Family fights over inherited property frequently lead to unnecessary hard feelings and tend to wind up becoming extremely expensive.
Answered on Sep 07th, 2012 at 4:51 PM
Appellate Attorney serving Grosse Pointe Farms, MI
at
Musilli Brennan Associates, PLLC
Update Your Profile
The utilities certainly should be paid by those who used the property. They consumed the utilities. The fair way to allocate the maintenance costs, including taxes, is to total the costs of having the property and divide it by the weeks used by each the respective owners. That is a reasonable "non profit" rent and by definition covers the costs. It would also be "fair" to have an owners' ante, a small amount, perhaps insurance and necessary maintenance costs, decided amount the owner group as such protects all of their interests. Your issue will be where the taxes belong, they could go in either category.
Answered on Sep 07th, 2012 at 4:44 PM
Peter James DeRose
You have more of a real estate question than an estate planning question. Depending upon how the property was deeded to you and your brothers-that is whether you are "joint" tenants or otherwise will decide how best to proceed. I agree with you that they should pay the utilities-not so sure about the taxes, because that benefits you as an owner. In Michigan, there is an action that can be brought in Circuit Court for the county where the property is located and the Court will "force" a sale. If the court finds that you benefited and had a duty to pay the taxes, as an owner, your brothers will get a credit for the taxes paid against your portion of the sales price. It may be possible to argue-I have seen it through-that you are entitled to one-third of the reasonable rental value because your brothers would not let you use the property. This is extremely complicated so hire the most experienced attorney you can afford.
Answered on Sep 07th, 2012 at 4:43 PM
Real Property Attorney serving Utica, MI
at
Douglas A. Tull, P.C. Attorney at Law
Update Your Profile
To the point of your question, as a co-owner of the property you would be responsible for real property taxes whether you used the property or not. Probably a portion of the utilities would be reimbursable to the extent they served to keep the vacation house pipes from freezing in the winter - otherwise, I would not think utilities play into the equation of a fair price. Really, a fair price will be what you can agree upon. What about insurance? Is there insurance on the property? Who pays for that? You benefit from insurance - at least its protection - while you own an interest in the vacation house. Often when dealing with these types of cases one side (usually the buyer) brings up the point that a real estate commission should also be figured in to determine a fair price, because if you were to sell it on the market you would have to pay a broker's commission most likely - at maybe 7% of the price. So keep that in mind as you negotiate your price.
Answered on Sep 07th, 2012 at 4:30 PM
That's a tough one. Any buyout is subject to negotiation. The value of the property based on a current appraisal is just one component of that buy out price. Other things like back taxes and utilities is another component. You could argue that there was obviously a deal in place since they had been paying them and never asking for reimbursement. The fact that you were never allowed to use the property certainly backs that up as being reasonable. On the other hand typically the owners and not the tenants pay property taxes, insurance and some utilities (water, sewer and garbage but not electricity, gas and phones/tv/internet). Going back the other way then you could argue you should be paid rent for the past. In the end all of the above is irrelevant and there are two simple things to keep in mind: 1) how much do you want to preserve your family relationship and 2) how much do you want to sell. Good luck!
Answered on Sep 07th, 2012 at 4:29 PM