When you think of owning real estate, you probably think of owning it with complete undivided interest.
That is, the land has just one owner, and the process of buying, selling, and making decisions is relatively uncomplicated.
Yet, it’s more common than people think to have multiple owners for one piece of land.
For instance, related or unrelated business partners, heirs of land, or a married couple can all hold land together.
All of these relationships create a scenario where you may have more than one owner of a property, and co-ownership can quickly become complicated.
Whether you’ve opted for co-ownership (marriage or business) or it’s been thrust upon you (inheritance), it’s important to know how sharing real estate can impact your ability to act.
Particularly when undivided interest comes into play.
So, in this blog, we’re talking about undivided interests, what they are, and how you can free yourself from them if necessary.
Keep reading to learn more.
1. What is undivided interest in real estate?
In real estate, an undivided interest refers to a co-ownership scenario whereby each owner owns a percentage share in the property.
It occurs in situations where a piece of real property is held by two or more persons without being subdivided or divided among the owners.
Thus, the land itself is a single undivided parcel and every owner has an equal right to enjoy the entire property.
However, despite having an equal right to enjoy the property, each owner only owns a percentage share in the lot.
Think of it like owning shares in a company.
2. What are the three different types of undivided interest in real estate?
There are three types of undivided interest:
tenancy in common
joint tenancy
tenancy by the entirety
We’ll detail each in the next three sections.
3. What is tenancy in common?
Tenancy in common is a form of co-ownership that is often used between unrelated individuals.
Tenants in common may own unequal shares of a property, but if they are not specifically designated (3/4 versus 1/4) then they are presumed to be equal or proportionate.
Tenants in common are said to hold “undivided” interests with the other co-owners.
Instead of owning one physical half of the property (the west half or the east half), they are rather considered to own a certain interest in the entire parcel of land.
4. What is joint tenancy?
Joint tenancy occurs when two or more parties own property jointly.
That is joint tenants have equal ownership in the property.
Furthermore, joint tenancy means that when an owner dies, the owner’s rights and interests pass to the surviving owner(s).
This is called the right of survivorship.
The rules for joint tenancy vary from state to state, so be sure to check the laws locally.
5. What is tenancy by the entirety?
This type of ownership is available only to married couples.
It allows them to own a property as a single legal entity, and the right of survivorship exists in case one of the spouses dies.
The primary advantage of this type of tenancy is that only creditors of the couple can attach and sell interest in the property.
It cannot be used to pay an individual spouse’s debt, and a spouse may not get rid of his/her interest in the property without the consent of the other spouse.
6. What is community property?
This term applies to married couples who own property in any of the following nine states:
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin
These are referred to as “community property states.”
Any property (cash, real estate, acquired assets, etc.) accumulated during a marriage is “owned” by both parties; it doesn’t matter whose name is on the ownership papers or deed.
Knowing this can be a good reminder.
While your spouse should ultimately be one of the most trusted people in your life, splitting property while divorcing will be difficult.
Purchasing property with another party is always a big decision, and you should consult legal and tax advisors to ensure you’re making smart decisions.
7. What are examples of undivided interest in real estate?
There are countless reasons people could own land collectively.
However, that doesn’t mean it always works out in everyone’s favor.
Here are some examples of undivided property in real estate.
Three siblings own two quarters (320 acres) of land together as Tenants in Common.
Sibling #1 farms the land and pays a pro-rata share of rent to siblings #2 and #3.
While the quality of the land is currently good, it would be improved with drain tiling, which removes excess water from soil below the service.
Drain tiling costs $1,000/acre.
As a result, the sibling farming the land is advocating to get the land drain tiled at a cost of $320,000.
This means that each sibling would need to contribute in excess of $100,000 in order to get the drain tiling done.
Because siblings #2 and #3 do not have sole ownership of the land, neither of them wants to make that type of investment
Five cousins inherit 12 acres of land when their grandpa passes away.
Shortly after the funeral, one of the cousins wants to sell the land because he is in financial trouble.
However, the other four cousins are content receiving rental income and do not want to sell the land.
8. Can you sell your undivided interest?
The short answer is yes, and the long answer is how.
You have the legal right to sell your undivided property.
The problem is finding a market for it.
Others may not desire to step into your shoes and have co-owners of your property.
Often, people with undivided interests in real estate are handling those interests with relatives or other close associates, which can be tricky.
This typically isn’t a selling point for buyers.
The best thing you can do is consult a real estate attorney, especially one who has handled undivided interests previously.
They can check the fine print and let you know under what circumstances you can sell your property.
You never know what could come up or make it especially complicated!
Openly and honestly discuss your desires pertaining to this land with your attorney.
They can give you some perspective about your options, and this can give you a path forward.
9. I’ve thought about keeping my undivided interest share, but I’m just not happy with that option. What are the alternatives if I can’t sell it?
Alright, so you know that it’ll be difficult to sell, but keeping the land just isn’t in the cards for you.
What can you do to get out of the arrangement altogether?
Try to sell it to one of the co-owners of the same land.
Let’s face it.
Depending on what type of land this is, it’s likely to be more attractive to someone who already owns an interest in some of it or knows the people who own the other interest in it.
See if there’s someone in the group who would be willing to take on your share of the interest.
The logistics for this route will be minimal compared to almost everything else on this list.
Buy your co-owners share.
This is also a fairly simple solution.
If the main problem you have in the arrangement is the undivided interest (not the actual land-owning itself), then you could offer to buy out your co-owners.
This is a great solution if you are the most interested party in having or developing the land, and your co-owners do not have the financial ability to acquire your share.
Partition the land through legal agreements and documents.
In this scenario, undivided interests become divided interests and create individual sole title owners.
Each owner will receive their share of deeded land with specific boundaries.
Unfortunately, we’re making it all sound a lot easier than it really is.
While the process can be neat and clean, it can also be pretty messy.
It ultimately depends on the willingness of the undivided interest partners to determine how easily the land can be divided, so everyone can receive their fair share.
Read more about what partitioning undivided interests looks like in #10.
Go to court to partition the land.
Yes, you’ll need to partition the land with legal agreements and documents anyway, but you may actually need to go to court to decide how to partition it.
This can happen if the owners of the land can’t get along.
Do what you can to avoid this, but if you’re in this position, make sure you have good legal counsel on your side.
Again, read more about this process in #10.
10. What is a partition action in real estate?
Above, we suggested that you partition the land through legal agreements and documents.
This is often done when you can agree with your fellow owners about how to use the land.
However, when this isn’t the case, the law offers something called a partition action, which can be brought to subdivide the property into individual shares among owners.
Instead of one person getting the last cupcake, you just cut it in half.
There are two types of partitions: voluntary partition and judicial partition.
Voluntary partitions occur when co-owners voluntarily agree to partition their ownership rights and divide the property.
However, sometimes not everyone agrees, and in this case, one owner may file a lawsuit.
If this occurs, then a judicial (or court-ordered) partition can occur.
It’ll be defended based on various legal principles, like statutes of limitations, laches, and public policy.
It may go without saying, but it’s often in your benefit to avoid time and money spent in court.
If you’re able to work it out with co-owners outside of the courtroom, then that’s your best bet.
11. How do legal partitions take place?
If the land in question will be partitioned, it won’t be as simple as snapping your fingers.
Regardless of whether you have a voluntary partition or a judicial partition, the actual way your land is severed can occur by two methods: a partition in kind or a partition by sale.
Here’s what each of those means:
Partition in kind:
This is known as an “actual partition.”
It severs the individual interest of each joint owner so that each party ends up controlling an individual and divided portion of the property.
It’s essentially a subdivision.
This is a great option when parties get along but disagree about the use of the land.
Each person can take the divided land as their own and record that division with the county clerk.
Partition by sale:
This type of partition is known as “licitation” or “succession.”
It is done by selling the entire property and then dividing the proceeds among the owners.
It is often used when partition in kind is difficult to perform or when parties cannot agree.
When this occurs, each party has the opportunity to take their share of the proceeds and put it toward their own separate properties.
Final thoughts
Undivided interests in real estate can cause conflict between those you’re closest with, and you want to come out ahead of it.
Don’t hesitate to get legal or financial advisors involved if you’re not sure what the best path forward is.
Additional Resources
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Disclaimer: we are not lawyers, accountants or financial advisors and the information in this article is for informational purposes only. This article is based on our own research and experience and we do our best to keep it accurate and up-to-date, but it may contain errors. Please be sure to consult a legal or financial professional before making any investment decisions.
Prior to starting Gokce Capital, Erika received a Bachelor of Architecture from the University of Southern California and a graduate degree in Urban Policy from Columbia University. She worked as both an architectural designer and engineer in New York before joining the New York City Department of Housing Preservation and Development.
Erika currently lives in the New York Metropolitan area with her spouse, daughter and cat. She is originally from Chicago and still considers herself a midwesterner at heart.
Erika also loves to read, write and travel (fun fact, she has visited all 50 states and more than 30 countries!). Her new book, Land Investing Mistakes: 11 True Stories You Need To Know Before Buying Land, is now available on Amazon.
My dad bought an undivided half interest in 40 acres in Arkansas from a widow in 1986. He knew she inherited a partial interest from her husband which my dad believed was one half interest. My dad believed he was buying her entire interest and thus owned a half interest in the whole parcel. We hired a title company to do a search for other owners. They told us that the language in the quitclaim deed in which she sold an undivided half interest legally means she sold a half interest in her interest not the total parcel. Thus it appears we own one quarter interest along with two other sets of heirs. All of this because of a mistake in preparing the deed.
Hello Steve, thank you for sharing your story. I’m sorry to hear about your situation. Were you able to reach back out to your seller and have the mistake corrected?
I cosigned a mortgage (he is also on the deed) for my son to buy a house and garage in Maine to start a legal cannabis growing business. The business is no longer operating legally, and now I am at risk if the house is confiscated in connection with illegal operation. My son refuses to stop the operation as it is his sole source of income without regard to the position he is putting me in. Partition by sale seems to be my only option.
Thank you for sharing your story, Hamilton. I’m very sorry to hear about your troubles and hope you are able to resolve the situation.
What happens if one of the individuals passed away. Will the person’s family members be entitled to that persons interest. Or will the remaining property go to the remaining siblings.. there was 6 siblings in this case and one passed away. What happens now.
Usually, undivided interest is held by multiple owners as tenants in common, which means that a deceased owner’s heirs would likely inherit their undivided interest in the property; however, I would recommend speaking with a local real estate or estate attorney about your particular case.
Can I buy a 10% interest in a 100 acres of hardwoods in North Louisiana and then force a ‘Sheriffs” sale of the property in order to bid on the other 90%?
Hello Ed, I believe that would only work if the other parties don’t pay their property taxes. It is also generally better to work with the other property owners rather than around them.
We have an undivided 1/10th interest in a condominium at Eagle Crest in Oregon. Works well other than the real estate taxes. These 1/10th ownerships are very common and sell often. The problem is with the County Assessor. He insists on valuing the property as a whole entity and simply dividing by 10 to arrive at a value for individual interest. The issue is that the 1/10th ownerships sell for substantially less than 1/10th of the property as if it was solely owned. I have contacted the assessor several times without any relief. I cannot convince them to value our 1/10th interest as they are readily marketed and sold.
I’m sorry to hear about your situation, Thomas, but thank you for sharing your story. It’s good to know that this can be an issue.
Hello,
My dad passed away in 2010 no will in the state of Louisiana. He his house before he remarried. Right before he passed away she asked him to put her name on his house. He decided to do so and did an act of donation of an undivided one-half interest to her. And it was listed on the succession incorrectly. Can you please help me understand what my rights are as his only child to the home. I was informed that it was not specified as separate property so it would make it community property. 1/2 separate property owned by me. 1/4 belongs to his wife in full her half of the community property. 1/4 to me as naked owner and his wife has usufruct.
Thank you
Hello Cheri, my apologies, but since I am not a lawyer I cannot advise on the specifics of your situation. I would recommend speaking with a local estate attorney.
Farm land (80 acres) and residence inherited by 2 sons. The son living in the residence wouldn’t speak to his siblings until the sibling would sell his interest for only $20,000 which wouldn’t cover FMV of 1/2 the residence and thus also no money was paid for land yet land was included in the deed. Is this voidable? A clear theft.
Hello Ellen, I’m sorry to hear about this situation. I would suggest speaking with a local real estate attorney to see if there is any recourse.
Filed a partition suit on undivided land in Texas – essentially suing the other owners to force a division.
An “independent” group of commissioners were picked to decide how to divide the property, but they just never decided – over a year went by and there was no decision made by them and there was no indication that one would ever be made.
Finally, got with the other owners and decided for ourselves – thinking the legal process is severely flawed.
Thank you for sharing your story, Al. I’m sorry to hear the process was such as mess.
Hi Erika,
Thank you so much for all the knowledge that you provide.
Is it possible to rent an undivided interest on vacant land? or to put an RV or mobile home and rent it?
Best regards.
Hello Ben, I would check with a local real estate attorney as the rules may vary from state to state. Generally, owner an undivided interest in a property is like owning shares in a corporation; thus, income from the rental may need to be divided among all interest holders. You may also need permission from all other interest holders.
We own about 30 percent or so of an acre in an undivided interest. I put up a sign on it and was a let’s go Brandon sign. Someone didn’t like it and they took it down and threw it away. I have a video of them doing it. I went to file charges on them but the police said I couldn’t file criminal because they contacted one of the other owners and they told them they could take it down so it would have to be a civil case against one of the other co owners. That’s what the Police said. I don’t believe that. Is this correct. They can just do whatever they want and destroy my property if someone else says it’s ok?
Hello Will, I would speak with a local real estate attorney since laws vary from state to state; however, this is one of the problems with undivided interest, all owners have a right to the entire property so there can be a conflict on how to manage and use the property.
Condo in indiana
One owner wants to extend patio on to undivided interest. How to stop them
Hello Meredith, unfortunately, the best advice I can offer is to consult with a local attorney. Best of luck!
My grandmother died 60 years ago and she owned a small piece of land with the house she raised her children in ( about 5 and a quarter acres, red clay soil-no farming). Her son settled her estate by giving my mother, her sister and him an undivided 1/3 interest in the land. I have been paying the taxes since my mother died 17 tears ago and that $250 / year in taxes is more than i can afford (on disability). Now I need to sale the land-problem. I can’t find the other owners. I know 2 are dead, their brother is ?, that is 1/3 of the undivided land. Next 1/3 won’t talk to me. I don’t want the land to sell for taxes, but no one else is willing to step up and pay them. Sheriff sale seems to be only option? Land is in Mississippi.
Hello Steve, thank you for sharing. You could look into a quit title suit or speak to a real estate attorney about your options, but, unfortunately, this will cost money. It’s also possible that someone will buy just your 1/3 interest, so you may want to speak to a real estate agent about trying to sell it.
I owned half interest in land for decades, went to court at sale time and acquired the other half. What is my tax obligation on each half? What tax schedule do I use for each if necessary? Any help in this matter would be appreciated, went to IRS site but no help there.
Regards
Hello Michael, I would recommend speaking with your attorney and your accountant for more information. You may also want to check with your local assessor.