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Undivided Interest in Surface Ownership: Understanding the Challenges and Finding Solutions

CEO Khai Intela
Introduction When it comes to surface co-tenancies, the issues and challenges that arise are often overshadowed by conflicts related to the mineral estate. However, it is crucial for real estate professionals and attorneys to be...

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Introduction

When it comes to surface co-tenancies, the issues and challenges that arise are often overshadowed by conflicts related to the mineral estate. However, it is crucial for real estate professionals and attorneys to be aware of the potential pitfalls and ways to mitigate them. In this article, we will explore the nature of co-tenancies, their creation, and the rights and obligations of co-tenants. By understanding these concepts, we can navigate the complexities of surface ownership more effectively.

What is a Co-tenancy?

Co-tenancy refers to the co-ownership of separate, undivided interests in land. Within the context of Texas law, there are two recognized types of co-tenancies: tenancy in common and joint tenancy. While both are concurrent interests in real property, they have distinct characteristics. In a tenancy in common, the interest of a deceased tenant "descends" to their heirs, while in a joint tenancy, the interest "survives" to the remaining joint tenants. It is important to note that Texas law heavily favors tenancies in common over joint tenancies.

Creation of a Co-tenancy

Co-tenancies are formed when two or more individuals or entities are vested with a mutual right to undivided possession of the same property. This can occur through deed, inheritance, or other means of property transfer. In cases where multiple parties jointly purchase land, they will automatically own it as tenants in common in proportion to their respective contributions. It is also possible for a co-tenancy interest to be created when a grantor conveys a specified area with undefined boundaries out of a larger tract. In such cases, the grantee receives an undivided share in the land.

While joint tenancies were once favored, Texas law abolished them with the passage of article 2471 in 1848. The statute made it clear that a deceased co-tenant's interest would not survive to the remaining joint owners but would instead descend to their heirs or legal representatives. The law was subsequently modified and clarified in 1927 as article 2580 of the Texas Revised Civil Statutes.

Rights and Obligations of Co-tenants

Possession and Accounting

Each co-tenant has the legal right to possess and occupy the entire property, including the authority to develop, lease, and make improvements. However, conflicts can arise when co-tenants have different ideas about how to use the property. While co-tenants do not have a fiduciary or agency relationship by default, there are common law obligations that address this issue.

Co-tenants have a duty to reasonably care for and maintain the common property, with each co-tenant being responsible for their pro-rata share of the costs. If one co-tenant incurs necessary expenses for the care and preservation of the property, they are entitled to reimbursement from the other co-tenants. Additionally, the co-tenant who pays for such expenses may recover interest from the date of payment. However, co-tenants are not obligated to pay for expenses beyond what is necessary for the property's upkeep.

Improvements

Any co-tenant has the right to construct improvements on the common property, as long as these improvements do not negatively affect the rights of the other co-tenants. However, non-joining co-tenants are not obligated to contribute to the costs of such improvements. In the event of a partition, the co-tenant who funded the improvements may be entitled to have them allocated to their share or receive compensation for the enhanced value they bring to the property.

Sale/Liens

Co-tenants have the ability to sell or convey their undivided interest in the property. However, such transactions only convey an undivided interest, and the buyer becomes a co-tenant with the other owners. Similarly, a co-tenant may encumber their undivided interest through mortgage or liens, but the lien will only burden that co-tenant's share. In certain circumstances, a co-tenant may encumber the entire property if it is necessary for the preservation of the common estate.

Rents and Income

In cases where a co-tenant develops or leases the property, they are entitled to an accounting and their pro-rata share of all rents and profits. Co-tenants who receive rents must account for them and hold them in trust for their fellow co-tenants. If one co-tenant is in exclusive possession and use of the property, they do not have to account for rentals, as each co-tenant has the right to use the entire property. However, if the other co-tenants formally demand access to the property and are refused, the co-tenant in possession must account for the rental value.

Easements

When a co-tenant grants an easement to a third party, such as a pipeline or access easement, all co-tenants must join in its creation for it to be valid. However, there are circumstances where an easement may burden the entire property if the other co-tenants consent or subsequently ratify the transaction. The claimant of such an easement must prove that the co-tenants had notice and that their interest was burdened through adverse use.

Adverse Possession

Adverse possession in a co-tenancy presents unique challenges. As co-tenants share possession of the property, the use of one co-tenant is presumed to be permissive. To establish adverse possession, the claiming co-tenant must show clear repudiation of the co-tenancy, notice to the other co-tenants, and the satisfaction of the statutory limitations period. Notice can be inferred from a change in use or character of possession. It is important to note that the limitations period for adverse possession does not apply among co-tenants, as the right to partition is continuous.

Dissolution of Co-tenancy

If a co-tenant wants to exit a co-tenancy and is unable to sell their undivided interest, they can seek partition. Partition can be achieved through written or oral agreement, by implication through individual occupation, or through judicial involvement. In cases where voluntary partition is not possible, any co-tenant can sue for a judicial partition. The court will determine the ownership interests, the property to be partitioned, and any outstanding equities. If the property can be partitioned, it will be divided among the co-tenants based on the court's decree. If not, the property will be sold, and the proceeds will be distributed accordingly.

Equitable Partition

In situations where one co-tenant conveys the entire property or a specific part to another co-tenant, the grantee can seek an equitable partition. This remedy aims to protect the grantee's interest without prejudicing the remaining co-tenants. Equitable partition requires that the conveyed interest does not exceed the value of the conveying co-tenant's interest in the larger tract. Non-joining co-tenants can challenge an equitable partition if they suffer financial harm, but they may be barred by ratification, acquiescence, or adverse possession.

Conclusion

Co-tenancy in surface ownership can present various difficulties and conflicts. However, many of these challenges can be addressed through well-drafted written agreements between co-tenants. These agreements can establish guidelines for property management, use, rentals, easements, and partition issues, among other considerations. While reaching a consensus among co-tenants may be challenging, such agreements provide certainty and set expectations for the co-tenancy relationship.

Robert M. Park is a partner at Uhl, Fitzsimons, Jewett, Burton & Wolff, PLLC, specializing in Texas oil and gas law and real estate. With extensive experience in drafting, negotiating, and litigating real estate transactions, Mr. Park brings a wealth of expertise to his practice. He is also well-versed in commercial real estate, water rights, and conservation easements.

For further inquiries, please contact:

  • Robert M. Park
  • Uhl, Fitzsimons, Jewett, Burton & Wolff, PLLC
  • 4040 Broadway, Suite 430 San Antonio, Texas 78209
  • Phone: (210) 829-1660
  • Email: [email protected]
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