Close Contact Us Now
Tap Here to Call Us
Updated:

What happens when a co-owner refuses to pay their share of the mortgage? ((Wallace v. Daley (1990) 220 Cal.App.3d 1028.)

In California, cotenants are obligated to pay for their portion of common costs. A huge part of owning property jointly is “splitting the bill,” so to speak. From Property taxes to mortgage payments to utilities, the list goes on and on in terms of what all cotenants are responsible for. But that does not mean that each co-owner has to pay an equal share, or always does. And not every property-related expense is one which every cotenant must share in.

Perhaps due to all these various rules and unforeseen responsibilities, joint-ownership arrangements can often fall apart. All it takes is one delinquent mortgage payment to crater the credit scores of all parties involved. In these situations, a co-owner’s best option is a partition action where they can recover their share of overpayments. The Underwood Law Firm is familiar with these matters, and our team has the legal acumen and skills necessary to help you with the process.

What are common costs? 

In California, the law of co-ownership (and therefore partitions) involves the term “common.” It is used in association with costs that are “common” to all co-owners of one property, or with expenditures made for the “common” benefit of all co-owners to the property. But that doesn’t make the term any less vague.

This ambiguity is unfortunately highlighted by the term’s importance to co-ownership. The general rule is that each cotenant to a property is responsible for their proportionate share of “common” property expenses. (see Little v. Mountain View Dairies (1950) 35 Cal.2d 232, 234.) So if “Julie” owns 60% of a house, and “Shawn” owns 40%, then “Julie” is responsible for 60% of the “common” expenses.

The best idea of what expenses actually fall into this category comes from a seminal partition case out of Third District Court of Appeal. (Wallace v. Daley (1990) 220 Cal.App.3d 1028, 1035.) In Wallace, the Court noted that certain expenses implied reimbursement or charges because they were, in essence, common. They were things all co-owners were responsible for. (Id.)

Those expenses are as follows: “necessary repairs, improvements that enhance the value of the property, taxes, payments of principal and interest on mortgages, and other liens, insurance for the common benefit, and protection and preservation of title.” (Id.)

Are improvements common costs? 

The answer to this question is actually fairly nuanced. In short, sometimes improvements to property can be considered to be “common costs,” and therefore reimbursable if one cotenant fronted the entire amount for the improvement.

Most treatises discussing the topic, however, note that a cotenant cannot compel another cotenant to join in making improvements on common property. (Higgins v. Eva (1928) 204 Cal. 231.)

That said, there’s another underlying issue: the protection of the common estate. In this context, the Higgins Court held that a cotenant can recover expenditures made in working on the property and developing it and protecting the estate.

In layman’s terms, this means that one co-owner may recover money spent (including his cotenant’s portion) if the action or expenditure benefits the entire property. (King v. Oakmore Homes Assn. (1987) 195 Cal.App.3d 779, 784.)

For example, suppose that “James” is informed by the county that if he does not replace his home’s septic tank, the county will condemn the property. If James then goes and pays for the brand new septic tank to preserve the property itself, then this is probably an expense that James can recover, even if his other cotenants never agreed to the expenditure.

Is failing to pay common costs a breach of fiduciary duty? 

This is another question that cannot be answered without some nuance. As a general rule, cotenants stand in a “fiduciary” relationship to one another. (Wilson v. S.L. Rey, Inc. (1993) 17 Cal.App.4th 234, 242.) Moreover, as stated above, each cotenant has the right to protect the entire common estate from injury, even without the consent or assistance of the other co-owners.

Suppose that “Shawn” and “Julie” take out a mortgage when buying their joint property. But, after a while, Shawn simply refuses to pay his portion. If the mortgage isn’t paid, then the bank will foreclose on the home, destroying the estate. In that instance, Julie could take action and protect the common estate by paying for the whole mortgage.

Whether she can later sue for breach of fiduciary duty against Shawn, however, is murkey. Most cases that hold co-owners have zero obligation to protect the interests of their other cotenants. For instance, there is no obligation upon the part of one co-owner to insure the other against loss of the latter’s interest in their jointly owned property. (Russel v. Williams (1962) 58 Cal.2d 487, 491.)

That said, this can be remedied with separate, written agreements that codify obligations at the outset. For example, in Bardis v. Oates (2004) 119 Cal.App.4th 1, the cotenants entered a written TIC agreement that specifically obligated each to pay all property expenses in proportion with their ownership share.

As such, in these co-ownership situates, “Julie” is frequently best served by filing a partition action so that she does not have to bear the entire burden of the property’s payments, and then seeking to recover the amounts that she expended for the common benefit during the accounting portion of the partition action.

How can the Attorneys at Underwood Law Assist You?

Co-ownership disputes are incredibly common in California, especially between business partners. And, absent a formal agreement between the parties, it can be hard for every cotenant to understand just what costs they are and aren’t responsible for. In these situations, emotions run high, and each cotenant may feel confused about what steps they can take to either get reimbursed, or to free themselves of responsibility for payment.

As each case is unique, property owners in these situations would be well-served to seek experienced counsel familiar with cotenancy, fiduciary relationships, and partition actions. At Underwood Law, our knowledgeable attorneys are here to help. If you are concerned about recovering payments on your property, seeking to exit a co-ownership scheme, or if you just have questions, please do not hesitate to contact us.

Otherwise, you can learn more about this here.

Start Chat