How to Calculate and Recover Carrying Costs from a Co-Owner in a Joint Sale Agreement in Arizona

Detailed Answer

When two or more parties co-own real estate in Arizona and agree to sell it jointly, each co-owner may pay carrying costs such as mortgage interest, property taxes, insurance premiums, maintenance and utilities. If one co-owner advances these costs, they can seek reimbursement from the other.

1. Identify and Document Carrying Costs
Carrying costs typically include:
• Mortgage interest
• Property tax installments
• Homeowner’s insurance premiums
• Repairs, maintenance and utilities
• HOA or condominium fees

Keep all invoices, receipts and statements. Note the dates and amounts paid.

2. Calculate the Total Costs
Sum each category of expense for the relevant period. For example, if the mortgage interest is $800 per month, insurance is $150, taxes are $200 and repairs average $100, your total monthly carrying cost equals $1,250.

3. Allocate Each Co-Owner’s Share
Divide total costs by each co-owner’s ownership percentage. In a 50/50 ownership, each owes half. Using the $1,250 above over four months equals $5,000. Each co-owner’s share is $2,500.

4. Attempt an Informal Recovery
Send a written demand with your accounting and supporting documents. Offer to discuss payment terms or use a neutral mediator.

5. Use Formal Remedies if Necessary
• Small Claims Court: For amounts up to $3,500, file in small claims under A.R.S. § 12-1770. Procedures are streamlined and you can represent yourself.
• Partition Action: If co-owners cannot agree on sale or cost allocation, file a partition lawsuit in superior court under A.R.S. § 12-1201. In that action, you can ask the court to order reimbursement of carrying costs under A.R.S. § 12-1216, which allows the court to apportion expenses of sale and upkeep among co-owners.

Illustrative Example: Alice and Bob co-own a rental home 50/50. Over six months Alice pays $1,000/month in mortgage interest, $150 in insurance, $250 in taxes and $100 in maintenance, totaling $9,000. Bob’s share equals 50% of $9,000, or $4,500. Alice sends Bob a demand letter with copies of all statements. When Bob refuses, Alice files in small claims to recover $4,500 (or files a partition suit if the amount exceeds the small claims limit).

Helpful Hints

• Gather and date all invoices, bank statements and receipts promptly.
• Use clear spreadsheets to show each co-owner’s percentage and owed amount.
• Send a polite but firm demand letter before filing any lawsuit.
• Consider mediation or arbitration clauses in your joint sale agreement.
• For amounts under $3,500, use Arizona small claims court to save time and costs.
• If co-owners dispute the sale or cost allocation, a partition action under Title 12, Chapter 15 of the Arizona Revised Statutes may resolve all issues.
• Consult a licensed real estate attorney for complex disputes or when the amount at stake exceeds small claims limits.