Detailed Answer
When two or more co-owners agree to sell property together, one owner may front mortgage payments, property taxes, insurance premiums or maintenance costs (“carrying costs”). Under California law, you can calculate each party’s share and recover unpaid amounts through negotiation or, if necessary, a partition action in superior court.
1. Understanding Carrying Costs
“Carrying costs” include mortgage interest, property taxes, hazard insurance, HOA dues and routine maintenance. Co-owners typically split these costs in proportion to their ownership interests (for example, 50% each in a half-and-half ownership).
2. Step-by-Step Calculation
- Gather Documentation: Collect invoices, payment records and loan statements covering the period you advanced funds.
- Total the Expenses: Sum up all eligible carrying costs. For example, $1,200 for taxes + $2,400 for insurance + $18,000 in mortgage interest = $21,600.
- Allocate by Ownership Percentage: If you own 50%, your co-owner’s share is 50% of $21,600, or $10,800.
- Account for Payments Already Made: Subtract any amounts your co-owner already paid toward these expenses.
3. Recovering Costs Under California Law
If your co-owner refuses reimbursement, you have two paths:
- Voluntary Settlement: Present your accounting and supporting documents. Propose a promissory note or escrow holdback from sale proceeds equal to their share.
- Partition Action: File a petition in superior court to force sale and distribution of proceeds. Under Code of Civil Procedure §873.830, the court may order reimbursement of advances for taxes and carrying costs. Courts also rely on Civil Code §845 to require accounting among co-owners.
4. What to Expect in Court
The judge or referee will review your detailed accounting, ownership percentages and any written joint sale agreement. If the court finds your advances reasonable and necessary for preservation of the property, it will deduct your co-owner’s share before distributing net sale proceeds, or enter a money judgment for the unpaid balance.
Key Statutes:
- CCP §873.830 (Partition costs and adjustments)
- CCP §874.040 (Distribution of sale proceeds & costs)
- Civ. Code §845 (Co-owners’ accounting)
Helpful Hints
- Keep detailed, dated receipts and bank records for every expense.
- Define carrying cost responsibilities in a written joint sale agreement.
- Consider mediation before filing a partition action to save time and fees.
- Use an escrow holdback for disputed amounts at closing.
- Consult a qualified real estate attorney to review filings and pleadings.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney to discuss your specific situation.