#1 Real Estate Law Surprise

Feb 1

Surprise #1: The impact of an Heir Who No Longer Wants Ownership In The Family Cottage.

When thinking about the future of your family cottage, it is important to understand how various forms of ownership of real estate can have unintended consequences.

Real estate laws provide rights and duties attached to different forms of ownership that can be surprising to cottage owners. In my current series of blogs, I identify various surprises and what impact they can have on the future of the family cottage.

Some children or members of future generations may not be enthusiastic about having a shared ownership in the family cottage. They may not use the cottage or have other interests that simply don’t include spending time at the cottage. These unhappy futureco-owners usually view their shared ownership interest in the family cottage as trapped inheritance.

Under real estate law in the absence of a cottage plan, a future co-owner is usually an owner as a “tenant in common” and as a result, that unhappy owner can sue the other joint owners to force a sale of the family cottage, this is called an action for partition.

The remedy is automatic and there is nothing the other co-owners can do to object or stop the partition from occurring.

So this surprise can result in a forced sale of the family cottage over other co-owners objections or a forced buy out by the co-owners who want to stay with the exiting co-owner at perhaps an inflated priced and bad terms forcing the co-owners who are staying to have to stretch to come up with the buyout proceeds

Cottage Property Risks

Cottage Succession Planning Terms

A cottage succession plan can be implemented to avoid this surprise altogether. Terms can be included in the plan to require the existing owner to maybe take a discount on the value of his ownership in the cottage, and impose terms as to how and on what terms those co-owners who want to stay will be allowed to purchase the existing owners interest tomake the terms affordable.