Co-Ownership Agreement | Civ. Code 686, CCP 872.210 Ready

A tenancy in common is one of three concurrent estates in American property law, next to joint tenancy and tenancy by the entirety. Each co-owner holds an undivided fractional interest, so a 25 percent owner may possess and use 100 percent of the property, not one bedroom out of four. Shares can be unequal, each share can be sold or mortgaged separately, and there is no right of survivorship. When a tenant in common dies, that share passes under a will or by intestate succession, never to the surviving co-owners.

The deed sets title. It says nothing about who pays the tax bill, who may rent the guest unit, or how a departing owner gets cashed out. That is the work of the co-ownership agreement, a contract binding the co-owners to each other that, once a memorandum is recorded, puts buyers and lenders on notice. It is not an LLC operating agreement, which creates a separate entity holding title in its own name, nor a cohabitation agreement, which governs the personal finances of an unmarried couple. Those documents sit beside a co-ownership agreement. They do not replace it.

Co-ownership rests on two legal layers that most buyers discover only in litigation. The first is title law. Nearly every state presumes a tenancy in common when a deed conveys to two or more people without survivorship wording: California Civil Code section 686, New York EPTL 6-2.2(a) and Florida Statutes section 689.15 say a version of the same thing, and the Cornell Legal Information Institute summary of the tenancy in common presumption against survivorship sets out the conveyancing language courts look for.

The second layer is partition. Every state gives a cotenant a statutory right to force division or sale: California Code of Civil Procedure section 872.210, Texas Property Code section 23.001, Florida Statutes chapter 64, New York RPAPL article 9. California courts call that right absolute, meaning no reason and no hardship need be shown. Contract can limit it, but only with explicit drafting. In LEG Investments v. Boxler (2010) 183 Cal.App.4th 484, the Court of Appeal held that a right of first refusal merely modified the partition right without waiving it, and ordered the property sold. A right of first refusal is not a waiver of partition. The two clauses have to be drafted separately.

Twenty-two states and the District of Columbia have adopted the Uniform Partition of Heirs Property Act, codified at Florida Statutes sections 64.201 to 64.214 and New York RPAPL section 993, which layers cotenant buyout rights and appraisal procedures onto ordinary partition. That act reaches property only where no recorded agreement binding all cotenants governs partition, so a signed co-ownership agreement decides which statutory track a judge follows. California went further with the Partition of Real Property Act, Code of Civil Procedure sections 874.311 to 874.323.

The classic case is an unmarried couple buying a first home where the down payment comes from one side and the monthly payment from the other. Marriage law will not sort that out later, so the split has to be written at closing, next to the real estate purchase agreement that puts both names on the contract. Siblings who inherit a family cabin have the same problem in reverse: they already own it together, usually in unequal shares after a probate distribution, and none of them chose the arrangement.

Small investor groups use a co-ownership agreement to hold rental property without forming an entity, usually to keep an existing mortgage undisturbed, and parents funding part of a child's purchase take back a recorded fractional interest instead of an unsecured promise.

Two edge cases justify a more careful draft. Property inherited among relatives is heirs property under the uniform act, and a recorded agreement pulls it into the exit rules the owners chose. Investors holding tenancy in common interests through a 1031 exchange must respect IRS Revenue Procedure 2002-22, which caps the arrangement at 35 co-owners and requires unanimity to sell or refinance.

• The statement of ownership shares ties each percentage to a capital contribution schedule listing cash at closing, closing costs paid and the source of each deposit. Where one owner contributes more later, the schedule adjusts by formula rather than by argument, and it governs any later accounting.
• The expense allocation and contribution mechanism covers mortgage, property tax, insurance, association dues, maintenance and capital improvements, each with its own sharing ratio. A cotenant who advances another owner's share earns a documented credit carrying interest, and repeated default dilutes the defaulting owner's percentage.
• The occupancy and use terms state who lives in the property, whether a resident owner pays fair rental value to the others, and how rental income is divided. Exclusive occupancy without this clause invites an ouster claim in a later accounting.
• The decision-making thresholds separate routine repairs, which one owner may authorize up to a stated amount, from refinancing, leasing, capital work and sale, which need unanimity or a supermajority of interests.
• The transfer restrictions and right of first refusal give the remaining owners a fixed window to match a bona fide third-party offer before any fractional interest moves by quitclaim deed or otherwise. The window stays short enough to survive a challenge as a restraint on alienation.
• The buyout formula names the valuation method in advance: one agreed appraiser, or each side's appraiser plus a third, with any minority discount applied or excluded expressly. Payment terms, closing deadline and release of the departing owner from the loan are fixed here, not negotiated under pressure.

California presumes tenancy in common under Civil Code section 686 and treats partition as an absolute right under Code of Civil Procedure section 872.210. Two local points matter more. A waiver clause has to use the word waiver, because after Boxler a transfer restriction alone reads as a modification and the property still gets sold. And transfers of fractional interests are reassessed under Revenue and Taxation Code section 65, so buying out a co-owner resets the tax basis on the transferred share.

Texas lets any joint owner compel partition under Property Code section 23.001, with procedure in Texas Rules of Civil Procedure 756 to 771, and codified the heirs property act at Property Code chapter 23A. The trap is homestead. If a co-owner is married and the property is homestead, Texas Constitution article XVI section 50 requires the spouse to join any conveyance, so a buyout closing without a spousal signature dies at the title company.

Florida abolished survivorship by default in Statutes section 689.15, so co-buyers who wanted survivorship and failed to say so are tenants in common. Partition runs through chapter 64, and section 64.081 lets the court apportion costs and attorney fees, which changes settlement math considerably. Owners with minor children should check the homestead devise restrictions of article X section 4 of the Florida Constitution before assuming a fractional interest passes freely by will.

New York applies the presumption of EPTL 6-2.2(a) and partitions under RPAPL article 9, where section 915 governs the accounting for rents received and carrying costs advanced. Property inherited among relatives falls under RPAPL section 993, giving non-petitioning cotenants a buyout window measured in days once the court fixes value.

Elsewhere, two points recur. Community property states including Arizona, Nevada and Washington may treat a married co-owner's interest as community property when community funds paid for it, and recording a memorandum in the county where the land sits is what binds later buyers and lienholders.

You start by selecting the state where the property sits, and the form loads the correct partition statute, the local presumption wording and any spousal or homestead signature requirement. Then you enter the parties and the legal description exactly as it appears on the deed, because a description that does not match the recorded instrument gets rejected at the recorder's office.

The contribution screen is where the document earns its keep. You list what each owner brings to closing and what each commits to pay monthly, and the template turns those figures into ownership percentages and expense ratios that stay consistent throughout. From there you set the decision thresholds, the notice period for the right of first refusal, the appraisal method for a buyout, and whether partition is waived and for how long.

The last screen covers notarization, witnesses where the state requires them, and the short memorandum you record with the county. Sign before closing, not after, because the leverage to negotiate percentages disappears the moment the deed is recorded.

The most expensive mistake is the reflexive fifty-fifty split. Co-buyers who paid unequal down payments write equal shares because it feels fair on the day, then discover that no court will rewrite the deed years later. The second is treating a right of first refusal as protection against a forced sale, which Boxler disposed of directly. The third is leaving the buyout price to later negotiation, since a clause promising the parties will agree on a fair price is close to unenforceable and is the first thing a departing owner tests.

Two further failures show up in practice. Owners sign and never record a memorandum, so a buyer of one fractional interest takes without notice and the remaining owner inherits a stranger as a partner. And few owners align the document with an estate plan. A tenancy in common share passes by will, so a co-owner who dies without a last will and testament hands a fractional interest to whoever intestacy law picks. Fund the death buyout with life insurance and name the mechanism in the agreement.