Owning property with others, whether family members, friends, or business partners, can be a practical way to acquire real estate. But without a clear agreement in place, co-ownership can quickly become complicated, contentious, and costly. In Michigan, where the law recognizes several forms of shared ownership, putting your expectations in writing is one of the smartest steps you can take to protect your investment and preserve your relationships.
Understanding Co-Ownership in Michigan
Michigan law recognizes three main forms of property co-ownership: tenancy in common, joint tenancy, and tenancy by the entirety.[1] Each carries different rights and obligations.
- Tenants in common each own a separate fractional share of the property and can sell, mortgage, or pass their share to heirs independently.
- Joint tenants hold property with rights of survivorship, meaning that when one owner dies, their interest automatically passes to the surviving owner(s)—not to their heirs.
- Tenancy by the entirety is available only to married couples and also includes survivorship rights.
While these default legal structures provide a framework, they don’t answer the practical questions that arise in day-to-day co-ownership: Who pays for repairs? Who can live in the property? What happens if one owner wants to sell and the other doesn’t?
The Risks of Operating Without an Agreement
Without a written agreement, co-owners are left to navigate disputes using only the default rules of Michigan law. Those default rules may not align with anyone’s expectations.
- Partition actions are a common trouble spot. Under Michigan law, any co-owner generally has the right to force a partition of the property. If the property cannot be physically divided without prejudice to the owners, the court may order it sold and the proceeds divided. This means one co-owner can compel a sale even if the others want to keep the property, which is a harsh outcome if you’ve invested time and money into a shared home or rental property.
There is an exception: co-owners can contract away their right to partition. Courts have found that when parties take property as joint tenants “with right of survivorship,” that language may constitute an implied contract not to partition.[2] But relying on implied agreements is risky. A clear, written co-ownership agreement eliminates ambiguity.
- Financial disputes are another major risk. Who pays the mortgage, property taxes, insurance, and utilities? What happens if one owner covers more than their share? Michigan law allows co-owners to seek contribution from each other for common expenses, but litigating these issues is expensive and time-consuming. An agreement can spell out each owner’s financial responsibilities from the start.
- Use and occupancy conflicts can also fracture co-ownership relationships. Does one owner have the right to live in the property while others do not? Can one owner rent out their portion? Without an agreement, disputes over exclusive use can lead to claims for rent or an accounting.
What a Co-Ownership Agreement Should Include
A well-drafted co-ownership agreement functions as a roadmap, addressing potential issues before they become disputes. Here are the essential components:
- Ownership Shares and Contributions. Clearly state each owner’s percentage interest in the property and their initial financial contributions. Specify how ongoing costs—mortgage payments, taxes, insurance, maintenance, and repairs—will be divided. Address what happens if one owner fails to pay their share.
- Use and Occupancy Rights. Define who has the right to occupy the property and under what circumstances. If one owner will live in the property while others will not, consider requiring that owner to pay fair rental value or increased share of expenses. Address whether owners can rent out the property or their individual interests.
- Decision-Making Authority. Establish how decisions will be made. What requires unanimous consent (e.g., selling the property, major renovations) versus majority vote (e.g., routine repairs, tenant selection)? Clarify who will manage day-to-day operations if the property is rented.
- Restrictions on Transfer. Decide whether owners can freely sell or mortgage their interests, or whether other co-owners have a right of first refusal. Include any required notice periods and procedures for buyouts.
- Dispute Resolution. Include a mechanism for resolving disagreements, such as mediation, arbitration, or other alternatives to litigation. Specify whether partition rights are waived and under what conditions a forced sale might be permitted.
- Exit Strategy. Plan for the future. What happens if one owner wants out? Include buyout procedures, valuation methods, and timelines. Address what happens upon death, divorce, or bankruptcy of an owner.
- Improvements and Repairs. Clarify who can authorize improvements, how costs will be shared, and whether improving owners are entitled to reimbursement or increased equity. Distinguish between necessary repairs and elective upgrades.
- Accounting and Records. Require transparent record-keeping for all income and expenses related to the property. Michigan courts have the authority to order accountings for rents, profits, and proceeds in partition proceeding, but a proactive approach is far less costly.
Conclusion
Co-ownership can be rewarding, but it requires clear communication and careful planning. A written co-ownership agreement tailored to Michigan law protects everyone’s interests, reduces the risk of costly litigation, and preserves relationships. Whether you’re buying a vacation home with siblings, investing in rental property with a friend, or co-purchasing a primary residence, take the time to put your agreement in writing. Your future self, and your co-owners, will thank you.
We Can Help
If you are purchasing a property with someone else and would like a co-ownership agreement, we can help. We can also help if you are in a situation where lack of a co-ownership agreement finds you in a situation where filing a partition action is necessary. Please call us at (248) 349-6203 or email us using the form below.
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[1] There is also “joint tenancy with full rights of survivorship,” but that is an entirely different beast and please do not title your co-owned property using those words of conveyance!
[2] See footnote 1. Please do not use those words!
