Co-Owner, Co-Inheritor or Executor Living in House and Not Paying Rent

Inheriting a house can have complications, especially when a co-owner, co-inheritor or executor lives in the house and does not pay rent. In these cases, what should you do?

Co-owner is living in the house rent-free

If a co-owner is living in a house rent free, it means the co-owner and the deceased are tenants-in-common. As a tenant-in-common, the co-owner is allowed to live in the house rent-free unless he ousts the other co-owners or makes known to the other co-owners that he is living in the house to the exclusion of the other co-owners This means the co-owner is asserting full ownership over the house as a sole owner and not a co-owner.

If you are the personal representative of the deceased co-owner, such as an executor or administrator, your remedy is to talk to the other co-owner to enter into an agreement to sell the property and split the proceeds. If you are the co-owner living in the property rent-free, make sure that in your stipulation, you have a provision on how to treat your living in the house rent-free. If the stipulation is silent, you might be shocked to learn that you are being charged for rent during the time you were living in the house. A provision in the stipulation will prevent future disagreements or issues on the imposition of rent to the co-owner living in the house.

If you, as the executor or administrator, and the other co-owner cannot agree on the sale of the property, then you can file an action for partition to force the sale of the property.

Co-Inheritor living in the house and not paying rent

This scenario where the co-inheritor is living in the house and not paying rent often occurs when the deceased and one of his children live together in the house, with the child being the deceased’s primary caregiver. Upon the death of the parent, the child then continues to live in the house and refuses to pay rent.

In this case, you can eject the co-inheritor from the house. However, you need to be appointed as personal representative of the deceased’s estate before you can file the action for ejectment. In your action for ejectment, you can already request for payment of rent during the time that the co-inheritor has been living in the house.

Executor living in the house and not paying rent

When it is the executor who has been living in the house and not paying rent, you have two options. You can either: (a) file a petition to have the executor removed because of misconduct and conflict of interest, request for the appointment of a new executor, and thereafter eject the previous executor from the house; or (b) you can wait for the executor to submit an accounting, object to the accounting, and have the executor surcharged for rent from the time he began living in the house rent-free.

In all of these three cases, settling amicably should be the objective to lessen your legal expenses. But even if you are in the process of amicable settlement, it is important to still be represented by competent legal counsel to ensure that your rights are protected and your issues are taken seriously. Should you need assistance when a co-owner, co-inheritor or executor lives in an inherited house that is part of estate property and does not pay rent, the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].

Understanding the Tenancy-in-Common Default

When multiple people own real property together without specifying otherwise, the default form of ownership in New York is tenancy in common. Tenants in common each own an undivided interest in the whole property, not a specific physical portion. Each tenant has the right to possess and use the entire property, subject to the equal rights of the other tenants.

This default rule has important consequences:

• Each co-tenant can occupy the entire property without paying rent to the others.
• One co-tenant cannot lock the others out without consequence.
• Each co-tenant pays their proportionate share of carrying costs.
• Each co-tenant can sell their interest to a third party without the others' consent.
• On the death of a co-tenant, their interest passes by their will or intestacy, not to the surviving co-tenants.

What Constitutes "Ouster"

The general no-rent rule has a critical exception: if one co-tenant "ousts" the others, the ouster creates an obligation to pay rent. Ouster occurs when one co-tenant:

• Changes the locks and denies the other co-tenants access.
• Explicitly tells the other co-tenants they cannot enter the property.
• Acts in ways that effectively prevent the other co-tenants from exercising their possession rights.
• Claims sole ownership of the property to the exclusion of the other co-tenants.

Mere occupation does not constitute ouster. The occupying co-tenant must take affirmative steps to exclude the others. Once ouster is established, the occupying co-tenant must account for the fair rental value of the property from the date of ouster.

Carrying Cost Allocation

Even without ouster, the occupation can create financial obligations. Carrying costs typically include:

• Property taxes.
• Mortgage payments (principal and interest).
• Insurance.
• Utilities.
• Necessary maintenance and repairs.

The default rule is that all co-tenants share carrying costs in proportion to their ownership. If one co-tenant pays more than their share, they have a right of contribution from the other co-tenants. Conversely, if the occupying co-tenant pays the carrying costs alone, they may claim contribution from the non-occupying co-tenants, who may then assert ouster or fair rental value claims as offsets.

The Partition Action

When co-tenants cannot agree on what to do with the property, the legal remedy is a partition action. Under New York Real Property Actions and Proceedings Law (RPAPL) Article 9, any co-tenant can file a partition action seeking either:

• Partition in kind. Physical division of the property between the co-tenants. This is rarely practical for a single-family home but may work for larger parcels.
• Partition by sale. Sale of the property at public auction or in some cases by private sale, with the proceeds distributed among the co-tenants according to their interests.

Most residential partitions result in partition by sale because dividing a house physically is usually not feasible.

Accountings in Partition Actions

An important feature of partition actions is the accounting that occurs as part of the proceeding. The accounting addresses:

• Contributions to carrying costs by each co-tenant.
• Improvements made by individual co-tenants that enhanced the property's value.
• Rental value of the property if one co-tenant occupied it to the exclusion of the others.
• Rents collected by a co-tenant from third-party tenants.
• Damages caused by a co-tenant's mismanagement or waste.

The court adjusts the distributions from the sale proceeds based on these factors. A co-tenant who paid more than their share of expenses recovers the excess; a co-tenant who occupied the property and excluded the others may have rent charged against their share.

The Ejectment Action

An ejectment action is the legal proceeding to remove someone from real property who is occupying it without legal right. As an executor or administrator of an estate that owns the property, you can bring ejectment against:

• Former family members or other occupants who have no ownership interest.
• Tenants whose leases have expired.
• Adverse possessors who have not yet completed the time required for adverse possession.

The ejectment action proceeds in Supreme Court for residential property. The court issues a judgment of ejectment, and if the occupant does not voluntarily leave, the sheriff executes the judgment by physically removing them.

Removing an Executor for Self-Dealing Occupation

When the executor is the one occupying the estate property rent-free, this constitutes both a conflict of interest and a use of estate property for personal benefit. The remedies include:

• Removal under SCPA § 711. The court can remove the executor for misconduct, dishonesty, or failure to perform fiduciary duties.
• Surcharge in the accounting. The executor can be charged for the fair rental value of the property during their occupation. The surcharge is paid from the executor's personal funds or deducted from any commissions or distributions due to them.
• Forfeiture of commissions. Misconduct can result in forfeiture of the statutory commissions the executor would otherwise earn.
• Liability for waste. If the executor's occupation involved damage to the property beyond normal wear, additional damages may be assessed.

Settlement Considerations

Litigation among co-owners or family members is emotionally and financially expensive. Settlement is usually preferable when achievable. Common settlement structures include:

• Buyout. One party buys out the others' interests at a negotiated price. Independent appraisal helps establish a fair price.
• Cooperative sale. The parties agree to sell the property and split the proceeds, with each party's share adjusted for past contributions and offsets.
• Rental arrangement. The occupying party agrees to pay rent going forward at a stipulated rate, with the property held jointly until eventual sale.
• Periodic accounting. The parties agree to track contributions and ultimate ownership shares for resolution at a later date.

Each structure has implications for taxes, ongoing obligations, and exit flexibility. The right structure depends on the parties' goals and circumstances.