Recent Partition Case: A Reminder of How Tennessee Courts Divide the Proceeds of Jointly Owned Real Estate
In a recent partition case between former domestic partners, the Court of Appeals of Tennessee set forth helpful reminders of the factors Tennessee courts are to consider when dividing the interests of joint owners of real estate. While the case involved former domestic partners, the principles laid out in the opinion are equally applicable to cases involving joint owners other than former domestic partners.
Although the case was not filed as a partition case, it should have been, and the Court of Appeals treated it as such. The case is remarkable, not only because it contains a clear and concise review of partition principles, but also because, in reversing the trial court, the Court of Appeals showed what is not a proper way for a trial court to adjudicate a partition case.
Here are the basic facts:
The man (“Man”) and woman (“Woman”) involved were domestic partners, but never married
They bought a home (“Property”) together in 2013 for $223,000
The Property was deeded to them as joint tenants with a right of survivorship
Man paid a $50,000 down payment using proceeds from another property he and Woman had owned together
Woman testified that Man had received $200,000 from the sale of the other jointly owned property but had never given her any of those proceeds
The balance of $171,000 was financed
Woman testified that she consistently paid $1,000 a month toward the mortgage loan
Man denied this but admitted she may have paid around $7,000 in total over the years
In 2015, Woman bought a home in Washington state
Man sent her a $5,000 check for the down payment and wrote “loan” on it
There was proof that Woman, through her employer, had provided valuable medical insurance benefits to Man for many years
Woman also testified that she put significant work into the Property
The trial court described the circumstances as a “crazy mess.” It then took a simplistic approach to resolving the dispute. It found that the equity in the Property was $229,000 and that it should be divided equally, except Man would receive $10,000 from Woman’s half for the Washington home down payment and for attorneys’ fees.
The Court of Appeals reversed. It held that the trial court had applied an approach that did not comport with Tennessee law. Whether trial courts like it or not, in a situation like this, the court must engage in the tedious work of determining who contributed what before it rules on how much each joint owner should receive. The overall rule in Tennessee partition cases is that, while there is a presumption that joint owners have an equal interest, a tenant who pays or contributes more is entitled to receive more.
So, what principles must a Tennessee court follow when determining how to divide proceeds in a partition case? There are five:
A joint owner who has improved the property such that its value is enhanced is entitled to be compensated, but only to the extent the improvement enhanced the value. Paying to add 500 square feet of livable space would almost certainly enhance value. Painting or refinishing floors may not.
A joint owner who contributes more toward the down payment or loan payments is entitled to an amount equal to that excess above what the other joint owner or owners paid.
A joint owner who has paid more for maintenance, repair, property taxes, or other expenses for upkeep of the property is entitled to a credit for those amounts. A joint owner, however, is not entitled to be compensated for personal services unless there was an agreement with the other owners to pay for such services.
An owner who solely possesses the property must account to the other owners for any profits received to the extent those profits exceed his or her pro rata share. For example, if the sole possessor rented farmland, leased hunting rights, or rented out rooms, he or she must share the income.
A joint owner who solely possesses the property because he or she has ousted or excluded the other owners must take a deduction from his or her portion of the proceeds for rent.
Tennessee partition lawyers should also remember that, where a joint owner claims that he or she received an interest in the land as a gift from another joint owner, some or all of the above principles may not apply if a gift is found. There were no allegations of a gift in the case discussed here.