Adjustments, Offsets, and Reimbursements in a Texas Partition Lawsuit

Offsets, Adjustments, and Reimbursements in a Texas Partition Lawsuit 

The Court has broad discretion to consider and adjust a partition based on various legal and equitable offsets and claims that joint owners might have against one another. These adjustments can have a large impact on what each joint owner gets.

When are Adjustments, Offsets, and Reimbursements made?

After the Court determines whether the property is susceptible to a partition in kind or whether the property must be sold, the Court will then consider what adjustments, offsets, and reimbursements must be made between the joint owners.

What Adjustments, Offsets, and Reimbursements can the Court consider?

The following are common adjustments, offsets, and reimbursements that the Court will consider and how they will effect joint owners in a partition lawsuit in Texas:

1.        Improvements: A court will generally award improvements to the joint owner. This could result in a joint owner getting property that the improvements were made on if the partition is in kind or receiving a created under a partition by sale for the value that the improvements provided the property

2.        Homestead: If a joint owner has established a homestead on the property and paid for the improvements to the extent that there is a new residence on the property, the court generally will portion off that piece of property for that specific joint tenant.

3.        Division into Unequal Portions/Owelty Liens: The Court may divide the property in unequal amounts of unequal value, so long as the Court fixes a lien on the larger share in favor of the joint owner who is receiving less. This is generally referred to as an Owelty lien which ensures that all joint owners are receiving the same value at the end of the partition process. An owelty lien is generally only implemented when the nature and character of the property is such that it cannot be equally divided without impairing the value of all the property together or when equity requires that one joint owner receive a particular portion of property sought to be partitioned. The Court will determine a period of time in which the owelty lien must be paid to the small share holder, otherwise the lien can be called due and force a sale of property received by the larger shareholder.

4.        Contribution – an additional equitable consideration, a general rule of thumb is that the care, maintenance, upkeep, and preservation of property rests upon joint owners collectively. A joint owner who expends funds for a necessary or property upkeep is entitled to be reimbursed for such expenditures pro rata amongst the other joint owners. A joint owner seeking reimbursement is also generally entitled to interest on reimbursed amounts. Such expenses are generally taxes, repairs, maintenance, and insurance premiums. Expenses related to physical improvement of joint owners may be subject to reimbursement but only if the other joint owner agreed to the improvement. If a joint owner did not agree, then the requesting joint owner is limited to reimbursement for the value that the improvements added to the property.

5.        Rent – Generally, joint owners are collectively entitled to a pro rata share of rent collected on a property. Therefore, rentals received from non-owners shall be split amongst the joint owners in their proportionate share. The exception to this rule is if there is a contract between the joint owners changing this default rule. An additional exception applies if a joint owner is occupying the property to the exclusion of the other joint owners by agreement, in which case no rent is owed. However, if a joint owner occupies the property without the permission of the other joint owners, then the occupying joint owner must pay fair market rent to the other joint owners for obstructing the use and possession of the property.