1L Property: co-tenants making improvements

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engineer
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1L Property: co-tenants making improvements

Postby engineer » Sun Apr 25, 2010 12:23 am

I'm having a little trouble understanding what happens when a co-tenant improves upon the estate. I know that no co-tenant has a duty to improve, and the co-tenant who makes an improvement is not entitled to compensation from the others.

So let's imagine that A, B, and C are tenants in common, and C, unbeknownst to A & B makes an improvement that costs $x.

I guess the general rule is that the improver should get the value added by the improvements, and if the improvements add no value, then C is out of luck (and $x).

Now, what happens if the improvements actually lower the value of the property? Can A & B collect damages from C? My intuition says yes: C should get the value added by the improvements, which is a nominal value. In this case, that nominal value happens to be negative.

Is this reasoning okay? Gibert's §686 is silent on the issue of improvements that lower the estate's value.

eth3n
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Re: 1L Property: co-tenants making improvements

Postby eth3n » Sun Apr 25, 2010 12:46 am

its threads like this that make me feel like I am going to fail property

tikitavi
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Re: 1L Property: co-tenants making improvements

Postby tikitavi » Sun Apr 25, 2010 9:31 am

I think you have to consider a value-reducing 'improvement' to simply be waste. And then you can jump into the analysis for waste between co-tenants.

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thexfactor
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Re: 1L Property: co-tenants making improvements

Postby thexfactor » Sun Apr 25, 2010 9:50 am

tikitavi wrote:I think you have to consider a value-reducing 'improvement' to simply be waste. And then you can jump into the analysis for waste between co-tenants.


I never learned about waste with cotenants
is that the same as waste with life estate holders?

270910
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Re: 1L Property: co-tenants making improvements

Postby 270910 » Sun Apr 25, 2010 9:56 am

This is hard to answer in the abstract. Anything you do to property will raise and lower its value to different people. For the most part, however, I'd say that anyone who is a tenant has the right to enjoy the property, which means a right to do stuff on that property so long as it doesn't constitute waste.

The first question has to be framework and context. You can't just say "A builds a gas station, what result?" or "A cuts down 1/3 of the tress, what result?". We have to know what B&C choose to do about it. There are a bazillion remedies available at law, but they tend to require more than just the initial action.

Like, if A clear-cuts the premises, that's not really an 'improvement'. But what if it's to build a mansion?

It all gets very fact specific. You have to keep in mind the remedies B&C have. They can seek partition, they can sue for waste, they can sue if it appears they have become ousted, and they will likely have a right to any rent collected by A from somebody else. But most of those require more back and forth than just 'A making an improvement'. Your analysis is very different if B&C attempt to sue for waste than if they claim ouster than if they seek partition. But there's no such thing as 'damages from an improvement'.

Also, the general rule isn't that 'the improver should get the value added by the improvements'. That statement barely even makes sense. There isn't any value until the property is sold, its fruits (minerals, harvest, etc.) are sold, or it is rented out. Each of those circumstances have particularized rules with respect to the distribution of the value of the land and any potential improvements, but there's no clear-cut hard and fast 'improver gets value of improvements' - in large part because the whole point of being co-tenants is that everyone has an undivided interest. If C puts a hot tub in the house, it's not like it gets to be his forever, nor will the court cut it out for him in a partition of the lot. If there is a sale he might see some of the value, but there's hardly a default interest granted to him just because he made an improvement.

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Re: 1L Property: co-tenants making improvements

Postby 270910 » Sun Apr 25, 2010 9:57 am

thexfactor wrote:
tikitavi wrote:I think you have to consider a value-reducing 'improvement' to simply be waste. And then you can jump into the analysis for waste between co-tenants.


I never learned about waste with cotenants
is that the same as waste with life estate holders?


There's only one waste suit. When you have an interest in property (co-tenant, hold a remainder, hold a reversion, etc.) and the person in possession does something to harm your interest then you can sue for waste.

So if A & B are co-tenants of an apple farm and A clear-cuts the farm for not reason, B can sue for waste. If A owns an apple farm as a life estate and B holds a remainder, it's the exact same suit.

engineer
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Re: 1L Property: co-tenants making improvements

Postby engineer » Sun Apr 25, 2010 11:53 am

disco_barred wrote:This is hard to answer in the abstract. Anything you do to property will raise and lower its value to different people. For the most part, however, I'd say that anyone who is a tenant has the right to enjoy the property, which means a right to do stuff on that property so long as it doesn't constitute waste.


Right, but it doesn't matter whether I think the garbage dump is worth the United States' annual GDP; it's only the objective, economic value with which we're concerned, to wit, the market value at sale. Right?

disco_barred wrote:The first question has to be framework and context. You can't just say "A builds a gas station, what result?" or "A cuts down 1/3 of the tress, what result?". We have to know what B&C choose to do about it. There are a bazillion remedies available at law, but they tend to require more than just the initial action.

Like, if A clear-cuts the premises, that's not really an 'improvement'. But what if it's to build a mansion?

It all gets very fact specific. You have to keep in mind the remedies B&C have. They can seek partition, they can sue for waste, they can sue if it appears they have become ousted, and they will likely have a right to any rent collected by A from somebody else. But most of those require more back and forth than just 'A making an improvement'. Your analysis is very different if B&C attempt to sue for waste than if they claim ouster than if they seek partition. But there's no such thing as 'damages from an improvement'.


I intentionally kept it in the abstract to encourage discussion about all of these factors. It doesn't help if I post the *exact* question (which itself was rather ambiguous); I'm more interested in what I should be thinking about regarding improvement.

From my understanding, an improvement may have two possible consequences: it can change the value of the property, or it can leave the value unchanged. As you say, change in value can be subjective, but does that even matter? If A & B were pissed that C's improvement was the addition of a toxic waste dump, it could probably be considered affirmative waste, correct?

However, if C was close with someone on the zoning board and got the lot re-zoned so that it could legally be used for commercial purposes (and drastically increasing the property's value), could that be considered ameliorative waste if A & B had intended for it to be used as a summer chalet?

disco_barred wrote:Also, the general rule isn't that 'the improver should get the value added by the improvements'. That statement barely even makes sense. There isn't any value until the property is sold, its fruits (minerals, harvest, etc.) are sold, or it is rented out. Each of those circumstances have particularized rules with respect to the distribution of the value of the land and any potential improvements, but there's no clear-cut hard and fast 'improver gets value of improvements' - in large part because the whole point of being co-tenants is that everyone has an undivided interest. If C puts a hot tub in the house, it's not like it gets to be his forever, nor will the court cut it out for him in a partition of the lot. If there is a sale he might see some of the value, but there's hardly a default interest granted to him just because he made an improvement.


That's just what I read somewhere. It may have helped to put this into context: I'm talking about when the property is sold. At sale, the improver should get the value added by the improvements. It wouldn't make sense for C to erect a windmill and say, "There. I added a windmill. Where the property was originally valued at $30k, it is now appraised at $50k. Pay up." However, if the sale price was $50k, could C get his $20k?

Regarding an "undivided interest," isn't that only for joint tenancy/tenancy in the entirety? I was under the impression that for tenancy in common, each tenant possessed a divided interest, which is to say that A, B, and C each possessed 1/3 of the property.

engineer
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Re: 1L Property: co-tenants making improvements

Postby engineer » Sun Apr 25, 2010 11:56 am

I guess as a logical follow-up, if A, B, and C each possess 1/3 of Blackacre, could A & B collude to do something against C's express wishes? In that case, C's options would be ouster, partition, or transferring his interest, right?

imchuckbass58
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Re: 1L Property: co-tenants making improvements

Postby imchuckbass58 » Sun Apr 25, 2010 12:08 pm

engineer wrote:
That's just what I read somewhere. It may have helped to put this into context: I'm talking about when the property is sold. At sale, the improver should get the value added by the improvements. It wouldn't make sense for C to erect a windmill and say, "There. I added a windmill. Where the property was originally valued at $30k, it is now appraised at $50k. Pay up." However, if the sale price was $50k, could C get his $20k?

Regarding an "undivided interest," isn't that only for joint tenancy/tenancy in the entirety? I was under the impression that for tenancy in common, each tenant possessed a divided interest, which is to say that A, B, and C each possessed 1/3 of the property.


My understanding is that neither of these points is correct.

I know for a fact the second one isn't correct. Co-tenants have a separate but undivided interest (i.e., each has a 1/3 interest in the entire tract). It wouldn't make sense if they had divided interests. Then they would just own separate tracts. Think of it like owning stock in a corporation - each shareholder owns 30%, 20%, etc. when it comes to dividing up profits, but it's not like one shareholder owns the factory, and another shareholder owns the headquarters building.

As for value of improvements, my understanding is that the improver does not get the value added unless there is some agreement/consent as far as contribution. To take your example, A and B own 50% of the property originally worth $30k. B erects a windmill increasing the value to $50k and they sell. A and B each get $25k. B might still be able to get contribution using a theory of consent by estoppel (i.e., A saw him building the windmill and didn't tell him to stop), but he only gets contribution for the cost of the improvement, not the value added (i.e., if the windmill cost $10k but added $20k value, B may be able to get $5k from A).

sbalive
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Re: 1L Property: co-tenants making improvements

Postby sbalive » Sun Apr 25, 2010 1:31 pm

imchuckbass58 wrote:
engineer wrote:
That's just what I read somewhere. It may have helped to put this into context: I'm talking about when the property is sold. At sale, the improver should get the value added by the improvements. It wouldn't make sense for C to erect a windmill and say, "There. I added a windmill. Where the property was originally valued at $30k, it is now appraised at $50k. Pay up." However, if the sale price was $50k, could C get his $20k?

Regarding an "undivided interest," isn't that only for joint tenancy/tenancy in the entirety? I was under the impression that for tenancy in common, each tenant possessed a divided interest, which is to say that A, B, and C each possessed 1/3 of the property.


My understanding is that neither of these points is correct.

I know for a fact the second one isn't correct. Co-tenants have a separate but undivided interest (i.e., each has a 1/3 interest in the entire tract). It wouldn't make sense if they had divided interests. Then they would just own separate tracts. Think of it like owning stock in a corporation - each shareholder owns 30%, 20%, etc. when it comes to dividing up profits, but it's not like one shareholder owns the factory, and another shareholder owns the headquarters building.

As for value of improvements, my understanding is that the improver does not get the value added unless there is some agreement/consent as far as contribution. To take your example, A and B own 50% of the property originally worth $30k. B erects a windmill increasing the value to $50k and they sell. A and B each get $25k. B might still be able to get contribution using a theory of consent by estoppel (i.e., A saw him building the windmill and didn't tell him to stop), but he only gets contribution for the cost of the improvement, not the value added (i.e., if the windmill cost $10k but added $20k value, B may be able to get $5k from A).


From my understanding:

If there is no consent or agreement for contribution but the improvement is sufficiently needed and beneficial to the land, then the co-tenants may be liable for a contribution to the costs of the improvement: an example would be a well they would all use if they had insufficient water supply otherwise and they need water for how they're using the land (e.g. raising livestock). If it isn't something that's less needed and clearly beneficial, then the improver wouldn't get any costs, but at sale could get the amount the improvement increased the value of the land (but not the actual costs of the improvement).

I think this is compatible with the "consent by estoppel" theory - at least in the sense that if A plugs into the windmill, then he'd be liable for the costs. And, if A doesn't use the windmill and doesn't contribute, but the windmill raises the value of the land at sale by X amount, then B would get X.

As for destructive changes, I have no idea, but waste seems right.

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macattaq
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Re: 1L Property: co-tenants making improvements

Postby macattaq » Sun Apr 25, 2010 2:12 pm

If it lowers the value, then it could be called waste. But, there is a line in the Understanding Property hornbook which says that even if it is characterized as waste by the court, the usual penalties typically don't apply. It doesn't really explain this, but I'm taking it to mean that C most likely won't be liable to his co-tenants for the diminution in value, because he does have the right to use the property as he likes, if he is the present possessor.

engineer
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Re: 1L Property: co-tenants making improvements

Postby engineer » Sun Apr 25, 2010 3:55 pm

imchuckbass58 wrote:I know for a fact the second one isn't correct. Co-tenants have a separate but undivided interest (i.e., each has a 1/3 interest in the entire tract). It wouldn't make sense if they had divided interests. Then they would just own separate tracts. Think of it like owning stock in a corporation - each shareholder owns 30%, 20%, etc. when it comes to dividing up profits, but it's not like one shareholder owns the factory, and another shareholder owns the headquarters building.


Yup, you're right, sorry about that. I was just confused about what the term "divided" meant; the stock analogy is on point. Each tenant in common has an undivided interest in the whole. Thanks for the clarification!

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McBean
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Re: 1L Property: co-tenants making improvements

Postby McBean » Sun Apr 25, 2010 4:02 pm

engineer wrote:
However, if C was close with someone on the zoning board and got the lot re-zoned so that it could legally be used for commercial purposes (and drastically increasing the property's value), could that be considered ameliorative waste if A & B had intended for it to be used as a summer chalet?




I think everything else has been addressed. Courts are split on Ameliorative waste. The traditional rule, assuming the change dramatically changes the character of the property, would be to issue an injunction and stop C if he decided to build a toxic waste dump. More modern courts, especially Posner followers, would not recognize a waste here if the value increased. Obviously, ameliorative waster hardly comes up, which may be why many jurisdictions have not changed the law. Your question involves the state action of rezoning. If because of the rezoning, the chalet must be torn down, then the answer to your question lies outside the realm of waste. My prof. never got to zoning.

And in regards to your question on TICs and JTs, just remember that there really is no difference until someone dies.




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