As I have written in the past, I try in almost all situations involving joint ownership by non-spouses to have the parties enter into a tenancy in common (TIC) or joint tenancy (JT) agreement. [This problem does not generally exist with married couples because there is a legal overlay with divirce and separation which will resolve the disposition of marital assets]
What I normally do in my TIC or JT agreements is develop a mechanism whereby one person can leave the TIC or JY with a minimum of disruption to the respective parties' lives. This is achieved through a variety of mechanisms which I would like to describe here for those of you who have these kinds of situations and would like to place value formulations into agreements you are suggesting to your clients:
1. Put and Call. This is probably the oldest of approaches, and certainly the most inexpensive. The departing party gives notice to the party who is staying indicating that the party wants to terminate the ownership arrangement. In the notice, the party presents a price which he or she is willing to pay for the other person's interest. The non-departing party has the option of accepting this offer or informing the person making the offer that he or she will buy the property at the price offered by the departing owner. This approach has a "built-in" element of fairness. The departing party will need to keep his or her offer reasonable or the non-departing person will get a bargain from the transaction.
2. One Appraiser Fits All. In this scenario, a formula is set forth for departure which gets the party to one licensed appraiser to make a valuation decision, and that will be binding. Sometimes, the parties appoint a person the the TIC or JT agreement to select the appraiser. Sometimes, a person with a title, like the President of the Greater Boston Real Estate Board, is nominated. If the parties are represented by counsel, sometimes it is the appraiser agreed upon by counsel. In any event, this approach involves the expense of an appraisal, and possibly fees of counsel for selecting the appraiser.
3. The Average of Two Appraisals. This is the simplest and most expensive option. You choose a licensed appraiser; I choose a licensed appraiser. We add up the sum of the appraisals and divide by two. No mess, no delay. The fact that the appraisers are licensed places a natural "governor" on their results. It gets done quickly, but there is the cost of two appraisals.
In all of my TIC or JT agreements, I provide that the non-departing person has time to complete his or her purchase, if that is the way the scenario plays out. I do this so that one party with a lot of money can not disadvantage the other party with not as much money with a "pre-emptive" strike to buy the other person out. Once the situation has broken down to the extent that the parties cannot amicably resolve their differences, whatever they may be, I want to provide as much fairness (in advance) as I can for resolution.
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