What Happens When 3 Siblings Own a Property Together?

It’s not uncommon for multiple siblings to own a property, usually because they inherited a childhood home or vacation house when their parents passed away. Joint ownership has several benefits, especially if each sibling wants to keep the home in the family’s possession.

However, there are some additional financial and legal considerations for each of the owners to be aware of. This guide will cover everything you need to know when 3 siblings own property together.  

Use the following sections as discussion points as you take ownership of the inherited property. They can help you have open, honest conversations with your family members on what you plan to do with the home.

Legal Implications of Joint Ownership Among Siblings

The first thing you need to discuss is how your family members plan to take possession of the house. There are two ownership types to consider: joint tenancy and tenancy in common. 

With joint tenancy, each sibling has equal ownership in the house. If you and two siblings own the property, then each sibling owns 33% of the home. Joint tenancy also comes with the right to survivorship, which means you can leave your portion of the property to your siblings. If you pass away but your other siblings are still alive, each can become 50% owners of the jointly owned property. 

With tenancy in common, unequal ownership shares are allowed. One sibling could own 60% of the vacation home and the other two siblings could own 20% each. This option allows owners to sell their portion of the house or transfer it without the others’ consent. Your sibling could sell their share to another family member or give it to their children without seeing prior approval. 

The option you choose might depend on the way to inherited property was bequeathed. If your relative wanted the siblings to share the home equally, then joint tenancy might be the best option. However, if they were specific in the ownership of the home, you might want a tenancy in common agreement. 

Your Ownership Agreement Needs to be in Writing

Regardless of whether you choose to jointly own the property or develop a tenancy in common agreement, you need to develop a legally binding contract that outlines ownership. This contract will be used if a sibling tries to sell the house (or their share) or tries to collect rental income without the consent of the others.

This written agreement can also highlight the responsibilities of each owner. It can list who is responsible for paying property taxes, covering maintenance, and making mortgage payments. It will also outline the percentage each sibling pays. In some cases, all three siblings will be able to contribute a third of the maintenance costs. In other cases, one sibling may cover the repairs and mortgage but take on a larger percentage of the property’s ownership. Even small discussions, like how utility bills are split, need to be outlined in your written agreement. 

Challenges of Owning Property with Siblings

While many siblings love the idea of owning a beloved childhood home or vacation property, they aren’t aware of all the challenges that come with taking over a house. These challenges become ever more complicated when it comes to splitting responsibility with one or more siblings. Here are a few challenges you need to be prepared to face. 

• Preventative maintenance and repairs: Outline who is responsible for basic upkeep (like mowing the lawn), preventative maintenance (like replacing an aging roof), and emergency repairs. Each of these tasks requires both time and money. Your family members need to be clear on who will maintain the home and who will pay for it. 
• Unequal financial contributions: Disparities in paying for maintenance, taxes, and other costs can lead to tension over who owns the house. For example, if the inherited property is distributed equally but only one sibling contributes to it financially, they might feel like they are owed a larger share. Financial contributions should be part of your ownership discussions.  
• Differing goals or priorities: One sibling might want to live in the inherited house, while another might want to collect rental income from the property. Each sibling needs to be clear about their goals for the house and you need to decide how to move forward as a group. 

This all comes to a head when discussions about selling the property start. Some siblings might want to divide the property equally while others want the division to be equitable based on what they contributed to the home. If one sibling doesn’t want to sell, they can consider buying out their brothers or sisters and taking full control of the home.

Options for Managing Joint Ownership

Shortly after you take control of an inherited property, you need to decide what to do with it. While you can certainly own a house with siblings equally, it’s rare for all parties to be able to contribute to the repairs and maintenance. Furthermore, not all siblings might want to retain control of their shares. Here are your options. 

• Formal agreement: if all siblings want to maintain control of the inherited house, create a legally binding agreement for how ownership is divided, how expenses are covered, and who handles the maintenance. The more detail you have, the faster you can resolve future disagreements. This contract should also have provisions for selling or buying out ownership shares.
• Hire a property manager: If all the siblings want to keep the inherited home but cannot maintain it (like a vacation home that nobody lives near), consider hiring a property manager. They can handle maintenance, tenant management, and other logistics to keep the home in order. Working with a property manager is a good option if you can afford the home but have limited options to visit it. 
• Buyout option: One sibling can buy out the others if they want sole ownership. This option is ideal for siblings who won’t use the house or who cannot afford its upkeep. 
• Selling the property: You always have the option to sell the property and divide the profits by ownership. Just because you loved your family home growing up doesn’t mean you have to hold onto it forever. 

Start this process with a family meeting to review the value of the property, maintenance costs, and mortgage payments. Everyone should agree with what the family will do with the inherited property.

What Happens When There’s a Disagreement?

You and your siblings may reach an impasse for what you want to do with the inherited property. One person might be adamant about keeping a vacation home where you all have fond memories while others want to sell the house to avoid excessive maintenance costs and taxes. Here are a few options at your disposal if you cannot agree on what to do. 

What to do When One Sibling Refuses to Sell

You have multiple options. You can ask your sibling to buy out your share of the house and take full ownership or you can work with a mediator to reach an agreement on an inherited property split. If you cannot reach an agreement, you may need to move forward with a partition action.

This is when you take your sibling to court and force them to sell the property. A partition action usually only occurs when there is a stalemate between all parties. 

How to Resolve Financial Disputes  

While houses are financial assets that can grow your wealth, they can also be expensive. Not everyone can afford the cost of a vacation home, even if the mortgage is split equally between siblings. If a sibling wants to be an owner of the inherited home but cannot afford it, you can ask them to sell their share or work out an agreement. They might agree to be a lesser owner while still maintaining a small share of the property. You can also buy them out buy grant them access to the house because they are family.  

The success of owning a house with siblings depends entirely on your ability to work together, communicate, and compromise. Not all siblings can do this or act fairly toward each other. You may need to hire a lawyer to resolve these disputes if you cannot come up with a private arrangement that all siblings agree to.

Tax and Financial Considerations for Owning a House With Siblings

You and your siblings will also need a clear picture of the taxes that come with taking over an inherited home. You may want to consult with a tax advisor to consider the taxes you need to pay in the short run and what costs you can expect when it’s time to sell the house. Knowing what taxes you owe can give you an idea of the home’s affordability.

Property Taxes

Even if the house is completely paid off, you and your siblings will need to cover basic annual expenses. Along with utility costs and insurance, research the property taxes on the house or vacation home. Get an estimate of how much you can expect to pay annually and determine how those taxes will be divided.

It’s also important to decide who will pay the taxes. One sibling should be in charge of the task and the other siblings can send them their share of the funds. 

If you cannot keep up with the basic costs of the inherited home, it might be in your financial best interest to sell it.

Capital Gains Taxes

If you decide to sell a house with siblings, you will likely need to pay capital gains taxes on the property. This is particularly relevant if the house isn’t the primary residence of any sibling and was always used as a vacation home.

When selling inherited property, make sure you subtract all potential costs before calculating the profits for each sibling. Along with paying capital gains tax, you will also need to pay Realtor fees and any repair costs to prepare the house for sale. Even if the house sells for its current market value, each sibling might take home less than they expect after these taxes and fees are removed. 

A tax advisor or real estate agent can help you estimate capital gains taxes on the sale of the home. They can estimate your bills for each sibling that has an equal share or the individualized shares of each brother and sister.

Inheritance Taxes

Some states levy inheritance taxes on beneficiaries, which means you will need to pay a tax on your portion of the home. If your three siblings own property together in Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania, you may want to discuss your tax requirements with an experienced advisor.

These taxes are usually on-time fees. This means you can continue to own a house with siblings after you pay it. If each sibling doesn’t have an equal share of the property, they will only pay their portion of the inheritance tax.

Create a Plan to Share a House With Siblings

Distribution of inherited property is common when parents pass away. One or more siblings are often left with a house they need to maintain and will potentially live in. Disagreements over what to do with the house, whether to sell it, and how it will be repaired, are also common. 

If you recently inherited property split between your siblings or are about to, start creating a plan. Learn what each person wants to do with the home and whether they are eager to sell it or can afford to maintain it. The sooner you have a plan in place that everyone agrees on, the sooner you can move forward with your ownership plans. 

If you need to sell your inherited property or vacation home, turn to FastExpert. You can find an experienced real estate agent who can help you navigate the sales process. They are here to answer any questions you have. Seasoned agents handle inherited properties and complicated family relationships all the time. They can navigate whatever challenges you and your siblings throw at them. Try FastExpert today and find a Realtor to help you.