When inheriting real estate, many people think, "Let's just put it in joint ownership for now," because an estate distribution agreement hasn't been reached or to divide the property fairly. However, as a real estate specialist, I can say definitively: joint ownership of inherited real estate is a recipe for future disputes.
At INA & Associates Co., Ltd., we receive consultations from many property owners every day. Among them, we have seen numerous cases where people deeply regret putting property in joint ownership, finding themselves unable to make any moves.
In this article, to prevent members of landlord associations from making the same mistake, I will explain in accessible terms—while incorporating specialist terminology—the 3 reasons not to put inherited real estate in joint ownership and the solutions to these problems.
3 Reasons Not to Put Inherited Real Estate in Joint Ownership
The problems caused by joint ownership can be summarized in the following 3 points.
1. Decision-making for managing and disposing of the real estate becomes difficult
When real estate is put in joint ownership, each action taken regarding that real estate requires the consent of the other co-owners. Under the Civil Code, the handling of jointly owned property is stipulated as follows.
| Nature of Act | Examples | Required Consent |
|---|---|---|
| Preservation acts | Repairs, removal of illegal occupants | Each co-owner can act independently |
| Management acts | Concluding/terminating lease agreements | Consent of majority by share value |
| Alteration acts (disposal) | Sale, rebuilding, large-scale renovations | Consent of all co-owners |
Particularly problematic are "alteration acts" such as selling or rebuilding the real estate. These require the consent of all co-owners. If even one co-owner objects, it becomes impossible to sell the property and convert it to cash, or to rebuild an aging structure to improve its profitability.
When differences of opinion arise, the real estate is left unutilized, becoming a "liability property" that only drains fixed assets tax and maintenance costs.
2. Complication of ownership rights through successive inheritances (exponential risk)
As years pass with real estate remaining in joint ownership, a co-owner may die and their share is further inherited—a situation called "successive inheritance."
For example, suppose three siblings jointly own real estate, and the eldest sibling dies, with their spouse and two children inheriting the share. At this point, the number of co-owners increases to five. As more time passes, the number of co-owners keeps multiplying exponentially, and it's not unusual for distant relatives who don't even know each other to become co-owners.
The more co-owners there are, the more desperately difficult it becomes to obtain everyone's consent. If a missing person or a co-owner without legal capacity due to dementia appears, it becomes necessary to go through family court proceedings to appoint an absentee property manager or adult guardian, requiring enormous amounts of time and expense.
3. Disputes over cost sharing and revenue distribution among co-owners
Maintaining real estate requires costs such as fixed assets tax, city planning tax, repair costs, and management fees. In principle, these costs must be borne by each co-owner in proportion to their share.
However, in practice, cases frequently arise where some co-owners refuse to bear costs, saying things like "I don't live there, so I don't want to pay" or "I don't have the money." As a result, dissatisfaction accumulates for the co-owner who is paying on everyone's behalf, leading to deterioration of family relationships.
Conversely, when revenue such as rental income is generated from the real estate, disputes over its distribution can also arise. A pattern emerges where the co-owner bearing the burden of management claims "I have the right to receive more" and conflicts with the other co-owners.
Specific Solutions to Avoid or Resolve Joint Ownership
What should you do if you have already put property in joint ownership, or if you are about to face an inheritance? Here are the main approaches.
Solution 1: Divide the property during the estate distribution agreement
The most fundamental solution is to avoid joint ownership from the start by thoroughly discussing the estate distribution agreement.
- Primary inheritance by a single heir: One person inherits the real estate and pays compensation money to the other heirs. The ideal approach if there are liquid assets.
- Division in kind: If the real estate is large land, divide it into separate parcels and have each heir inherit a portion.
- Sell and divide the cash: Sell the real estate and divide the proceeds. Recommended when no heir wishes to retain the property.
Solution 2: Resolve joint ownership through share purchase or sale
If you are already in a joint ownership situation, the following methods can be used to resolve it.
- One co-owner purchases all shares: One co-owner purchases the shares of the others, becoming the sole owner.
- Sell all shares to a third party: All co-owners agree to sell to a third party and divide the proceeds.
- Partition claim: This is a legal procedure to resolve joint ownership. If negotiations among co-owners fail, you can file a lawsuit with the court to demand partition.
Solution 3: Utilize trusts (family trusts)
In recent years, "family trusts" have attracted attention as a method of real estate management. This is a scheme where a family member (trustee) manages real estate on behalf of the owner (settlor) according to the objectives set by the owner.
By establishing a trust, authority for real estate management and disposal can be concentrated in the trustee, enabling smooth management even after the settlor becomes incapacitated, and preventing complications from successive inheritances.
Conclusion
The three reasons not to put inherited real estate in joint ownership are: (1) difficulty in decision-making, (2) exponential complication from successive inheritances, and (3) disputes over costs and revenue distribution. Once joint ownership is established, it is extremely difficult to resolve, so it is essential to set up a proper scheme at the inheritance stage.
At INA & Associates Co., Ltd., we provide comprehensive support from estate distribution consultations to trust setup and property sales. We welcome consultations from landlord association members about real estate inheritance planning.
FAQ
Q1. Can a co-owner sell only their own share without the consent of other co-owners?
A. Yes, it is legally possible to sell only your own share. However, for an outsider purchasing a partial share, management and disposal will require the consent of the other co-owners, making it difficult to use the property freely, so there are limited buyers and the price tends to be low. In practice, it is difficult to sell at a fair market price.
Q2. What is a "partition claim"?
A. A partition claim is a legal procedure to resolve joint ownership by filing a lawsuit in court when negotiations with co-owners break down. In court, a division in kind (dividing the property itself), a valuation buyout (where one party buys out the others at court-assessed value), or a forced sale with distribution of proceeds may be ordered. It tends to require time and cost.
Q3. Is it difficult to establish a family trust?
A. Establishing a family trust requires creating a trust agreement and registering with the legal affairs bureau, so specialist knowledge is required. However, by working with a specialist such as a certified judicial scrivener or lawyer, the procedures can be handled. The costs include trust setup fees and annual management fees, but it is a highly useful tool for the medium to long term.
Related Articles
- What to Do When Inheritance of Real Estate Gets Complicated—Advice from a Specialist
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- A Complete Guide to Family Trusts for Real Estate
