How can a co-owner obtain monetary compensation instead of receiving physical property in Texas (TX)?

Detailed Answer — How a co-owner can get money instead of physical property under Texas law

When two or more people co-own real property in Texas (for example, siblings who inherited a rental house), each owner has an enforceable interest in the whole property. If one co-owner wants money instead of a physical share of the land or building, Texas law offers several paths: negotiate a buyout, use mediation or arbitration, or—if the co-owners cannot agree—file a court action for partition. Below are the practical steps, legal bases, and likely outcomes under Texas law.

1) Try a voluntary buyout first (private agreement)

The simplest route is negotiation. The co-owner who wants money can:

• Obtain a current market appraisal or broker price opinion to determine value.
• Calculate each owner’s share (often based on ownership percentage or deed language).
• Account for liens, mortgages, taxes, outstanding expenses, and credits (for example, one co-owner’s payment toward mortgage or improvements may reduce their share).
• Offer a lump-sum buyout or a structured payment plan and put the agreement in writing (purchase agreement and deed transfer documents prepared by an attorney or title company).

Voluntary buyouts avoid court costs, speed resolution, and give control over timing and taxes. If the co-owners sign a buyout agreement, the seller should record any conveyance and satisfy liens as required.

2) Use mediation or arbitration

If negotiation stalls, a neutral mediator or arbitrator can help the parties reach a buyout or split proceeds without a contested court trial. Mediation often preserves relationships and is cheaper than litigation.

3) Partition action in court (when agreement fails)

If co-owners cannot agree, Texas law permits a partition suit. The governing rules are in the Texas Property Code, Chapter 23 (Partition). See Texas Property Code Chapter 23: https://statutes.capitol.texas.gov/Docs/PR/htm/PR.23.htm.

Key points about partition suits:

• Any co-owner with an interest in the property may file suit for partition. See Tex. Prop. Code § 23.001 and following: § 23.001.
• The court will decide whether to partition in kind (divide the property physically) or partition by sale. Courts prefer partition in kind if it is practical and equitable; if dividing the property is impractical or inequitable, the court will order a sale and split the net proceeds. See Tex. Prop. Code Chapter 23.
• If the court orders a sale, it will appoint commissioners or a trustee to sell the property; sale proceeds pay liens and costs first, then are divided among owners according to their interests.
• The court can account for contributions or unequal equities (for example, payments of mortgage, repairs, or taxes) so the distribution reflects those credits or charges.

Practical effect: if a co-owner wants cash and the court orders a sale, that co-owner receives money after the sale, less the co-owner’s share of liens, costs, and any judicially-allowed adjustments.

4) Court-ordered buyout (allotment) or allotment with payment

Sometimes the court will allot a particular portion to one co-owner and require that owner to pay other owners their shares in money. This functionally creates a judicial buyout: one co-owner keeps the land but pays the others so they receive cash rather than physical property. Texas courts can order such arrangements as part of partition proceedings if it results in a fair division.

5) Factors that affect how much money a co-owner receives

• Ownership percentages or the language of the deed.
• Current fair market value (appraisals matter).
• Outstanding mortgages, tax liens, and judgments that attach to the property.
• Costs of sale (attorneys’ fees if awarded by the court, realtor commissions, closing costs).
• Credits or debits for contributions (mortgage payments, repairs, improvements, or waste).
• Any buyout discount negotiated by the parties (a quick cash buyout often sells below full market value).

6) Steps to take right away (practical checklist)

1. Confirm ownership: get a copy of the deed and title report.
2. Get a professional appraisal or broker opinion to establish value.
3. Gather documents: mortgage statements, tax bills, HOA assessments, rent rolls, repair invoices.
4. Try a negotiated buyout or demand letter proposing terms; use mediation if needed.
5. If negotiation fails, consult a Texas real property attorney about filing a partition suit and the likely allocation of costs and proceeds under Tex. Prop. Code Chapter 23: https://statutes.capitol.texas.gov/Docs/PR/htm/PR.23.htm.

7) Tax and lien considerations

A buyout or court-ordered sale has tax consequences. Selling real property may trigger capital gains tax measured by the seller’s basis and the sale price. Mortgage and other liens are typically satisfied from sale proceeds. Consult a tax professional to understand tax effects and timing (for example, whether a 1031 exchange applies to investment property).

8) Timing and likely costs

Voluntary buyouts can close in a few weeks to a few months. A contested partition suit can take many months or over a year and generates court costs, attorneys’ fees, appraisal expenses, and likely a reduction in net proceeds. Mediation reduces time and cost in many cases.

Hypothetical example

Example: Two siblings, A and B, co-own a rental house in Travis County as tenants in common. A wants out. They get a $300,000 appraisal. Each owns 50%. A asks B to buy A’s 50% for $150,000. B counters with $130,000 because B will assume outstanding mortgage debt of $60,000 and pay closing costs. They negotiate, sign a buyout agreement, record a deed, and A receives cash—no court needed.

If B had refused to buy, A could have filed a partition suit under Tex. Prop. Code Chapter 23 and asked the court to order a sale. After sale and payment of mortgage and costs, the siblings would split the net proceeds according to their ownership shares, possibly adjusted for any credits.

Disclaimer: This article explains general Texas law and common practice. It is not legal advice. For advice tailored to your situation, consult a licensed Texas attorney and, for tax questions, a qualified tax advisor.

Helpful Hints

• Get an appraisal early. A neutral market value anchors negotiations and court evidence.
• Document contributions. Keep records of mortgage payments, repairs, taxes, and improvements—courts credit these items.
• Explore mediation. It’s faster and cheaper than litigation and often preserves working relationships.
• Consider timing and taxes. A fast cash offer may be lower than a court-ordered sale; talk to a tax professional before closing a buyout.
• Check liens and mortgages. A buyer usually must satisfy or assume liens; these reduce net proceeds to co-owners.
• Use written agreements for any buyout. Record deeds and any lien releases to protect all parties.
• If you plan to file suit, consult a Texas real property attorney to review Tex. Prop. Code Chapter 23: https://statutes.capitol.texas.gov/Docs/PR/htm/PR.23.htm.
• Beware of costs. Litigation reduces net proceeds—factor attorney fees and court costs into decisions.