My in-laws gave us $300,000 and are taking the deed to our house. Now they want $125,000.

My in-laws helped my wife and I purchase a house that we all live in, including my teenage son. They provided $300,000 and we bought the house for just over $500,000. All four of us – me, my wife and my in-laws – have the deed and the loan. I’m currently paying my mortgage. We live in a state of equal distribution.

My in-laws now want my wife and I to sign a document stating that if we were to sell the house at any time, now or in the future, whether alive or dead, we will give a fixed amount of $125,000 of the initial sum proceeds to their adult granddaughter, our granddaughter, who lives in another state. This will reduce their investment in the home to $175,000.

I said we couldn’t sign it because it actually constitutes a legal claim, a lien on the property, similar to that of a creditor. Such a request can be made to the county and can harm your attempts to refinance or obtain a home equity line of credit that may be needed for improvements and repairs. I said that perhaps we could establish a percentage, net of costs, etc., to be paid if we sell, but without a fixed limit.

They got angry and threatened to go to a lawyer. This is causing problems at home. This settlement would also take away a lot of equity from me and my wife. The in-laws think this is a fair way to recoup their initial investment and do what they want with it. Our house is now worth $720,000. What should we do?

Husband and son-in-law

Related: “I shouldn’t be punished”: My sister can’t afford to buy me our mother’s $450,000 house. She has no home. What should I do?

“Typically, unless the deed says otherwise, tenants in common have an equal interest in the property, so it appears that each of the four parties to the deed owns 25% of the house.”

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Dear husband,

Don’t sign anything.

Types of ownership vary by state, but you either have a joint tenancy with right of survivorship or you are tenants in common. Joint tenancy with right of survivorship gives all owners an equal share of the property and does not allow one owner to add another person to the deed, and most importantly, if one owner dies, his or her share of the property goes to the other owners . If you are tenants in common, however, you would Not you have the right of survivorship if your in-laws predecease you.

Generally, unless the deed says otherwise, tenants in common have an equal interest in the property, so it appears that each of the four parties to the deed owns 25 percent of the home, says Brian P. Corrigan, partner at Farrell Fritz . “Co-tenants have the right to live in the premises without paying rent to other co-tenants,” he says. “In general, roommates also have the same obligation to pay expenses: taxes, maintenance and repairs. Therefore, in the event of a subsequent sale, the co-tenant who paid these shipping costs may be entitled to a credit.

“A tenant in common cannot sell the entire property without the consent of the other tenants in common,” he adds. “Therefore, in-laws’ concern about a current or future sale may not be a cause for concern. If they die, they can pass on their interest in the property to their niece/niece. If the in-laws are alive when the husband and wife want to sell the entire property – not just the husband and wife’s interests – this can only happen with their agreement. The solution proposed by the in-laws seems to be one in search of a problem.”

Partition action

So where does this leave you? If they threaten to contact an attorney, they may be looking into a partition action, i.e., forcing a sale of the property, regardless of what type of property you share. “Tenants with rights of survivorship are not obligated to continue a competing property and are not required to sell only their interests to sell themselves out of co-tenancy,” according to Cornell Law School. “Rather, the tenant has the absolute right to petition a court to divide the property if both tenants have concurrent ownership rights.”

You have a couple of immediate options: Selling the property and buying another home would seem like the path of least resistance, especially since 1) there are four people on the deed and only two people paying the mortgage and 2) your in-laws seem temperamental : They surprised you with this request and are threatening you with legal action if you don’t comply. Alternatively, they could deduct $175,000 from your wife’s inheritance. But that doesn’t solve the immediate problem: your legal ties to your in-laws.

The fairest way to sell the house would be to return the $300,000 investment and split the remaining equity 50/50. It’s a complicated situation that raises more questions: Did your in-laws give you $300,000? Did they lend you the money with the expectation that you would pay it back? Or do they intend to deduct that money from your wife’s inheritance, assuming you have rights of survivorship? Will the monthly mortgage payments you’ve made be taken into consideration when you split the spoils? Any steps taken should be undertaken with the help of a real estate attorney.

Remember that the longer you procrastinate, the more your home will appreciate and the more equity you will have to give up.

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Previous articles by Quentin Fottrell:

“I grew up pretty poor”: I received an annual bonus. After I pay off my credit cards, I will have $10,000. What should I do with it?

“I received an insurance claim check for $22,000” – why on earth does it take five days for my check to clear?

“I want to protect my family”: My rich father, 49, is marrying his third wife. How can I address the issue of my heritage?

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