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Bankruptcy Estate that Collects Rents has Legal Obligation to Cotenants to Pay Property Taxes

June 14, 2014 by  
Filed under Blog

Bankruptcy attorneys may be asked, “does a bankruptcy estate that owns property as a tenant in common have an obligation to pay the on-going taxes?” The general rule is that the obligation to pay taxes assessed against property held by tenants in common is the responsibility of all of the tenants in common. See Beatty v.Benton, 135 U.S. 244, 250 (1890)(tenants in common are equally entitled to the benefits of the property and equally liable fo rits burdens); 20 Am. Jur. 2d Cotenancy and Joint Ownership § 63 (2d ed. 2006). Accordingly, one tenant in common is under no legal obligation to the other cotenants to pay the taxes. See Stoltz v. Maloney, 630 P.2d 560, 563-64 (Ariz. Ct. App. 1981); 86 C.J.S. Tenancy in Common § 63 (2006). There are exception to the general rule , however. Several courts have held that because a fiduciary relationship exists between tenants in common, if a cotenant is in possession of the property and receiving all the profits and rents from it, it is the duty of that cotenant to pay the taxes owing up to the extent of the rents and profits received. See Stoltz, 630 P.2d at 563; Crossman v. Meek, 556 P.2d 325, 326 (Ariz. Ct. App. 1976); Wallach v. Korniczky (In re Korniczky), 308 B.R. 153, 157 (Bankr. W.D.N.Y. 2004); 86 C.J.S. Tenancy in Common § 89 (2006).

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