My father and my two sisters and I have jointly purchased a second vacation home. There are five equal shares to the home, two belonging to my father, and me and my two sisters each own one share. We drew up an agreement that states that if one of us dies, the other owners have first choice to purchase the deceased's share, thus ownership would not automatically be to the deceased's heirs. Is this agreement legal in Michigan or will the deceased's share automatically go to the joint owners heirs?

Was the agreement written into the deed, and how is the wording on the deed done.

Did you have an attorney write up the agreement ?

But upon the death, the property automatically goes into estate, since someone has to sign it over for the one party to sell. The only issue is would the agreement be binding on the estate. And who decides the price ?

No, it is not written into the deed. The warranty deed was originally in just my name. Then I signed a quit claim deed to myself, my 2 sisters, and my dad, so that it would be in all of our names. The language on the deed says "The grantor grants to the grantee the right to make all divisions under Section 108 of the Land Division Act, Act No. 288 of the Public Acts of 1967 as amended. Grantor does not warrant the number of dvisions stated above. Any division must be approved by the appropriate county, municipal or local governing bodies. " Other than the above, the rest is pretty much straight forward.

My sister who works for a law firm in Illinois had the agreement drawn up for us. It reads " If one of the co-owner dies, the remaining co-owners have first choice to purchase the deceased owners share among them. IF anyone does not want another partial share, the share could be purchased by a single remaining co-owner. The purchase price would be paid directly to the deceased person's estate or heirs. Heirs to an estate will not automatically become a co-owner but could be considered on an individual basis, after unanimous approval by all remaining owners. " We did not include anything in the agreement about the cost, other than each share was valued at $5,000. At the time we purchased the home.

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Originally Posted by brandts4

... " If one of the co-owner dies, the remaining co-owners have first choice to purchase the deceased owners share among them. IF anyone does not want another partial share, the share could be purchased by a single remaining co-owner. The purchase price would be paid directly to the deceased person's estate or heirs. Heirs to an estate will not automatically become a co-owner but could be considered on an individual basis, after unanimous approval by all remaining owners. " ...

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A lot of questions would come up regarding this agreement.

1. Lets say you die. Your estate would own a 20% share. At that point, do all remaiing shareholders (father and two sisters), together, have to jointly decide whether they want to purchase your share?
2. If they decide to purchase it (leaving the purchase price aside for the moment), would your 20% go to, and be paid by, your father and sisters pro-rata (father pays 2/4 of the purchase price for 10% of the whole property and each sister pays 1/4 of the purchase price for 5%)?
3. What if your father doesn't want to exercise his right to purchase, but both sisters do. The agreement provides that your "share could be purchased by a single remaining co-owner". Which sister would get to buy it?
4. Lets say neither your father nor your sisters wants to buy the share. Who would it go to? The agreement suggests your heirs might qualify. Let's say you leave a son as your only heir. Let's further assume that your co-owners don't agree to allow their grandson/ nephew to become a co-owner with them. Ok. So what does the estate do then? Sell the share? In that case, the buyer (not being an heir) could become a co-owner and the other co-owners wouldn't have anything to say about it.
5. Oh. Let's not forget the purchase price. Since you left it out of the agreement, it would probably be fair market value of the property, at the time of purchase of your share from your estate, divided by 5. I doubt the purchase price would be the price the 4 of you originally paid for it.

I suggest you consider re-writing the agreement.

Thank you for your assistance with my questions. You have been most helpful and I will discuss this with the other co-owners and see if they want to rewrite the agreement.