Third party in housing investment needs a buyout

Q. Three of us purchased a property together a number of years ago with the intent of fixing it up and either renting it or selling it. We all put down the same amount and all three of us are on the mortgage. The market wasn't very good when the house was ready so we rented it out. The rent never covered the mortgage, taxes and other expenses but until recently we were able to cover the shortage equally. Now we have a problem.

One of the partners has been having marital and financial problems. About a year ago he started falling behind, only paying a part of his share, which the other two partners made up. It wasn't a large amount and we all figured he would be back on his feet shortly and whatever amount we advanced for him could be accounted for when we finally sold the house.

Now he tells us he is broke and cannot contribute anything. We offered to buy him out but we could not agree on an amount, as he feels the house is worth far more than we do. With him contributing nothing, the burden on the remaining two partners is causing major problems for both.

We are curious as to what options are available to us to resolve this.

A. It appears to me the easiest and cleanest option is to buy him out. Resolving the value of the property shouldn't be difficult. Spend a few hundred dollars and obtain a certified appraisal of the property. Have everyone agree that the appraisal will establish the value of the property. Once the value is established, refinance the loan, remove the third partner from title and the mortgage obligation and pay him one-third of the difference between the mortgage balance plus refinance costs and the appraised value. I would also add accrued real estate taxes and the amount you advanced when third partner wasn't paying to the mortgage balance and refinance cost.

If that doesn't work, your remaining options would be to sell the property, which will be more difficult if you have a tenant with a written lease, or file a partition suit if third partner won't agree to sell. A partition suit would ask the court to order the sale of the property and account for the net proceeds. Talk to a real estate attorney to further explore your options.

Q. I signed a lease to rent a condo about 2½ years ago. The lease was for one year. Since then, there has been no lease, though the owner raised the rent twice, which I agreed to.

I was transferred by my employer and needed to move out. I sent a letter on July 3 telling the owner I would be out at the end of the month. I did not receive a response and moved out on July 31.

I called the owner to give him an address to send my security deposit. He told me I owe him rent for August plus the cost of painting the condo. The condo looks the same as when I moved in.

What can I do to get my security deposit back? I could really use it.

A. When the written lease expired and you remained at the condo, a month to month tenancy was created. A month to month tenancy can be terminated by either party upon 30 days' notice. The catch to this is that if your monthly term was from the 1st to the end of the month, notice must be given prior to the 1st of the month to terminate the lease at the end of the following month. You cannot send a notice of termination on July 15 terminating the lease on Aug. 14. A notice served on July 15 terminates the lease on Aug. 31.

Your notice sent on July 3 arguably terminated the lease on Aug. 31. As for the painting, most local judges consider painting a cost of doing business for the owner and will not award damages due to the need to paint a property absent extraordinary circumstances.

So, presuming your security deposit was one month's rent, you should probably call it a day and move on. It is very unlikely the owner will chase you across the country in an attempt to recover the cost of painting the unit.

• Send your questions to Attorney Tom Resnick, 345 N. Quentin Road, Palatine, IL 60067, by email to tdr100@hotmail.com or call (847) 359-8983.