When Two People Own Property, But One Person Doesn't Want to Sell Suit For Partition
|Prepared By: Melissa C. Marsh, Los Angeles Real Estate Attorney
Written: November 2013
Suit For Partition
Under California law, a co-tenant's right to partition is virtually absolute. Partition does not create a new title in real property, it simply asks the Court to divide the existing interests of the owners "in kind" or "by sale."
Co-Owners, Partnerships, and Joint Tenants Who Disagree
Oh how partnerships that never should have been formed and bad estate planning leads to more lawsuits. When two or more people own a piece of real estate, conflicts often arise as to how the property should be used and maintained, who should pay for the upkeep and to what extent, how rents (if any) should be distributed, and the desire to liquidate. In additional to those real economic concerns, there is also typically a long thread of emotion which stems from either familial co-ownership disputes, or just plain resentment between and among former friends, or business partners.
How A Suit For Partition is Started
If a co-owner of a property will not agree to sell their portion of the property, and conversely will not allow you to "buy them out" (e.g. is being an unreasonable A**), your only real course of action is to file a lawsuit for partition. This process can be relatively expensive, and typically requires getting a formal appraisal of the property and the preparation and filing of a Summons and Complaint, a Notice of Pending Action (Lis Pendens), and a motion for an interlocutory judgment. California Code of Civil Procedure §872.250(a) requires the plaintiff to file and record a Lis Pendens -- Notice of Pending Action to Partition Real Property -- in the county in which the property is located. If the plaintiff fails to file and record the Lis Pendens, California Code of Civil Procedure §872.250(c) requires the court to stay the action until this is done.
Responding to a Suit For Partition
Once all of the above has been properly filed and served, the defendant will be given the opportunity to file an Answer that sets forth the co-tenants claim to the property in question, including any liens which must be described by date, character and amount owing. (California Civil Code of Procedure §872.410(a); 872.420 ), any facts that controvert the Plaintiff's allegations in the complaint. (California Civil Code of Procedure §872.410(b), and any affirmative claims for contribution or other compensatory adjustment the defendant believes is owed to him or her. (California Civil Code of Procedure §872.430) If the defendant also seeks a sale, the answer must justify it by allegations of fact. (California Civil Code of Procedure §872.410(c).)
Referees and Appraisals
In a suit for partition, any interest of a party in the property may be put in issue, tried, and determined, (California Civil Code of Procedure §872.610.) but prior to granting relief, the court must resolve all issues pertaining to title of the property (including the priority of any liens) prior to granting relief. California Civil Code of Procedure §872.620 and C.C.P. 872.630(a).) To accomplish this, the Court may require the parties to pay for a referee appointed by the Court to take evidence on the issue, ascertain the facts, and report back to the court. (California Civil Code of Procedure §872.630(b).) Once this has been accomplished, the only real questions for the court to decide are: (1) can the partition be accomplished by a physical division of the property, or is a sale necessitated; and if the later (2) what is the property actually worth. In the vast majority of cases, the result is an order for partition by sale.
If the Court determines that a partition by sale is necessitated (which is almost always the case in modern times), the Court may issue what is known as an interlocutory judgment of partition for sale, which enables the court to appoint a real estate professional to sell the property, subject to court approval; once the real estate professional has secured a buyer, the real estate professional will be required to go back to court for an order approving the pending sale and the distribution of the sale proceeds.
Only Remedy in a Suit For Partition is the Sale of the Property Absent the Parties Settling
Absent the parties coming to an agreement on the method and terms of sale (the rational decision), the court may prescribe any manner, terms, and conditions of sale not inconsistent with the partition statute. (California Civil Code of Procedure §873.610(a).) which include sale by either public auction or by private sale. (California Civil Code of Procedure §873.600 and §873.530.)
Division of the Proceeds
Here much of the proceeds of sale will be essentially wasted in excess fees the parties could have simply avoided by being reasonable. The Court may also fashion its own terms such as all cash, sale on credit with only a specific type of security, etc. (California Civil Code of Procedure §873.630.) The Notice of sale must state a place for receiving written bids (normally the referee's office) and the earliest date of sale. (California Civil Code of Procedure §873.650(b)). It should be noted that the property may not be sold directly, or indirectly, to the referee, a party's attorney, or a party's guardian or conservator (acting other than for his ward or conservatee). (California Civil Code of Procedure §873.690(a)). Once the referee has a buyer, the referee must prepare a report to the court which includes a description of the property sold, the purchaser's name, the price, the terms and conditions of sale, any security taken, the amounts payable to lienholders (if any), and arrangements for payment of the agents' commissions. (California Civil Code of Procedure §873.710.)
The California Civil Code of Procedure §873.820 requires that the proceeds of sale be applied in the following order:
- Expenses of sale.
- Other costs of partition, including a reserve for costs later allowed.
- Liens in order of priority.
- Distribution of the parties' shares of the residue.
A more Rational Approach -- Settlement Agreement For Appraisal And Buy-Out.
If the parties at some point allow reason to overtake them, as opposed to sheer emotion, the need to control, or the need to injure, they will come to an agreement which will typically results in an agreed partition by appraisal, under which one or more parties will acquire the interest(s) of the other(s) at the agreed upon appraised value. To effectuate this result after a suit for partition has been filed requires the parties to execute an agreement, file it with the court, and either use an already agreed upon licensed real estate agent to sell the property or allow the court to immediately appoint a named agreed upon referee to appraise the property and report to the court. (C.C.P. 873.940.)
© 2013 Melissa C. Marsh. All Rights Reserved.