Partition of Jointly Held Property - The Basics

INTRODUCTION:

To legally “partition” property means to bring a proceeding in court to force the physical division or sale of the property and division of the proceeds among the co owners. In certain cases it can be an absolute right of a co owner while in others it is contingent on various factors.

If you are planning or do own property jointly it is absolutely vital for you to fully understand how partition works and what rights a co owner has to insist upon…or fight…the right of partition.

Why? Not only can your use of the property be drastically altered but you may be forced to sell property at a time that is disastrous for you due to personal events in your life or the state of the market. The right to partition can be waived if the correct agreement is executed. Whether to have such an agreement…the pros and cons…can only be grasped by understanding the basics of the right to partition property in California.

 

THE BASIC LAW

If real property is owned concurrently by two or more persons, or in successive estates (e.g. one or more persons will have an interest in the future but not now) then any of the interested parties may bring an action to “partition” the property which, effectively, requests the court to physically divide or, alternatively, order the sale of the property and division of the proceeds. The action is called a Partition Action and for people with concurrent interests (currently existing) who have not “waived” the right to partition, it is an absolute right. The demand for partition must be granted by the Court to those persons.

This article shall discuss the basics of an action to partition, how it is brought, what are the criteria for success and how the property or the sale proceeds, if successful, are divided up.

Note that this article does not discuss the more complex procedures for division of joint interests if a Tenancy in Common Agreement is executed which normally waives the right to partition and the reader is advised to review other articles on this web site for such discussion.

 

1. Partition is normally commenced by one of the co owners filing a civil action in Superior Court but the parties can simply agree among themselves as to how to accomplish partition if they wish. The procedures for partition of real property by the Court are found in the California Code of Civil Procedures (CCP Sections 872.020 and the following statutes).

 

2. The proper court is the court in which the property is located. The court, while having broad equitable powers to prevent waste and protect the property, also during the proceeding has the right to “…order allowance, accounting, contribution or other compensatory adjustment among the parties according to the principles of equity.” CCP 872.140. Thus the court may require various of the co owners to put in money or grant access to the property based on the court’s consideration of what is just and fair between the parties. Any agreement between the parties is normally enforced by the court.

 

3. Any person with an existing or future interest in the property may bring the action for partition. This includes existing co owners (joint tenants; tenants in common, etc.) as well as people with a future interest (remainder men to life estates.) However, lien holders do NOT have the right to partition. (Holders of Mechanics Liens or Deeds of Trusts have other remedies aside from partition.)

 

4. Note that actions by spouses or putative spouses for division of community or quasi community property are expressly excluded form the new law on partition. They cannot seek partition. (CCP 872.210 (b).)

 

5. All persons with an existing or future interest in the property must be named as parties to the action. Anyone claiming an interest in the property known to the plaintiff must be named in the action as a party.

 

7. Normally a Lis Pendis is filed during the action so that all persons may know a partition suit is being filed. The Lis Pendis is recorded in the recorders office in the county in which the property is located.

 

6. The court, in the partition action, must make any necessary determination of the status and priority of all liens on the property and the various rights to the property of the parties. (CCP 872.630 (a).

 

7. The right to partition depends upon the plaintiffs owning a sufficient interest in the property. PARTITION OF CONCURRENT INTERESTS IS A MATTER OF RIGHT UNLESS BARRED BY WAIVER. (CCP 872.710 (b)). PARTITION OF SUCCESSIVE ESTATES IS ALLOWED ONLY IF IN THE BEST INTERESTS OF THE PARTIES AS DECIDED BY THE COURT.  In determining the latter, the court is to consider such factors as burdensome expenses, changes in circumstances since creation of the estates, the intent of the creator and the needs and interests of the successive owners. The court has almost total discretion in the latter instance.

 

8. The court has the right to either order the property sold or to physically divide the property up among the owners. But this discretion as to choice of methods of partition does not extend to the denial of the right of partition among concurrent interests…unless they waived it. Even if the result could be economically disastrous, the court must grant partition, either by physical division of the property or sale and division of proceeds, if even one concurrent interest plaintiff insists. Priddell v Shankie (1945) 69 C.A. 2d 319.

 

9. Partition is by physical division unless the parties agree upon a sale or the court determines that partition by sale would be “more equitable.” The court may order part of the property partitioned by sale and the remainder by physical division and may appoint a referee to assist in determination of whether to order a physical division. CCP 872.830; Butte Creek Island Ranch v Crim (1982) 136 C.A. 3d 360.

 

10. Property to be partitioned by sale is sold by the referee appointed for that purpose either at public auction or by private sale, as determined by the court.

 

11. The court maintains control of the proceeds and applies them as follows: expenses of sale; other costs of partition; liens in order of priority (both parties and non parties); distribution of the parties’ shares of the residue. (CCP873.820) A tenant for life or remainder man is allowed a proportionate share of the proceeds as determined by the court.

 

12. The costs of the proceeding, including its attorney’s fees incurred by various parties, are allocated by the court among the parties predicated on equitable principles. However, specifically allowed are attorneys fees incurred by a party; referees fees; surveyor fees; title report. These costs are normally allocated by the court in proportion to the interests in the property but the court may make a different equitable arrangement based on the court’s discretion.

 

Practical Considerations:

Our office normally recommends that the parties seek to informally agree upon division of property rather than rely on the expensive and clumsy method of court partition to divide the property. We advise that partition is a “last resort” since strangers to the property, judges and referees, at considerable expense, will eventually do the job…but in a very expensive and often confrontational manner.

The problem, of course, is that by the time the lawyers are called emotions are often so inflated that such calm discussion of practicalities is impossible, with certain parties insisting upon buy out while others refuse to even consider the idea. If that is happening, the sobering effect of filing a partition suit can lead the parties to reconsider their intransigence and informally resolve the problem by a written agreement providing for a buy out of a party’s interest or sale with the procedure mutually agreed upon.

But it is also important to know that minus waiver of the right, partition WILL happen if you own concurrent interests in the property and if you are “locked” into joint ownership that is not working well, this is a guaranteed way out. It is a very powerful remedy and must be considered carefully by all joint owners.

If you are creating a partnership or tenancy in common agreement for property, this right must either be integrated into your documents or waived since it will normally supersede agreements that do not waive that right. This office has seen many carefully structured real estate partnerships, with elaborate buy and sell provisions, come to naught because the right to partition was not carefully considered and integrated into the arrangement. Good legal advice is, as so often, essential to protect your rights in this area and do not forget the tax ramifications that can arise if partition is foisted upon an unprepared party.

One client likened the right to partition as a form of “nuclear deterrence,” in which the radical effect of commencing that action will cause joint owners to be “sensible.”

Perhaps…but it certainly is a very powerful tool of relief that is available to joint owners in California and an essential aspect of knowledge that one must have before owning joint property with any other person.