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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.
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