Partition by Valuation

If the parties agree, the property can be partitioned based on a valuation.  There are a number of ways to do this, but generally an appraiser will be agreed upon, or the parties will submit names to the Referee and/or the Court, and one will be selected (of course, these parameters can vary based on the parties creativity and leverage); and after a final valuation is set based on the parameters agreed to, each party will be given a chance to buy the other out, and if neither does, the property will be sold and the proceeds divided based on ownership interests, other adjustments, and equity.

As part of the partition process, there will be an accounting of charges and credits to each co-owner’s share. Both plaintiff(s) and defendant(s) will want to seek reimbursement of money spent to maintain, improve or preserve property that benefits all co-owners. Credits can include expenditures in excess of the co-owner’s fractional share for necessary repairs, improvements that enhance the value of the property, taxes, payments of principal and interest on mortgages, and other liens, insurance for common benefit, and protection and preservation of title.

Partition of Heirs Property

The Uniform Partition of Heirs Property Act (UPHPA) modified the above statutory framework, effective January 1, 2022, creating a right for certain co-owners to force a buy-out based on an appraised value of the property. The UPHPA applies to “Heirs Property”—defined as property (i) owned at least 20% by relatives and (ii) where the interest of the party seeking to buy-out was acquired by a relative.  California Code of Civil Procedure §874.311 Et Seq. (2021).

Under the UPHPA, when an action for partition is filed by a co-owner of inherited property, the other co-owners/heirs are provided with an opportunity to buy out the property at fair market value.   The co-owner seeking to buy out the others’ shares must timely make an election with the court and timely deposit sufficient funds with the court.

The Partition of Real Property Act

In actions filed after January 1, 2023, the Partition of Real Property Act applies to all property held by tenants in common unless (1) they have an agreement not to partition the property, or (2) they have a written agreement specifying another procedure for partition of the property. Thus, unless an action was filed January 1, 2022 and December 31, 2022, or prior to that time period, the Partition of Real Property Act applies to all property held by tenants in common unless one of the above two exceptions applies, whether or not the property is “heirs” property. It does not, however, apply to property held by joint tenants.

The Partition of Real Property Act requires the Court to determine the “fair market value” of the property, subject to limited exception.  After the fair market value is determined, the parties/cotenants that did not request a partition by sale are allowed to buy out the interests  of those that did request a partition by sale. Subsequent to this buy-out process, if a party/ies duly completes the buy-out process, the Court will enter an order reapportioning the interests accordingly.

If no party elect to buy out the cotenants, the Court shall order Partition in Kind, unless Partition in Kind would result in great prejudice, in which case it shall order a Partition by Sale.

THE ABSOLUTE RIGHT TO PARTITION, AND EXCEPTIONS

In California, the right to partition property is absolute, subject to very minor exceptions.  In other words, a co-owner of property can force the sale of that property, or force the buyout of their interest in the property.  This is true even for owners who have a smaller interest in the property than others.

For example, five siblings inherit a property.  Initially, each has a 20% interest in the property.  However, one sibling then acquires the interest of three others, giving that sibling 80% of the property.  Now, there are two co-owners, one with 80% and the other with 20%.  The 20% co-owner still has a right to partition.  A partition action will always result in a forced sale or buyout.  Unless the property can be physically divided, the 20% co-owner is entitled to force a sale or buyout, and the 80% co-owner has no defenses.

Although partition is regarded as an “absolute” right, there are exceptions. Community property cannot be partitioned. The right to partition can also be waived by either express or implied agreement. Waiver can be written or oral, but proving an oral waiver will almost certainly be difficult. California Courts have found a waiver of the right to partition where parties to divorce actions entered into property settlement agreements allowing one spouse to live on property for life or until remarried. However, even life and remainder estates can be partitioned in the right situations.

California Courts have also found a waiver of the right to partition in situations where co-owners had agreements as to how they were going to use the land for business, such as: where the co-owners have an active operating agreement to use the land to run an oil business; where there was an agreement to provide continuous income to investors under a long term lease. Each situation is unique, and a thorough understanding of all California cases is necessary to evaluate your situation and make the best possible decision as to how to proceed.

WILL THERE BE A TRIAL IN A PARTITION CASE?

If a case is solely for partition, the case can be resolved by motion, and no trial needs to be held. See, for example, LEG Investments v. Boxler (2010).  In LEG Investments, the Appellate Court directed the trial court to grant summary adjudication, and to enter an interlocutory judgment directing partition by sale.  In other words, in this partition action, the Court ordered the sale of the property without holding a trial.

Partition actions are equitable proceedings, and “there is no right to a jury trial in civil actions that are equitable in nature.” Meyer Koulish Co. v. Cannon (1963) 213 Cal.App.2d 419, 430-431; see American Medical International, Inc. v. Feller (1976) 59 Cal.App.3d 1008, 1013.

If, however, you are bringing other claims which require factual testimony, a trial may be necessary. The other claims depend on the facts of your specific case. Some examples of claims that may be brought are for conversion, breach of fiduciary duty, breach of contract, and breach of partnership agreement. Again, the claims will depend on the facts in your situation. A party bringing claims will want to weigh the benefits and downsides to bringing different claims, and strategically decide on what is best. ANAND LAW has successfully represented parties in property cases between spouses, boyfriend and girlfriend, siblings, and business partners. We have the experience and dedication to create the best plan of action for your particular situation.

CO-OWNER’S RIGHT OF FIRST REFUSAL DOES NOT PREVENT PARTITION

A co-owner can force partition despite an agreement giving each co-owner a right of first refusal. The California Court of Appeal dealt with this issue in Leg Investments v. Boxler. The co-owners had an agreement which required them to, before selling their interest to a third party, allow the other co-owner to purchase it at the same price. The co-owner who wanted to sell his interest (“Leg”) found a buyer, and then offered to sell it to the co-owner (the “Boxlers”) for the same price. The Boxlers refused to buy Leg’s interest. Leg then demanded that the entire property be listed for sale, or that the Boxlers by out his interest. The Boxlers again refused.

Left with no other option, Leg filed an action for partition. The Boxlers argued that their agreement to have a right of first refusal amounted to an agreement that the parties waived their right to partition. The Trial Court agreed, finding that there was an implied waiver. However, the California Appellate Court disagreed and reversed the Trial Court’s decision, finding that the right of first refusal “merely modifies the right of partition to require the selling cotenant to first offer to sell to the non-selling cotenant on terms as favorable as those offered by the prospective buyer.” This is now the law in California. If you have an agreement (written or verbal) with co-owners, and you want to divide your property, contact ANAND LAW today for a no-obligation evaluation of your situation.

EXTENSIVE EXPERIENCE & EXPERTISE

We have counseled and represented parties in connection with real property ranging in value from $300,000 to $25,000,000, including residential, commercial, mixed use, vacant land, multi-family, industrial, and apartments. ANAND LAW has successfully represented parties in property cases between spouses, boyfriend and girlfriend, siblings, and business partners. We have the experience and dedication to create the best plan of action for your particular situation. ANAND LAW is a partition lawyer that can end your co-ownership expeditiously and ensure that you get every penny you are entitled to.