PARTITION AND FORCED SALE
THE NEED FOR A PARTITION ACTION
Real estate is one of the ways that we build wealth, and sometimes we do this through joint ownership with family members or friends that we trust until there is disagreement and we need to force a sale. Besides co-ownership between friends and romantic partners, the need to force a sale may also arise when multiple heirs inherit a property in equal or proportionate shares, and one or more heirs is living in the property and doesn’t want to sell or leave. When disagreement arises between multiple owners in California on how to divide a property, they may enlist the Court in an action for a California Partition Action and Forced Sale.
WHO CAN FILE A PARTITION ACTION
A California Partition Action is the procedure for segregating and terminating common interests in the same parcel (or parcels) of properties and it is governed by the California Code of Civil Procedure (CCP) Part 2 Title 10.5: Partition of Real and Personal property. In California, joint owners to real property may file a lawsuit seeking to have their joint interest in the property partitioned. [Cal. Code of Civ. Proc. § 872.210.]
A need for a Partition action may arise during a divorce or other breakup or after a death where multiple parties have an inherited interest and are in disagreement as to their interests or how to divide them. It may also occur when multiple parties own a property that only one of them is living in.
HOW DOES A PARTITION ACTION WORK
A partition does not mean a War of the Roses situation where someone comes with blue tape and divides the property so each party can live there, although sometimes separate parcels can be designated. In some California Partition Actions the Court may allow one party to pay another party in order that both may keep a portion of the property or properties they are in disagreement about and this can occur without a sale. In most California Partition Actions, the court forces a sale so that the profits can be divided as the court decides.
A California Partition action must be filed pursuant to the California Code of Civil Procedure. [see Cal. Code of Civ. Proc. §872.010 et seq.] In a California Partition lawsuit, the trial court must determine two things:
a determination of the parties and their interests in the property, and
the manner of partition (whether sale or division)
Partition actions follow an unusual procedure in that the court conducts an initial trial to determine whether the plaintiff has a right to partition the real property. [Cal. Code of Civ. Proc. §872.210.] If the court determines that there is a right to partition the property, the court enters an interlocutory judgment for partition. [Cal. Code of Civ. Proc. §872.720.] This interlocutory judgment for partition determines the interests of the parties in the property, orders the partition of the property, and determines the method of partition. In this interlocutory judgment, the court is authorized to either divide the property between the joint owners or order its sale. [Cal. Code of Civ. Proc. §872.810, et seq.] If the court determines that it ‘is impractical or highly inconvenient to make a single interlocutory judgment that determines the interest of all the parties in the property’ the court may issue sequential interlocutory judgments for original concurrent and successive owners. [Cal. Code Civ. Proc. § 872.720(b).] Only after the partition is completed is a later final judgment entered by the court.
In a California Partition lawsuit, the determination of each of the parties ownership interest must come before a property sale is ordered. [See: Summers v. Superior Court, 24 Cal. App. 5th 138, 234 Cal. Rptr. 3d 63 (2018).] The reason for this is that selling a property before the ownership is determined might deprive the parties of the benefits of the asset, such as rental income, during the time that the case is litigated. However, if the proportional interest is not in dispute, the parties may save money by stipulating to an interlocutory judgment establishing undisputed ownership interests and ordering partition.
APPOINTMENT OF A PARTITION REFEREE
Once the court has determined that real property is to be partitioned through a California Partition Action, the court is authorized to appoint a Partition Referee for the purpose of handling the actual partition of the property. [Cal. Code of Civ. Proc. §873.010.] A Partition Referee is a neutral third party appointed by a judge to oversee the partition or division of real or personal property. The court may appoint either one Partition Referee or, with the consent of the parties, three Partition Referees. [Cal. Code of Civ. Proc. §873.020 & §873.030.] (It is much more common to have a single Partition Referee.) Usually the property is sold by the referee, and the proceeds are disbursed by the court to the owners. [Cal. Code of Civ. Proc. §872.630(b) & §873.010 et seq.] The court’s order of appointment will set forth the duties and powers of the Referee.
WHO CAN BE A PARTITION REFEREE
The Code of Civil Procedure does not set forth any qualification requirements for the Partition Referee, but the following categories of people are ineligible to be a Partition Referee:
A Clerk or Deputy Clerk of the Court
A former or present partner or employee of the Judge
A relative within the third degree of the Judge or the Judge’s spouse
An owner of record of the property that is being partitioned.
[Cal. Code of Civ. Proc. §873.050.]
DIVISION OF REAL PROPERTY BY A PARTITION REFEREE
If the court’s interlocutory judgment orders division of the real property (rather than sale of the property), the Partition Referee shall be appointed to carry out that division. [Cal. Code of Civ. Proc. §873.210.] To this end, the Partition Referee may be authorized to employ attorneys, surveyors, engineers, and the like. [Cal. Code of Civ. Proc. §873.110 et seq.]
The Partition Referee then issues a report proposing the division of the property into lots or parcels for the purpose of dividing the property amongst its owners. The report of the Referee may be confirmed, modified, or set aside by the appointing court. [Cal. Code of Civ. Proc. §873.290.] The division of real property proposed by the Referee shall become effective and vests title upon a final judgment of partition by the court. [Cal. Code of Civ. Proc. §873.290.]
SALE OF REAL PROPERTY BY A PARTITION REFEREE
Once the court orders the sale of the real property by its interlocutory judgment, the judge appoints a Partition Referee to carry out the sale. [Cal. Code of Civ. Proc. §873.510.] The Partition Referee may conduct the sale either by public auction or by private sale, with discretion to decide whichever means is more beneficial to the parties. The court may (and often does) refer to the Partition Referee the job of determining the best manner and mode of sale of the real property. [Cal. Code of Civ. Proc. §873.610.] The most common method of sale is by private sale with fees going to the Partition Referee and the real estate broker for advertising and listing the property. Most often, the property is listed for sale in the commercial multi-listing service, and marketed in a manner consistent with other similar properties.
Before the sale is consummated, the Partition Referee makes a report of the sale to the court which includes details of the sale, such as the name of the purchaser, the sale price, and the terms of the sale. [Cal. Code of Civ. Proc. §873.710.] The court must confirm the sale before it can become final. [Cal. Code of Civ. Proc. §873.720.] This confirmation is made by motion to the court by the purchaser, Referee, or any party. [Cal. Code of Civ. Proc. §873.720.] At the hearing for the confirmation motion, the court may confirm the proposed sale, set aside the proposed sale, or allow higher bids for the property. [Cal. Code of Civ. Proc. §873.740.]
Upon confirmation of the sale, the Court gives the Partition Referee the authority to execute documents as required to consummate the sale. [Cal. Code of Civ. Proc. § 873.750.] Following the sale, the Partition Referee provides the Court with a final report and is instructed by the court as to who to dispose the proceeds of sale. Once this is done, the Partition Referee is discharged by the court.
PARTITION REFEREE’S FEES
Similarly to the real estate agent, the Partition Referees is normally paid from the sale proceeds, but unlike the real estate agent the referee bills for their work on an hourly bases and not as a percentage of the sale. [Cal. Code of Civ. Proc. § 873.820.] Parties should demand that the order appointing the Partition Referee set forth the allowable hourly rate of pay for the Partition Referee so that there are no misunderstandings later on.
HOW TO SUCCEED IN A CALIFORNIA PARTITION ACTION
The first key to winning a partition action is to understand the statutory scheme and follow it. The second is to get as organized as possible and maintain all relevant documentation.
Keep all documents that pertain to ownership of land or business. Keep a filing system and label all sections properly so that you can access them easily.
If your property is part of a business agreement, go to all the company meetings and take regular meeting minutes. Keep all records about what is talked about or agreed.
If you are a private owner, keep a record of improvements to the property that you have paid for and keep track of receipts and correspondence with other owners regarding the repairs.
Pros and cons of a partition action
Pros – Benefits
Best option when co-owners of a property cannot agree to terms
Ensures an end to any real estate dispute where a party refuse to cooperate
Possibility of recovering reimbursement for costs on payment of mortgage, taxes, insurance, repairs and renovations
Potential recovery of attorney’s fees and costs
CONS – Challenges of a partition action
partition cases may be time consuming
Adversarial stance vis-à-vis your co-owner
Risk of the property being sold to a third party
High cost of referee fees and real estate agent to conduct property sale
Turning power over to the court and the Partition Referee
Attorneys with the Experience and Dedication to Get Results
With over a decade of experience in Quiet Title and Partition litigation, our attorneys at Advocate Legal are committed to providing you with straightforward advice and legal assistance throughout your case.