A partition action is a process in which common interests in a property, such as co-owners who own co-tenancy interests, are separated and ended. In other words, if you co-own a property with a business partner or family member, this is a way to end that co-ownership. The parties will end up with individual rights of exclusive possession of a portion of the property. The parties can partition a property via a voluntary agreement or through litigation. A voluntary action is based on a contractual agreement that must meet the required elements of law, according to state law and the statute of frauds. When the court partitions a property, it determines the respective interests in the property of each party. Further, it determines whether the property should be physically divided or sold, and proceeds divided.
The law authorizes the court to appoint a referee specifically for the purpose of making that determination. To perform his duties, the referee may contract with “surveyors, engineers, appraisers, attorneys, real estate brokers, auctioneers, and others.” (California Civil Procedure Code § 873.110). This helps to ensure a fair division of the property and prevents arbitrary results.
When is a Partition Action Necessary?
One common scenario that occurs is a person becoming a co-owner without paying for a property. This could be the result of someone co-signing on a property to help a purchaser with damaged credit obtain financing. It could happen when investors are buying properties and are added to the title of multiple properties. Siblings could end up co-owners of a property through inheritance. When this happens, and there is disagreement as to the management or operation of the property, sparks can fly, and the parties could decide that separating themselves from the property is a better outcome. Disputes can include whether to rent a property, whom to rent a property to, how much rent to charge, etc.
If one co-owner decides that she wants to move on, there could be a disagreement on the price that the remaining co-owner/s intends to pay to buy out the interest. In this situation, the court will act to break the tie, so to speak, and clear obstacles that impede the beneficial use of the property.
Other less common situations when a partition might be considered are when individuals hold successive estates, such as a life tenant and remainderman, or when an individual who holds an estate for several years and a different individual holds the reversion.
What are the Defenses Against a Partition Action?
Co-tenants can waive the right to partition, either by an express or implied agreement between them. A waiver is just an agreement that the right to partition will not apply in the situation. It will be binding on successors just as would on the original parties, if it is contained in a recorded covenant running with the land.
The court will often find an implied agreement – even where the agreement vesting property rights in the co-owners does not mention either partition or waiver – when a right of first refusal requires a co-tenant to offer the property for sale to another co-tenant as a condition precedent to an action for partition. A waiver may also be implied where the partition would defeat the intention of the parties when it includes a specific objective that requires the running of a time period. The rationale is that an early partition would frustrate the parties’ objective.
A weaker defense is the defense of estoppel, which essentially relies on a fairness argument. This is a court-created limitation to partition that stems from the court’s power of equity. Though statutory amendments could be deemed to end this defense, they did not explicitly do so, giving courts the option to rule that the omission was intentional to preserve this equitable power.
How Will an Attorney Assist in Partition Actions?
There are several ways that an attorney can help you save money and protect your property from loss.
First and foremost, the decision by the court of how much of the property will be distributed to you can be influenced by an experienced real estate attorney who can marshal the facts and evidence in your support. An attorney can usher the transaction through the system faster than it otherwise would occur. Time is money, especially in a volatile real estate market. A partition can take a few months to over a year, depending on the complexity of the situation. Likewise, an attorney can help ensure that a fair market value is received for the property if a sale is ordered or agreed to.
You are entitled to reimbursement for improvements that you have made in good faith. This might be true even if the other owners did not know or approve of the improvements. If the co-tenant who is in possession of a property made the improvements, the court would look at the character of the improvements. If they were strictly for the maintenance and preservation of the property, they may not be proportionately shared amongst all co-tenants.
The attorney can play a protective role to prevent or mitigate harm with regard to a court decision on receivership. For example, if a property can be lost or damaged while the action is pending, the court may appoint a receiver to control the property. For a particularly sensitive commercial properly, the management of it could be very critical, and losses could be significant if an appropriate receiver is not in place.
If you have more questions about partition actions, forms of property ownership, or estate planning in general, either for you or a member of your household, please contact one of our experienced specialists for legal assistance. Trusted real estate and estate planning attorneys are available to consult with you at Lowthorp, Richards, McMillan, Miller & Templeman by calling (805) 981-8555 or filling out our online contact form. We operate primarily in the Tri-Counties area – Ventura, Santa Barbara, and San Luis Obispo.