California Partition of Real Property Act – The Buyout Process or Partition by Sale or Partition In Kind Processes

            This post is my third post in a series discussing the California Partition of Real Property Act. This post provides a summary of the buyout process or in the alternative the partition by sale or partition in kind processes.

            The law still favors partition in kind; however, as many real properties cannot be partitioned in kind or because partition in kind may in some circumstances result in prejudice to a cotenant, in the majority of partition actions to which the Act applies the result will either be a buyout by one or more of the cotenants who did not bring the partition action, or partition by sale on the open-market or possibly sale by sealed bids or auction (see also, e.g., California Code of Civil Procedure §874.319 for the meaning of “great prejudice”). Further, if one or more of the cotenants that did not bring the partition action under the Act does not buy out all of the interests of all of the cotenants that did bring the action or claim for partition, whether the partition proceeds to partition by sale or partition in kind also depends on the remedies and actions that were requested in the claim or action for partition.

            Remember, if the Partition of Real Property Act does not apply, in the case of a partition action California’s other already-existing partition statutes and cases will apply.

            Between the partition buyout process or partition by sale or partition in kind many different scenarios are possible when the California Partition of Real Property Act applies. This discussion is a summary. You can refer for example to California Code of Civil Procedure §§874.317-874.321. It is also possible that other statutes or relevant case law could apply.

            The most simple scenario is that the real property is owned by only two cotenants in common, one of whom brings the action for partition, after which the property is appraised by the Court, and thereafter the cotenant who did not bring the action for partition timely gives notice that he or she or it will buy all of the interest of the cotenant who did bring the action for partition, at the appraised amount, and the buying cotenants also has the ability to and does fund the buyout in a timely manner.

            A second relatively simple scenario is that the real property is owned by three cotenants in common, two of whom file an action for partition, and similar to the above scenario the cotenant who did not bring the partition action timely gives notice that he or she or it will buy all of the interests of the cotenants who did bring the action for partition, at the appraised amount or amounts, and the buying cotenant also has the ability to and does fund that buyout in a timely manner.

            Similarly, if all of the interest or interests of the cotenant or cotenants in common who bring the partition action are being bought out by the cotenant or cotenants who did not bring the partition action, the scenarios tend to be less numerous or complicated. If more than one of the cotenants who did not bring the partition action are buying out all of the interest or interests of the cotenant or cotenants who did bring the partition action the general or statutory rule is that the buying cotenants buyout in accord with their ownership percentages. Question: What if the buying cotenants propose buyout percentages that are different while still buying out all of the interest or interests of the cotenant or cotenants who brought the partition action? Might it be possible that the Court would accept that type of scenario – well, it might be possible depending on the view of the specific Court in which the partition case has venue – if the Court does not allow such an alternative buyout proposal, the result might be partition by sale or possibly partition in kind.

            The Partition of Real Property Act requires that all of the interest or interests of the cotenant or cotenants who bring the action for partition be bought out by the cotenant or cotenants that did not bring the action for partition, and that if that does not occur then partition by sale or in kind (that is, the Act requires that all of the interest or interests of the cotenant or cotenants who bring the partition must all be bought out). Question: Again, what if all of the tenants in common propose something different to the Court and all of the co-owning tenants in common agree and so stipulate? Again, that would need to be determined on a case-by-case and Court-by-Court basis.

            If the property is to be sold such as on the open-market the Act provides a statutory scheme and timeline, including that the property be offered for sale by a real estate broker who is licensed in the State of California and approved by the Court (see, e.g., California Code of Civil Procedure §§874.320-874.321).

            There are many different scenarios that can occur throughout this entire process including objections that can be made, contrary evidence and requests that can be introduced, and issues that might need to be litigated and determined by the Court – there are too many different scenarios to cover in this discussion. However, the above discussion gives you an overview, and you can also read the statutes which cover many of the possible scenarios.

            I will be posting a fourth discussion in this series – in which I will discuss additional and different issues and claims that also can arise in and relate to partition actions and co-owner tenant in common disputes, such as claims and counter claims of wrongdoing, breach of duties, for damages or reimbursement, and possibly for costs or attorneys’ fees.

Best to you, David Tate, Esq.

Please reach out on this topic or on other topics if you wish.

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Thank you for viewing and reading this discussion. Please do pass this blog and blog post and information to other people who would be interested as it is only through collaboration and sharing that great things and success are more quickly achieved. If you are interested in discussing anything that I have said in the discussion above or in either of my two blogs (see blog addresses below), or if you simply want to reach out or are seeking assistance, it is best to reach me by email at dave@tateattorney.com.

David Tate, Esq. (and inactive CPA)

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Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation, or as or for my opinions and views on the subject matter.

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David Tate, Esq. (and inactive California CPA) – practicing only as an attorney in California.