If a claim or action is brought for partition of real property to which the California Partition of Real Property Act applies – e.g., if the ownership is held as tenants in common, the Court shall determine the fair market value of the property, after which the tenant in common owner or owners who did not bring the partition claim or action have the right to buy the interest of the tenant in common owner or owners who did bring the claim or action for partition.

            Obviously the Court’s determination of fair market value is a key determination in the partition case. Note however, if the property is ultimately sold on the open market, such as because the tenant in common owner or owners who is or who are entitled to purchase the interest or interests of the tenant in common owner or owners who initiated the partition action decide not to purchase, the Court can allow sale of the property for an amount or value that is greater or less than the appraised value. Thus, partition actions and the valuation and partition process present multiple strategy points for all and each tenant in common.

            In relevant part California Code of Civil Procedure §874.316 contains many of the valuation provisions.

            If the cotenants (i.e., the tenant in common owners) have agreed to the value of the property or to a method of valuation, the Court shall adopt that value or the value that is produced by the agreed upon method of valuation.

            If the Court determines that the evidentiary value of an appraisal is outweighed by the cost of the appraisal, the Court, after an evidentiary hearing, shall determine the fair market value of the property and send notice to the parties of the value.

            If the Court orders an appraisal, the Court shall appoint a disinterested real estate appraiser licensed in the State of California to determine the fair market value of the property assuming sole ownership of the fee simple estate. On completion of the appraisal, the appraiser shall file a sworn or verified appraisal with the Court. If an appraisal is conducted, not later than 10 days after the appraisal is filed, the Court shall send notice to each party with a known address, stating all of the following:

1. The appraised fair market value of the property.

• That the appraisal is available at the Court Clerk’s office.

• That a party may file with the Court an objection to the appraisal not later than 30 days after the notice is sent, stating the grounds for the objection.

            Continuing with the appraisal valuation process, the Court shall conduct a hearing to determine the fair market value of the property not sooner than 30 days after a copy of the notice of the appraisal is sent to each party, whether or not an objection to the appraisal is filed. Further, in addition to the Court-ordered appraisal, the Court may consider any other evidence of value offered by a party (thus, e.g., evidence of a different value). After the hearing, but before considering the merits of the partition action, the Court shall determine the fair market value of the property and send notice to the parties of the value.

Each situation and case must be carefully evaluated. And since the Partition of Real Property Act is very new, there are few guiding legal authorities. I am doing a series of posts about the Partition of Real Property Act – this post is the second post about the Act and the partition process. Next up, tenant in common buyout rights and the buyout process, and other issues and situations that arise in real property partition actions.

Best to you, David Tate, Esq.

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

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David Tate, Esq. (and inactive CPA)

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