A partition action is a legal process used to resolve disputes among co-owners of a property. When multiple individuals or entities jointly own a piece of real estate and cannot reach an agreement on its use, management, or potential sale, a partition action can be initiated. This legal proceeding allows the co-owners to seek a court-ordered division or sale of the property, effectively severing their joint ownership. The court may either physically divide the property among the owners or order its sale, with the proceeds being distributed among the co-owners based on their respective ownership interests. A partition action provides a legal framework to fairly address conflicting interests and ensure an equitable resolution in situations where joint ownership becomes untenable.
Sometimes, co-owners of a property are simply unable to solve conflicts on their own. While it would be wonderful if everyone could agree on how to manage a property that they own jointly with others, that is not always the case.
These conflicts often happen between divorcing or divorced couples, siblings with a joint inheritance, business partners who are dissolving their partnership, and friends or family members who disagree on what to do next with something they own together.
Conflict can arise over how to manage, renovate, improve, sell, or use the property. There can also be questions about when or how to dispose of the property.
The partition remedy may need to be implemented in circumstances like these. A partition action can be used for all sorts of real property, including, but not limited to, real estate like single-family and multi-family homes, commercial buildings, apartment complexes, investment properties, and land parcels.
A partition referee is a neutral, court-appointed individual who makes decisions when co-owners cannot do so.
The role is governed by Section 872.720 of California’s Code of Civil Procedure, which states: “[i]f the court finds that the plaintiff is entitled to partition, it shall make an interlocutory judgment that determines the interests of the parties in the property and orders the partition of the property and, unless it is to be later determined, the manner of partition.”
In a dispute, each co-owner has the right to request a partition referee to be appointed. The referee’s responsibility is to ensure that the sale is handled efficiently and fairly. Each owner has their own arguments regarding how they should be compensated for the sale, and the referee ensures that the court’s decisions regarding the division of property are fairly and equitably enforced.
Partition referees manage complicated scenarios in which they must determine the most efficient way to oversee the sale of the property and the appropriate distribution that is provided to each owner.
Distribution is determined by the courts and the referee by evaluating each owner’s past and current expenditures related to the property including mortgage payments, insurance payments, utility bills, repair costs, and building improvements.
Now that we know what a partition referee is, let’s talk about how one gets appointed.
Once a complaint for partition has been filed with the court, most plaintiffs are eager to get the court to appoint a referee. It is important to remember that it may take some time for this process to be completed.
As experienced partition referees, Griswold Law has seen all sides of partition cases. Interestingly, we have seen courts order the partition of property through a variety of procedural channels, including some that may be at odds with California law.
In every partition case, the court’s first step is to verify if the party has a right to a partition. This can only be done through one of three ways: a trial, summary adjudication, or stipulation.
Section 872.710(a) of California’s Code of Civil Procedure states that “[a]t the trial, the court shall determine whether the plaintiff has the right to partition.”
Assuming the right to a partition is confirmed, the next step is as follows: The court “shall make an interlocutory judgment that determines the interests of the parties in the property and orders the partition of the property and, unless it is to be later determined, the manner of partition.” This is from the Code of Civil Procedure § 872.720.
The court in Bacon v. Wahrhaftig, 97 Cal.App.2d 599, 603 (1950), stated that “[n]o partition can be had until the interests of all the parties have been ascertained and settled by a trial.” Courts should not order partition upon the motion or ex parte application of a party, although we have seen that occur.
Some daring parties may try to expedite the process by seeking the appointment of a referee via noticed motion, but good opposing counsel will be ready to point out that the case law states that a trial is required.
In many partition cases, enough of the facts are undisputed that summary adjudication may be a viable route for a party seeking a referee. Additionally, the parties may be able to stipulate the appointment of a referee.
It is important that the party seeking the partition vets the potential referee before making the nomination. The process that a partition referee must go through to sell property is specifically outlined in the Code of Civil Procedure, and the nominated referee must have the requisite experience conducting partition sales.
The sale process may include the publication of a notice of sale, potential overbid, specific counteroffer terms, and unique escrow or title requirements that will likely be foreign to someone who has never previously overseen a partition sale.
Once a partition referee sells a property, they split up the funds among the owners and the case is over, right? Well, not exactly.
In any partition case, “[t]he court may…order allowance, accounting, contribution, or other compensatory adjustment among the parties according to the principles of equity,” meaning that the court may change how the money is distributed to ensure fairness. (California Code of Civil Procedure section 872.140)
There are two main reasons why every case includes an accounting phase:
Different courts may handle the accounting phase of a partition case differently.
Some may ask the parties to file briefs with the Court with their arguments and evidence regarding the potential equitable adjustments to the distribution of the sale proceeds. Many courts, if not most, ask the partition referee to oversee the accounting by receiving arguments in the form of written briefs from the parties.
After reviewing these briefs, the partition referee makes a recommendation to the Court regarding the distribution of proceeds, including compensatory adjustments.
When considering the distribution of sale proceeds and potential compensatory adjustments to each party’s share, the starting point is always the court’s interlocutory judgment for partition, which “determines the interest of the parties in the property.” (California Code of Civil Procedure section 872.720)
From there, the Court may deduct or add to a party’s distribution depending on their financial contribution to the benefit of the property.
Some of the types of payments that may be considered during the accounting process include:
Reimbursement for improvements is an interesting example because fellow co-owners do not have to consent to the improvements for reimbursement to occur, as long as they were undertaken in good faith and enhanced the value of the property.
This means that even though a co-owner may have objected to certain improvements, they still may be responsible for some of the costs.
Partition cases often involve scenarios where only one co-owner resides at the property.
All co-owners have a right to occupy their property. The out-of-possession owners are generally not able to recover the rental value of the property from the owner in possession, though there are some exceptions to this rule.
In summary, every partition action includes an accounting phase, and co-owners will be entitled to compensatory adjustments for repairs, improvements, and other payments made that enhance the value of the property.
Good record-keeping will make the process much easier for all involved. As always, parties to a partition action should seek counsel with experience with partitions and who understands the nuances of the accounting phase of these cases.
Learn more by visiting Griswold Law’s resource page on partition referee services. We also invite you to book a consultation with us!