Coming into law Jan. 1 2022 are changes to the Partition Act. AB-633 is amending current rules. I'll update these when they go into effect.
I have successfully negotiated 8 partition sales all thru different attorneys at BPE Law Group and other attorneys in Sacramento. I’m familiar with the process and what the court requires of me. Each partition is different and has its challenges since there’s one party who doesn’t really want to sell. Partition sales don’t happen very often but I think we’ll be seeing more of them in the future since more and more people are buying properties together. The cost of real estate is causing more and more families and friends to pool their money to buyer a house. These partition sales occur when a co-owner wants to sell. In our great state, any co-owner can force a sale. These tend to happen after boyfriend / girlfriend break up and have a house to sell, or upon a death and the heir wants the money. Here’s more about the process, but if you have questions about this I’d be happy to help and refer you to an attorney for a consult. If you are an attorney looking for a broker to assist, you can find my resume below that you can download so you can supply to the court.
Do you need a resume to supply to the courts? Resume.docx
1. The Demand for Sale
- Any co-owner can force
a sale or buy-out. Under California law, no-one can be compelled to remain a
co-owner of real estate if they don't want to. People become co-owners in many
different ways including purchase, inheritance, gifts, foreclosure, etc. But
often, for as many different reasons, they want out. This triggers a lot of
related issues such as:
(1) What is the Property really worth?
(2) Is a buy-out price based upon current fair
market value or what the owners would net from any actual sale after payment of
sales costs and commissions?
(3) Are there Leases in effect giving tenants
occupancy rights that may affect sale?
Bottom-line however, if the parties cannot reach a buy-out or sale agreement,
the person who wants out can force the sale through a two-part legal process
called Partition and Accounting. But before that commences, typically the one
that wants out will have an attorney-generated Demand for Sale served on the
other party. While the involvement of an attorney ratchets up the seriousness
of the matter, the Demand also serves the important legal purpose of putting
the refusing owner on legal notice that unless they agree to sell or buy-out, a
lawsuit will be filed against them to force the sale. This step may
become critical when it comes around to determining who is going to pay the
costs of the legal action.
2. The Partition lawsuit
- The person seeking to force the sale starts the legal process by filing a
lawsuit against the other requesting the Court to Order a division of the
common property. This division or partition can be accomplished by a physical
division of the property, a sale of the property and a division of the
proceeds, or a partition by appraisal whereby one co-tenant acquires the
interests of the other co-tenants based on a court ordered and supervised
appraisal. Since a partition action is an action in equity (fairness), the
court, unless there is agreement, will determine which method of division is
fairest. Significantly, because the person who refused to sell has essentially
forced the other to go to Court to force the sale, the Plaintiff can typically
recover Attorneys' fees where they are incurred "for the common
benefit" of parties entitled to share in the lands divided. This is why
the Demand for Sale is important. Since this is a lawsuit that impacts
title to the real property, at the time the Complaint is filed to start the
lawsuit, the Plaintiff will also record a "Notice of Pending Action"
(also called a Lis Pendens) which will tie up the title and prevent any
transfers of title until the dispute is either settled or decided by the Court.
3. Appointment of
Referee - California law does not simply require that the
parties list the Property for sale by a mutually acceptable real estate broker.
Instead, the law requires that the Court appoint a neutral third party called a
"Referee" who will have the Property appraised, contract with a
Listing Broker, and handle the negotiations for the benefit of both the current
and prospective owners. Referees are typically attorneys or real estate
brokers acting as an agent of the Court. They are paid for their services from
the sale proceeds.
4. The Property Sale
- assuming that the Court finds that there is good cause for the Property to be
sold, the Court will issue an Order instructing the Referee to cause the
Property to be sold and requiring that the Parties cooperate as is needed.
Pricing is generally set based upon a value determination from a licensed
Appraiser. The Property is generally then listed for sale at that price with a
licensed real estate professional. From this point forward it is just like any
other sale except the Court stands ready to resolve any disputes that arise
along the way. If a purchase offer is received, either party will generally
still be able to buy-out the other at that price although some commission
liability may remain if they do so.
5. The Accounting Phase
- After the sale is completed, all of the remaining sale proceeds are available
for division between the former owners. Unless and agreement is made between
the parties, the Judge will determine who is entitled to what from the
proceeds. This typically flows as follows: (1) the Receiver fees and any
remaining costs of sale are paid; (2) the Plaintiff is reimbursed for
their costs and attorneys incurred fees in forcing the sale; (3) Any
costs such as taxes, utilities, etc. paid by one side for which the other
has not contributed will be reimbursed so that the parties' contributions match
their ownership interests in the Property; 4) income earned from rents or other
use of the property will be distributed; and (5) any remaining proceeds are
divided between the parties according to their ownership interests.
If you're looking for a good local real estate attorney, I'd recommend contacting BPE Law Group.
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