What is a partition action? A partition action divides up the existing interests of the owners of real property. Partition is usually accomplished by a court action, but can also be achieved by the parties outside of court. The proper jurisdiction is the superior court of the county in which the property is located. When a parcel of real property is jointly owned by two or more parties and the request of one owner to divide the interests of the owners is denied, the party who wants to divide the interests may do so by bringing a partition lawsuit in court against the other owners.
Under California Code of Civil Procedure (“C.C.P.”) section 872.210, an owner of real property may sue for partition. C.C.P. 872.230 specifies the necessary allegations of the complaint:
- A description of the property. Both the legal description and the street address must be given for real property.
- The plaintiff’s interests as owner and lienholder.
- All interests of record or known to the plaintiff that the plaintiff reasonably believes will be affected by the action.
- The estate to be partitioned and a prayer for partition.
- If a sale of the property is sought, facts justifying the sale.
In a partition action, the party filing is entitled to attorneys’ fees pursuant to C.C.P. 874.040, which states “the court shall apportion the costs of partition among the parties in proportion to their interests or make such apportionment as may be equitable.”
A co-owner can be the administrator or executor of an estate, a conservator, or a receiver appointed by the court, even if they do not have an actual interest in the property. The demand for partition must be granted by the court to such plaintiffs, although the details of the order can vary widely. The order for the sale is typically an Interlocutory Judgment of Partition by Sale, either issued soon after the lawsuit is filed but sometimes not until all of the financial and legal issues are resolved.
Of course, the parties can always reach an agreement to partition a property without resort to litigation, either through negotiation or mediation. Whether a referee should be involved after the parties have agreed to a sale will depend on the degree of amicability. If there are strong, underlying tensions that might interfere with the sale process or which will prevent effective marketing of the property, it may be appropriate to file a friendly partition action and obtain the appointment of a referee. In many respects, the role of the referee is similar to that of a receiver and special master. The referee is a “quasi” judicial officer whose responsibilities are, in effect, an extension of the court. The referee is a neutral party and does not represent either side of the dispute even if his or her appointment is the result of the nomination by one side, as is usually the case. Creative use of the referee can often save a great deal of money and may result in higher proceeds from the sale. Ideally, the referee should have both solid litigation and real estate experience.
It is a statutory requirement that a Lis Pendens be recorded when commencing the lawsuit. And, it is also a requirement to name as defendants all of the lenders, which has the potential of triggering an immediate calling of the mortgage loan. More typically, however, the lenders enter into a stipulation that allows them to sit out the litigation, so long as the mortgage loan is kept current while the case is pending. Some parties deliberately avoid bringing the lender into the lawsuit to avoid any loan acceleration problems. If a referee is appointed, normally the referee is the only person thereafter authorized to sign a deed or to act in a fashion that would encumber the property.
Some referees are both attorneys and licensed real estate brokers. In appropriate cases, they may be willing to participate as the listing broker in lieu of receiving separate referee fees. While this arrangement may not be suitable in all instances, it can substantially reduce the cost of the partition sale to the litigants and can result in a more efficient and effective sale process. Referees who agree to be compensated in this fashion often have relationships with title officers who understand the complexities and issues generally relating to a partition sale. It is very important that the title officer fully understand the nature and complexities of the sale and it is generally the referee’s responsibility to make sure that occurs. This is very important, for the typical title officer has seldom, if ever seen this type of proceeding. Likewise, most real estate brokers are unfamiliar with partition sales and simply do not understand that they must be handled in conformity with the statutes. The appointment of an inexperienced broker or sales agent could be a costly mistake. As an example of the differences between a partition sale and an ordinary escrow, the real estate commission in an ordinary sale is paid from the escrow and at the time that title is transferred. In a partition sale, payment of the commission should await the distribution order. Similarly, in a conventional sale, once the parties are in contract and the conditions are fulfilled, the matter proceeds to closing without concern for third parties. In a partition sale, the buyer’s broker often can be displaced during the confirmation process by an overbid buyer who is represented by another broker, and if so, the escrow process begins anew. All claims between the parties must be resolved before the proceeds are distributed.
If you have questions or need assistance with partition matters, please contact our law firm.