A right of first refusal does not take away a California co-owner’s right to partition. In LEG Investments v. Boxler (2010) 183 Cal.App.4th 484, the Court of Appeal held that this common clause only adds a step: the co-owner who wants out must first offer its share to the other owner. Once that owner says no, the co-owner can file a partition action and force the sale of the jointly owned property.
The case is the leading California decision on the right of first refusal in a partition action, and it matters to anyone who signed a tenancy in common agreement or shares a jointly owned vacation property.
The Facts: A Lake Tahoe Vacation Home Split 50/50
In 1976, two couples bought a lakefront home at Lake Tahoe, each owning half as tenants in common. In 1993, the owners signed a written co-ownership agreement. It gave each owner a right of first refusal: if one owner received a genuine offer for its half, the other owner could buy that half at the same price and on the same terms. The agreement ran for 30 years, renewed automatically, and bound future owners.
LEG Investments bought one half in 1998. Disputes with the other owners, the Boxlers, began almost at once, including over cleaning, maintenance, and repairs. In 2005, an experienced Lake Tahoe investor offered $1.4 million for LEG’s half. LEG sent the offer to the Boxlers, who declined in writing to use their right of first refusal. The investor then met the Boxlers, decided he would not co-own with them, and withdrew.
In 2006, LEG filed for partition by sale.
The Trial Court Said the Clause Waived Partition
The Boxlers argued that the right of first refusal was a waiver of the right to partition, one of the few affirmative defenses to a partition action. They also argued that a sale would be unfair to them, a theory California courts have since rejected, as explained in our article on why fairness is not a defense to partition.
The Placer County trial court agreed with the Boxlers on waiver. It ruled that the clause barred partition for the life of the agreement and awarded the Boxlers $86,955 in attorney’s fees under the agreement’s fee clause. LEG was left holding half of a house it could neither sell nor divide.
The Court of Appeal: A Right of First Refusal Modifies Partition but Does Not Waive It
The Third District Court of Appeal reversed. It started from the rule in California Code of Civil Procedure section 872.710, one of the California partition statutes:
“A co-owner of property has an absolute right to partition unless barred by a valid waiver. (Code Civ. Proc., § 872.710, subd. (b).)”
LEG Investments v. Boxler (2010) 183 Cal.App.4th 484, 493
That is the absolute right to partition, and California Code of Civil Procedure section 872.210 lets any co-owner bring the case. The question was whether the right of first refusal took that right away.
No Express Waiver
The agreement never mentioned partition or waiver, so there was no express waiver. As the court put it, “A right of first refusal has been construed only as an implied waiver or modification of the right to partition.” (LEG Investments v. Boxler (2010) 183 Cal.App.4th 484, 494.)
No Permanent Implied Waiver Either
The court then asked what the clause was for. A right of first refusal lets the remaining owner control who becomes a new co-owner and buy the share at the market price of a fractional interest, set by a real outside buyer. Both purposes are fully served once the remaining owner gets the first chance to buy. Reading the clause as a 30-year ban on partition was not needed for either purpose, and the court called that reading disfavored because it would restrict the owner’s ability to sell.
The court also relied on the reason partition exists: “The policy behind a partition action is to permanently end all disputes about property and to remove all obstructions to its free enjoyment.” (LEG Investments v. Boxler (2010) 183 Cal.App.4th 484, 497.) LEG had offered evidence that no buyer would agree to co-own with the Boxlers, so a permanent waiver would have trapped LEG in the property.
Following a 1964 Court of Appeal decision, the court held that the right of first refusal modified the right to partition by requiring the selling owner to comply with the clause first. LEG had done that. The Boxlers had declined, and they never offered admissible evidence that the $1.4 million offer was anything but genuine. In fact, their own refusal letter called it a “bona fide offer.”
The Result: An Order for Partition by Sale
The Court of Appeal reversed the judgment and the $86,955 fee award. It directed the trial court to grant LEG’s motion and “to enter an interlocutory judgment directing partition of the Property by sale.” (LEG Investments v. Boxler (2010) 183 Cal.App.4th 484, 497–498.)
That order is the first-phase ruling described in California Code of Civil Procedure section 872.720, and the case shows it can be won by motion rather than trial. Our guides on the interlocutory judgment of partition and how to obtain an interlocutory judgment of partition explain that step.
Both sides had agreed that a sale was more fair than physically dividing the house, called partition in kind, which is the standard in California Code of Civil Procedure section 872.820. From there, a partition referee typically sells the property, and the court divides the proceeds after the partition offsets and accounting under California Code of Civil Procedure section 872.140.
What LEG Investments v. Boxler Means for California Co-Owners
- A right of first refusal, standing alone, does not permanently bar partition.
- The co-owner who wants out must first offer its share on the terms of a genuine outside offer.
- Once the other owner declines and the outside sale falls through, the door to partition is open, though a negotiated co-owner buyout can still end the case.
- A prevailing-party fee clause cuts both ways, as the reversed fee award shows. See attorney’s fees in a California partition action.
Courts read waivers of partition narrowly, and a waiver rarely happens by accident, as explained in Did I Accidentally Waive My Right to Partition? For newer cases, the Partition of Real Property Act generally requires a waiver to be in writing. When drafting a co-ownership agreement, we recommend stating plainly that partition is not waived.
Honor the Right of First Refusal, Then File Your California Partition Action
If your co-ownership agreement has a right of first refusal, the path to a sale runs through it, not around it. Offer your share on the terms of a real offer and keep the paperwork. If your co-owner declines, you can still file a partition lawsuit.
Talkov Law can help. With 12 full-time partition attorneys and experience in over 650 partition actions throughout California, our team handles every step of the process, from honoring the right of first refusal through the referee’s sale and the final distribution of proceeds. Call (877) PARTITION (727-8484) today or contact us online to get started.
