Can a Co-Owner Buy the Property in the Partition Action?

Yes. While co-owners have the opportunity to purchase each other’s shares, navigating this path can introduce potential disputes and requires adherence to specific state laws and court procedures aimed at co-owners seeking to acquire interests. Exploring the feasibility of a co-owner purchasing property in a partition action merges legal intricacies and strategic considerations within the partition process. Talkov Law’s partition attorneys offer invaluable support, providing strategic advice and simplifying the transaction process to ensure a favorable outcome within the legal framework, making the complex process of co-owner buyouts more navigable and compliant.

Buyout Process Under the Partition of Real Property Act

The newest co-owner buy-out technique arises under the Partition of Real Property Act effective January 1, 2023, as follows:

If any cotenant requested partition by sale, the court shall, after the determination of value under Section 874.316, send notice to the parties that any cotenant except a cotenant that requested partition by sale may buy all the interests of the cotenants that requested partition by sale.

California Code of Civil Procedure 874.317(a)

This means that if a co-owner, usually a plaintiff, requested partition by sale, usually by filing a complaint for partition by sale, the other co-owner, usually the defendant, has the right to ask for an appraised buyout of the property. This is a unilateral right that can be exercised only by the co-owner who did not request partition by sale.

Appraised Value for Buy Out

Within the Partition of Real Property Act, California Code of Civil Procedure 874.316 establishes a protocol for appraising property in partition actions, dictating how courts should assess fair market value, the conditions under which they may accept an agreed valuation by cotenants, and the criteria for appointing an independent appraiser to ensure an impartial valuation process as follows:

(b) If all cotenants have agreed to the value of the property or to another method of valuation, the court shall adopt that value or the value produced by the agreed method of valuation.

(c) 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.

(d) 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.

California Code of Civil Procedure 874.316(b)-(d)

The most common issues arise under subsection (d) whereby the court will hold a hearing on the value of the property under subsection (g) after the appraisal is filed with the court under subsection (f) of California Code of Civil Procedure 874.316.

Private Versus Public Auction

Code of Civil Procedure 874.320 details the court’s role in deciding between an open-market sale, sealed bids, or auction for partitioning real property. It emphasizes the court’s discretion to select the most economically advantageous and fair method for co-tenants, the appointment of a broker if parties can agree, and the procedures for handling offers below the determined property value, highlighting the law’s flexibility to adapt to different sale circumstances and its aim to balance efficiency with fairness among co-owners.

Some of the terminology used in this area of law is confusing. For example, the phrase “private auction” gives co-owners the belief that there will be a secret auction in an alleyway. However, as a practical matter, the referee will generally hire a real estate broker to market a residence on the MLS, Zillow, Redfin, Trulia, etc. just as a normal owner would, or market a commercial property on LoopNet/Co-Star. This will result in top value. In turn, the referee will ask for court approval of this “private” sale. Invariably, the co-owners have already realized that the proposed buyer is paying top dollar such that they will stipulate to the sale.

Working with an attorney who can select the most appropriate California partition referees will ensure that fair market value is obtained.

At Sale, All Co-Owners are Eligible to Purchase the Property

Under California Code of Civil Procedure 873.690, only a small group of individuals are prohibited from purchasing property in a partition action. These ineligible individuals include the referee overseeing the partition, the attorney representing a party in the action, and the guardian or conservator of a party unless the purchase is for the benefit of the ward or conservatee. Sales to ineligible purchasers are considered void, although sales to bona fide purchasers following such prohibited sales are not disturbed. This means that co-owners have an absolute right to purchase the property, supposing they are the highest bidder under the partition statutes.

Multi-Property Co-Ownership Option: Division by Lots

When there are multiple co-owned properties, there is a unique option: division by lots and parcels. This could allow one party to obtain the property they want based on the exchange of values with the property or properties they no longer wish to own. Code of Civil Procedure 873.240.

If there is any money owed because of unequal values, the concept of owelty comes into play as follows: “Where division cannot be made equally among the parties according to their interests without prejudice to the rights of some, compensation may be required to be made by one party to another to correct the inequality.” Code of Civil Procedure § 873.250(a).

Talkov Law’s Partition Attorneys Can Help

If you’re grappling with ending a co-ownership relationship and find yourself at an impasse with your co-owner, remember that a partition action could be your strategic solution. At Talkov Law, our expertise lies in handling partition actions, with a team of skilled attorneys who are adept at resolving disputes over co-ownership throughout California. Our proven track record speaks volumes: we’ve successfully facilitated sales and resolutions in over 300 cases, ensuring our clients’ rights and interests are protected. Talkov law unlocks access to justice for co-owners by funding your case. For qualified cases, you pay no fees until we successfully partition your property by obtaining a sale on the market or to your co-owner! Call (844) 4-TALKOV (825568) or contact us online to schedule your free, 15-minute consultation with Talkov Law.

About Scott Talkov

Scott Talkov is a partition lawyer in California. He founded Talkov Law Corp. after more than one decade of experience at a California real estate litigation firm, where he served as one of the firm's partners. He has been featured on ABC 7, CNN, KCBS, and KCAL-9, and in the Los Angeles Times, the Orange County Register, the San Diego Union-Tribune, the Press-Enterprise, and in Los Angeles Lawyer Magazine. Scott has been named a Super Lawyers Rising Star for 9 consecutive years. He can be reached about new matters at info@talkovlaw.com or (844) 4-TALKOV (825568). He can also be contacted directly at scott@talkovlaw.com.

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