Code of Civil Procedure 874.317 CCP – Cotenant buyout of interests (Partition of Real Property Act)

California Code of Civil Procedure 874.317 is the California partition statute that sets forth the manner in which a co-owner of property can buy out the interests of the other co-owners once the fair market value of the property has been determined. In conjunction with the appraised valuation process under Code of Civil Procedure 874.316, these statutes form the essence of the Partition of Real Property Act. Talkov Law has developed cutting edge strategies using this new law to ensure that our clients put a prompt and favorable termination to partition actions.

Code of Civil Procedure 874.317 states the following:

(a) 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.

(b) Not later than 45 days after the notice is sent under subdivision (a), any cotenant except a cotenant that requested partition by sale may give notice to the court that it elects to buy all the interests of the cotenants that requested partition by sale.

(c) The purchase price for each of the interests of a cotenant that requested partition by sale is the value of the entire parcel determined under Section 874.316 multiplied by the cotenant’s fractional ownership of the entire parcel.

(d) After expiration of the period described in subdivision (b), the following rules apply:

(1) If only one cotenant elects to buy all the interests of the cotenants that requested partition by sale, the court shall notify all the parties of that fact.

(2) If more than one cotenant elects to buy all the interests of the cotenants that requested partition by sale, the court shall allocate the right to buy those interests among the electing cotenants based on each electing cotenant’s existing fractional ownership of the entire parcel divided by the total existing fractional ownership of all cotenants electing to buy and send notice to all the parties of that fact and of the price to be paid by each electing cotenant.

(3) If no cotenant elects to buy all the interests of the cotenants that requested partition by sale, the court shall send notice to all the parties of that fact and resolve the partition action under paragraphs (a) and (b) of Section 874.318.

(e) If the court sends notice to the parties under paragraph (1) or (2) of subdivision (d), the court shall set a date, not sooner than 60 days after the date the notice was sent, by which electing cotenants shall pay their apportioned price into the court. After this date, the following rules apply:

(1) If all electing cotenants timely pay their apportioned price into court, the court shall issue an order reallocating all the interests of the cotenants and disburse the amounts held by the court to the persons entitled to them.

(2) If no electing cotenant timely pays its apportioned price, the court shall resolve the partition action under paragraphs (a) and (b) of Section 874.318 as if the interests of the cotenants that requested partition by sale were not purchased.

(3) If one or more but not all of the electing cotenants fail to pay their apportioned price on time, the court, on motion, shall give notice to the electing cotenants that paid their apportioned price of the interest remaining and the price for all that interest.

(f) Not later than 20 days after the court gives notice pursuant to paragraph (3) of subdivision (e), any cotenant that paid may elect to purchase all of the remaining interest by paying the entire price into the court. After the 20-day period, the following rules apply:

(1) If only one cotenant pays the entire price for the remaining interest, the court shall issue an order reallocating the remaining interest to that cotenant. The court shall promptly issue an order reallocating the interests of all of the cotenants and disburse the amounts held by it to the persons entitled to them.

(2) If no cotenant pays the entire price for the remaining interest, the court shall resolve the partition action under paragraphs (a) and (b) of Section 874.318 as if the interests of the cotenants that requested partition by sale were not purchased.(3) If more than one cotenant pays the entire price for the remaining interest, the court shall reapportion the remaining interest among those paying cotenants, based on each paying cotenant’s original fractional ownership of the entire parcel divided by the total original fractional ownership of all cotenants that paid the entire price for the remaining interest. The court shall issue promptly an order reallocating all of the cotenants’ interests, disburse the amounts held by it to the persons entitled to them, and promptly refund any excess payment held by the court.

(g) Not later than 45 days after the court sends notice to the parties pursuant to subdivision (a), any cotenant entitled to buy an interest under this section may request the court to authorize the sale as part of the pending action of the interests of cotenants named as defendants and served with the complaint but that did not appear in the action.

(h) If the court receives a timely request under subdivision (g), the court, after a hearing, may deny the request or authorize the requested additional sale on such terms as the court determines are fair and reasonable, subject to the following limitations: (1) A sale authorized under this subdivision may occur only after the purchase prices for all interests subject to sale under subdivisions (a) to (f), inclusive, have been paid into court and those interests have been reallocated among the cotenants as provided in those subdivisions.(2) The purchase price for the interest of a nonappearing cotenant is based on the court’s determination of value under Section 874.316.

California Code of Civil Procedure Section 874.317

Partition of Real Property Act

• California Partition of Real Property Act Statutes
  • CCP § 874.311. Short Title; Application of Act
  • CCP § 874.312. Definitions
  • CCP § 874.313. Applicability; Relation to Other Laws
  • CCP § 874.314. Method of Service; Notice by Publication
  • CCP § 874.315. Referees
  • CCP § 874.316. Determination of Fair Market Value; Notice
  • CCP § 874.317. Cotenant Buyout of Interests
  • CCP § 874.318. Partition Alternatives
  • CCP § 874.319. Considerations for Partition in Kind
  • CCP § 874.320. Court Ordered Open-Market Sale; Sealed Bids; Auction
  • CCP § 874.321. Filing Report for Open-Market Sales
  • CCP § 874.321.5. Apportionment of the Costs of Partition
  • CCP § 874.322. Repealed by Stats.2022, c. 82 (A.B.2245), § 12
  • CCP § 874.323. Supersedes the Electronic Signatures in Global and National Commerce Act

Partition of Real Property Act Forces a Partition by Appraisal, Which Would Have Otherwise Been Only With the Consent of All Owners

The essence of the Partition of Real Property Act in California, previously known as the Uniform Partition of Heirs Property Act, is that it forces the parties into a partition by appraisal process, which would have otherwise been voluntary. Since that process was voluntary, and few people consent to a lawsuit, it was rarely used. This forced partition by appraisal will increase its utilization throughout California partition actions.

Only a Co-Owner Who Has Not Requested Partition by Sale Can Buyout the Other Co-Owners at the Appraised Price

The Partition of Real Property Act in California also allows a party who did not request a partition by sale to purchase the interest of a party who did request partition by sale.

It does so through Section 874.317(a), which explains that the court will “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.” Section 874.317(b) explains again that only a co-owner “except a cotenant that requested partition by sale may give notice to the court that it elects to buy all the interests of the cotenants that requested partition by sale.” “‘Partition by sale’ means a court-ordered sale of the entire property, whether by auction, sealed bids, or open-market sale conducted under Section 874.320.” Code Civ. Proc. § 874.312(b).

A trial court ruling obtained by Talkov Law interpreted “874.312 to mean that in order to request a court-ordered sale, one must first initiate a lawsuit in a court, not simply request it informally amongst the parties.”

In other words, if you elect a partition by sale by filing a partition complaint, you are prohibited from buying the property at the appraised price, even if the appraisal comes back lower than expected, i.e., the buyout price is a great deal. Skilled partition attorneys can help plaintiffs assert their rights without running afoul of new laws in this area.

Purchase Price Calculation

Section 874.317(c) sets forth the calculation for the purchase price, explaining that the “purchase price for each of the interests of a cotenant that requested partition by sale is the value of the entire parcel determined under Section 874.316 multiplied by the cotenant’s fractional ownership of the entire parcel.” Seemingly, this allows a party to purchase only the interest of the selling party, rather than being required to buy the entire property, then to wait until a later time to determine if they receive part of those proceeds back as a fractional owner.

Purchase Procedures

Section 874.317(d) explains what happens when a co-owner elects to purchase the property at the appraised price. First: “If only one cotenant elects to buy all the interests of the cotenants that requested partition by sale, the court shall notify all the parties of that fact.”^[1]California Code of Civil Procedure Section 874.317(d)(1)

Second: “If more than one cotenant elects to buy all the interests of the cotenants that requested partition by sale, the court shall allocate the right to buy those interests among the electing cotenants based on each electing cotenant’s existing fractional ownership of the entire parcel divided by the total existing fractional ownership of all cotenants electing to buy and send notice to all the parties of that fact and of the price to be paid by each electing cotenant.”^[2]California Code of Civil Procedure Section 874.317(d)(2)In this scenario, perhaps multiple siblings still live in the family home and wish to purchase the property.

Third: “If no cotenant elects to buy all the interests of the cotenants that requested partition by sale, the court shall send notice to all the parties of that fact and resolve the partition action under paragraphs (a) and (b) of Section 874.318.”^[3]California Code of Civil Procedure Section 874.317(d)(3) In turn, Section 874.318 allows for a partition in kind or partition by sale, though nearly all properties are single family residences, and nearly all such residences are subjected to a partition by sale since they cannot be divided.

Depositing the Purchase Price

Section 874.317(e) provides that the “court shall set a date, not sooner than 60 days after the date the notice was sent, by which electing cotenants shall pay their apportioned price into the court.”

In turn, if “all electing cotenants timely pay their apportioned price into court, the court shall issue an order reallocating all the interests of the cotenants and disburse the amounts held by the court to the persons entitled to them.” ^[4]California Code of Civil Procedure Section 874.317(e)(1)This means that the money is disbursed promptly in a Partition of Real Property Act, which is a big change.

Are Offsets Allowed Under the Partition of Real Property Act in California?

Notably absent under the Partition of Real Property Act is any specific procedure for requesting more than the fractional interest due to partition offsets.

Nonetheless, there is some ambiguity as to whether offsets may be allowed. Notably, CCP 874.317(f)(1) provides that: “If only one cotenant pays the entire price for the remaining interest, the court shall issue an order reallocating the remaining interest to that cotenant. The court shall promptly issue an order reallocating the interests of all of the cotenants and disburse the amounts held by it to the persons entitled to them.” Further, under CCP 874.317(e)(1): “If all electing cotenants timely pay their apportioned price into court, the court shall issue an order reallocating all the interests of the cotenants and disburse the amounts held by the court to the persons entitled to them.” Under both scenarios, the sum is to be disbursed “to the persons entitled to them.”

Arguably, this leaves the court able to consider offsets since the Partition of Real Property Act makes clear that it “supplements the other provisions of this title and, if an action is governed by this chapter, this chapter shall control over any provisions of this title that are inconsistent with this chapter.“^[5] California Code of Civil Procedure 874.313 Potentially, this supplement to the existing law would mean the that the general partition statutes allowing for offsets against the co-owners for unpaid mortgage, taxes, insurance, etc. are applicable.

Procedure if the Deposit is Not Made

However, if none of the co-owners “timely pays its apportioned price, the court shall resolve the partition action under paragraphs (a) and (b) of Section 874.318 as if the interests of the cotenants that requested partition by sale were not purchased.” ^[6]California Code of Civil Procedure Section 874.317(e)(2) In turn, Section 874.318 allows for a partition in kind or partition by sale, though nearly all properties are single family residences, and nearly all such residences are subjected to a partition by sale since they cannot be divided.

Further: “If one or more but not all of the electing cotenants fail to pay their apportioned price on time, the court, on motion, shall give notice to the electing cotenants that paid their apportioned price of the interest remaining and the price for all that interest.” ^[7]California Code of Civil Procedure Section 874.317(e)(3)This procedure resolves the issue of some of the remaining co-owners wishing to purchase the property while one defaults on payment.

Reallocation Where Only One Co-Owner Pays the Purchase Price

Section 874.317(f) provides for certain rules where “any cotenant that paid may elect to purchase all of the remaining interest by paying the entire price into the court” within 20-days.

However, there are special rules after the 20-day period. First: “If only one cotenant pays the entire price for the remaining interest, the court shall issue an order reallocating the remaining interest to that cotenant. The court shall promptly issue an order reallocating the interests of all of the cotenants and disburse the amounts held by it to the persons entitled to them.” ^[8]California Code of Civil Procedure Section 874.317(f)(1) This allows one co-owner to own a larger percentage of ownership in the property than their other co-owner.

Second: “If no cotenant pays the entire price for the remaining interest, the court shall resolve the partition action under paragraphs (a) and (b) of Section 874.318 as if the interests of the cotenants that requested partition by sale were not purchased.”^[9]California Code of Civil Procedure Section 874.317(f)(2) In turn, Section 874.318 allows for a partition in kind or partition by sale, though nearly all properties are single family residences, and nearly all such residences are subjected to a partition by sale since they cannot be divided.

Third: “If more than one cotenant pays the entire price for the remaining interest, the court shall reapportion the remaining interest among those paying cotenants, based on each paying cotenant’s original fractional ownership of the entire parcel divided by the total original fractional ownership of all cotenants that paid the entire price for the remaining interest. The court shall issue promptly an order reallocating all of the cotenants’ interests, disburse the amounts held by it to the persons entitled to them, and promptly refund any excess payment held by the court.”^[10]California Code of Civil Procedure Section 874.317(f)(3) Once again, this allows one co-owner to become an owner of a larger portion of the co-owned property.

Talkov Law's Partition Attorneys Can Help

If you want to end your co-ownership relationship, but your co-owner won’t agree, a partition action is your only option. With eight, full time partition lawyers, Talkov Law is the #1 partition law firm in California and has handled over 430 partition actions throughout California. Every case has resulted in a sale to either a third party or one of the co-owners. Not a single court has denied our clients the right to partition or declared our client to be a non-owner. Plus, for qualified cases, there is no fee until we settle or win your case!

If you're looking to end your co-ownership dispute, contact California's premier partition action law firm by calling Talkov Law at (844) 4-TALKOV (825568) or sending us a message today.