Code of Civil Procedure 874.320 CCP – Court ordered open-market sale; sealed bids; auction (Partition of Real Property Act)

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California Code of Civil Procedure 874.320 the California partition statute that explains the details of how a court will sell a property under the California Partition of Real Property Act. The statute states the following:

(a) If the court orders a sale of property, the sale shall be an open-market sale unless the court finds that a sale by sealed bids or an auction would be more economically advantageous and in the best interest of the cotenants as a group.

(b) If the court orders an open-market sale and the parties, not later than 10 days after the entry of the order, agree on a real estate broker licensed in the State of California to offer the property for sale, the court shall appoint the broker and establish a reasonable commission. If the parties do not agree on a broker, the court shall appoint a disinterested real estate broker licensed in the State of California to offer the property for sale and shall establish a reasonable commission. The broker shall offer the property for sale in a commercially reasonable manner at a price no lower than the determination of value and on the terms and conditions established by the court.

(c) If the broker appointed under subdivision (b) obtains within a reasonable time an offer to purchase the property for at least the determination of value, the following requirements apply:

(1) The broker shall comply with the reporting requirements in Section 874.321.

(2) The sale shall be completed in accordance with state law.

(d) If the broker appointed under subdivision (b) does not obtain an offer to purchase the property for at least the determination of value within a reasonable time, the court, after a hearing, may do any of the following:

(1) Approve the highest outstanding offer, if any.

(2) Redetermine the value of the property and order that the property continue to be offered for an additional time.

(3) Order that the property be sold by sealed bids or at an auction.

(e) If the court orders a sale by sealed bids or an auction, the court shall set terms and conditions of the sale. If the court orders an auction, the auction shall be conducted under Chapter 6 (commencing with Section 873.510).

(f) If a purchaser is entitled to a share of the proceeds of the sale, the purchaser is entitled to a credit against the price in an amount equal to the purchaser’s share of the proceeds.

Code of Civil Procedure 874.320

Sale by Broker under Partition of Real Property Act

The statute specifies how an open-market sale will be conducted as well as specifying how a real estate broker will be appointed. Under a normal partition action, a partition referee would be appointed under California Code of Civil Procedure 873.010(a), which states: “The court shall appoint a referee to divide or sell the property as ordered by the court.”

However, while the Partition of Real Property Act does allow for a referee to be appointed under California Code of Civil Procedure 874.315, co-owners may instead choose a broker to offer the property for sale. This occurs upon a conclusion by the court that partition alternatives, notably partition in kind, do not apply under California Code of Civil Procedure 874.318(b). The purpose of this law appears to be to cut partition referees out of the process for perceived simplicity and cost savings, though many times partition referees are inexpensive and produce peace among the co-owners during the process.

It should come as no surprise that the California Association of Realtors was the sole organizational proponent of the California Partition of Real Property Act.

Expedited Sale when the a Broker’s Proposed Sale is Higher than the Appraised Value (Determination of Value)

CCP 874.320(c) provides for an expedited sale when the broker obtains a buyer that is at or above the value of the property determined by the court, which would generally be through an appraisal, as follows:

(1) The broker shall comply with the reporting requirements in Section 874.321.
(2) The sale shall be completed in accordance with state law.

In other words, no further court hearing would be required to complete the sale.

Additional Procedures When a Broker’s Proposed Sale is Lower than the Appraised Value (Determination of Value)

The California Partition of Real Property Act adds an additional requirement if the broker comes back with a buyer who is below the determination of value made by the court, generally through an appraisal, giving the court multiple options as follows under CCP 874.320(d):

(1) Approve the highest outstanding offer, if any.
(2) Redetermine the value of the property and order that the property continue to be offered for an additional time.
(3) Order that the property be sold by sealed bids or at an auction.

This means that that the appraised value if relevant even if the property is sold by a broker. However, the appraisal does not govern the value. Rather, if the broker does not obtain an offer that is at least at the appraised value (determined value), there would be an additional hearing where a any co-owner could argue against the sale to ask that “the property continue to be offered for an additional time” under CCP 874.320(d)(2).

Contact an Experienced Partition Attorney in California

If you want to end your co-ownership relationship, but your co-owner won’t agree, a partition action is your only option. Our experienced partition lawyers have years of experience ending co-ownership disputes and can help you unlock the equity in your property. For a free, 15-minute consultation with an experienced partition attorney at Talkov Law, call (844) 4-TALKOV (825568) or fill out a contact form online.

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