In partition actions, where co-owners seek to divide or sell jointly owned property, the issue of down payment gifts can become a contentious matter. When one party receives a substantial financial gift from their family members or friends, intended to be used as a down payment for their share of the property, it can complicate the distribution of proceeds during the partition.
What are Down Payment Gift Letters?
When a co-owner applies for a mortgage, the lender may ask for disclosure of any gifted money that will pay parts of the loan in a document called a gift letter. When a down payment gift is provided, any accompanying letter or documentation may characterize the down payment gift as a gift to either one co-owner or both. When a party’s family provides a gift such as a sum of money to co-owners purchasing a home, the gift may be accompanied with writing that articulates the gift is intended for one co-owner or both. Often times, parents from one of both co-owners in a romantic relationship may provide a gift of the down payment.
If the letter explicitly states that the gift is intended for the sole benefit of one co-owner, the letter will strengthen a co-owner’s claim to retain the entirety of those funds during the partition. This may also depend upon whether the letter was ever seen or approved by the co-owner whose name is not on the gift letter. However, if the language in the letter suggests that the gift is meant for both co-owners or for the property itself, it can be interpreted as a contribution to the shared asset, potentially subject to division among the parties.
A partition attorney may also ask about the details surrounding the gift, including any accompanying documentation, the stated purpose of the gift, and the actual flow of funds. Parents or family members who provided the gift may argue that it was intended solely for their child or relative, while the opposing party may contend that the gift was meant for the shared property and should be divided accordingly as part of the accounting in a partition.
How Does Filing for Partition Help Co-owners Regain a Down Payment Gift?
“After the court has determined the share of each party in the net proceeds of the sale according to their respective interests, any claims that one party may have against the other should be deducted from the share of the party to be charged, and that of the other party should be increased accordingly.”[1]48 Cal. Jur. 3d Partition § 98 Generally “a cotenant who has advanced funds to pay common expenses generally is entitled to be reimbursed from the sale proceeds before distribution.”[2]48 Cal. Jur. 3d Partition § 98
A down payment may be reimbursed in a partition action. As explained California court: “proceeds of partition sale ordered divided ‘in the proportion of one–third to her and two–thirds to him’ based on unequal down payments.”[3]Donnelly v. Wetzel (1918) 37 Cal.App. 741, 742. Similarly, another court “decreed that plaintiff owned a one-fourth interest in the real property and that defendant owned a three-fourths interest based on their proportional unequal payments toward the purchase of the property.”[4]Cosler v. Norwood (1950) 97 Cal.App.2d 665, 666.
Who is Eligible to File a Partition?
In California, “the right to partition is absolute, and cannot be denied, ‘either because of any supposed difficulty, nor on the suggestion that the interest of the cotenants will be promoted by refusing the application or temporarily postponing action, . . . .’”[5]Priddel v. Shankie (1945) 69 Cal.App. 2d 319, 325. Generally “a cotenant is entitled to partition as a matter of absolute right; that he need not assign any reason for his demand;…The only indispensable requirement to its award is that a clear title be shown, and in no event is a partition to be denied because it will result in financial loss to the cotenants.”[6]American Medical International, Inc. v. Feller (1976) 59 Cal.App.3d 1008, 1013.
Partition actions are most commonly between siblings who have inherited property from their parents or other family members, couples who were never married and are no longer romantically involved, friends or family members who purchased property together, and previously-married couples post-divorce judgment.
Who Cannot File a Partition to Recover Down Payment?
California’s partition statutes have delineated that “partition [of] the property shall be as of right unless barred by a valid waiver.”[7]California Code of Civil Procedure 872.710(b). Similarly, A California court has found that “the right of partition may be waived by contract, either express or implied.”[8]LEG Investments v. Boxler (2010) 183 Cal.App.4th 484, 493, quoting American Medical International, Inc. v. Feller (1976) 59 Cal.App.3d 1008, 1014.
Generally, a waiver would be written and approved of as “an agreement among co-owners of property….”[9]Orien v. Lutz (2017) 16 Cal. App. 5th 957, 963. There are some scenarios where an implied waiver may bar co-owners from filing a partition action. One court found that one co-owner could occupy the home under certain conditions, which “constitute[ed] a restriction upon the rights of the parties to partition the property so long as these conditions exist, and constitutes a waiver of the right of either party to a partition during the prescribed period.”[10]Miranda v. Miranda (1947) 81 Cal.App.2d 61, 68.
Talkov Law Partition Attorneys Can Help
Co-ownership presents numerous complications, but often those complications may be resolved through a partition action to severe the co-ownership. Moreover, a partition action may be the only way to recover contributions you have made towards the property. If you’re looking to end your co-ownership dispute, Talkov Law can help. As California’s foremost experts in partition action, having Talkov Law’s partition attorneys by your side means legal strategies tailored to maximize your outcome. For a free consultation, call (844) 4-TALKOV (825568) or reach out online today.
References
| ↑1, ↑2 | 48 Cal. Jur. 3d Partition § 98 |
|---|---|
| ↑3 | Donnelly v. Wetzel (1918) 37 Cal.App. 741, 742. |
| ↑4 | Cosler v. Norwood (1950) 97 Cal.App.2d 665, 666. |
| ↑5 | Priddel v. Shankie (1945) 69 Cal.App. 2d 319, 325. |
| ↑6 | American Medical International, Inc. v. Feller (1976) 59 Cal.App.3d 1008, 1013. |
| ↑7 | California Code of Civil Procedure 872.710(b). |
| ↑8 | LEG Investments v. Boxler (2010) 183 Cal.App.4th 484, 493, quoting American Medical International, Inc. v. Feller (1976) 59 Cal.App.3d 1008, 1014. |
| ↑9 | Orien v. Lutz (2017) 16 Cal. App. 5th 957, 963. |
| ↑10 | Miranda v. Miranda (1947) 81 Cal.App.2d 61, 68. |
