Proving Unpaid Net Rental Proceeds Collected by a Co-Owner in a California Partition Action
Co-owning a property in California can be a profitable arrangement, particularly when it’s rented out. But what happens if one co-owner collects all the rent, perhaps for decades, but refuses to share the income? In a partition action, you may be entitled to your share of the net rental proceeds, but how can you prove the amount when you don’t have access to key financial information?
This situation can be challenging, especially if the other co-owner was solely in charge of managing the property. However, the law provides ways to obtain the necessary information and ensure you receive your fair share of the rental income.
Step 1: Understanding Your Right to Net Rental Proceeds
When a property generates rental income, each co-owner is entitled to their proportional share of the net rental income—meaning the gross rental income minus necessary expenses (e.g., taxes, repairs, insurance, and management costs). Under California law, a co-owner who has been deprived of their share of rental income may be entitled to reimbursement through an accounting in a partition action (see California Code of Civil Procedure § 872.140).
The court will adjust the division of the property or award monetary compensation based on the unpaid rental income that one co-owner owes the other.
Step 2: Discovery to Obtain Key Information
If the other co-owner managed the property and handled all the finances, you may not have the necessary records to prove what the net rental income should have been. Fortunately, the discovery process in a partition action allows you to obtain that information. Here’s what you’ll want to request:
- Bank records: Request the co-owner’s bank statements where rental payments were deposited. This can provide clear evidence of the total rent collected over the years.
- Rental agreements: Demand copies of any lease agreements with past and current tenants. This will show how much rent was agreed upon and for how long.
- Expense records: Ask for documentation of property-related expenses, such as property taxes, insurance payments, repairs, and management fees. These expenses will be deducted from the gross rental income to calculate the net proceeds owed.
- Tax returns: The co-owner may have declared rental income on their tax returns. Request these records to see how much rental income they reported to the IRS.
This discovery process is essential if you don’t have access to the financial records yourself. You can ask the court to compel the other co-owner to produce these documents if they’re unwilling to share them voluntarily (see California Code of Civil Procedure §§ 2030, 2031).
For more information on the partition process and discovery, visit our California Partition Actions Guide.
Step 3: Leverage Public Records and Comparable Rentals
In addition to discovery, public records and rental data can help estimate the rental income:
- Comparable rental rates: Look at similar properties in the neighborhood to estimate what the property may have rented for. This can provide a benchmark for calculating potential rent if the co-owner’s records are incomplete or misleading.
- Property tax records: Tax records can provide valuable information about the property’s value, which can help estimate rental income over time.
- Past sales listings: If the property was ever listed for rent online, you may be able to find historical rental data through sites like Zillow or Craigslist.
Using these tactics will bolster your case when it is presented to a court or a partition referee for a report on offsets.
Step 4: Use Depositions to Get the Facts
Depositions are another key tool in proving your case. In a deposition, you can ask the co-owner questions under oath, such as:
- How much rent was collected from each tenant?
- What were the property’s ongoing expenses?
- How was the rent income handled, and where was it deposited?
By questioning the co-owner, you can uncover vital details that they may not have voluntarily disclosed. Depositions can be conducted under California Code of Civil Procedure § 2025.010.
Step 5: Hire a Real Estate Expert to Address Rental Value
Sometimes, the discovery and deposition process might not be enough to get a complete picture of the rental income. In these cases, bringing in a real estate broker or appraiser can bolster your case. A real estate broker or appraiser can estimate the fair market rental value of the property over the years, providing further evidence of how much rent the property could have generated. Some courts or partition referees preparing a report on an accounting may disregard evidence of rental value if it not presented by an expert, such as a broker or appraiser.
Step 6: Utilize an Experienced Partition Attorney to Present Your Case to the Partition Referee or the Court
Once you’ve gathered the necessary records and expert opinions, an experienced partition lawyer can prepare an accounting on the sum that should be awarded to you. While many attorneys will believe that only a judge can make this award, an interlocutory judgment of partition can assign to a partition referee the task of preparing a report on offsets. The referee or court will review your evidence and determine the amount of net rental income you’re owed. Often times, the parties will accept the findings of the partition referee, thereby ending the partition action swiftly and without a court hearing.
In a partition action, the court can:
- Order an accounting of the rental income (see California Code of Civil Procedure § 872.140).
- Award a monetary judgment to compensate you for your share of the rent from the proceed of sale.
- Adjust the division of the property to reflect the unpaid rental income.
For more information on how courts handle financial adjustments in partition actions, read our article on Accounting in Partition Actions.
Talkov Law’s Partition Attorneys Can Help
Proving unpaid net rental proceeds in a partition action can be complex, especially if the other co-owner has withheld crucial financial information. Fortunately, California’s legal system allows you to use discovery, public records, depositions, and expert testimony to gather the evidence you need.
At Talkov Law, we specialize in partition actions and can help you navigate this process to ensure you receive your rightful share of the rental income. If you believe you’re owed unpaid rent from a co-owner, contact our experienced partition attorneys today at (844) 4-TALKOV (825568) or or reach out online for a free consultation.
