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What Does a Notice of Private Sale Mean in a Partition Action?

A notice of private sale in a partition action is a required notice that the partition referee is likely to be marketing the property to the public to ensure it sells for fair market value. Since the word “private” seems to suggest something other than the public marketing as though a backroom deal is occurring, this article explains this confusing term in the partition statutes.

Notice of Sale is Required

The California partition statutes provide that: “Notice of the sale of real or personal property shall… be given to every party who has appeared in the action and to such other interested persons as may have in writing requested the referee for special notice.” California Code of Civil Procedure 873.640(a). Accordingly, if the partition referee has provided notice of a sale, that may simply mean that they have begun the process of marketing the property, not that they have located a buyer.

As to why this notice if required, one court explained: “Viewing the statutory framework as a whole, it is evident the intent was to ensure that members of the public receive notice and have an opportunity to bid on property during a partition sale, whether a sale at public auction or a private sale. This is logical because, by maximizing the pool of potential bidders, one might reasonably hope to secure a higher sales price.” Cummings v. Dessel (2017) 13 Cal.App.5th 589, 600–601.

Property Must be Sold by Public Auction or Private Sale

As to the method of sale, Code of Civil Procedure Section 873.520 explains that a property subject to a partition can proceed via public auction or private sale as follows:

The property shall be sold at public auction or private sale as the court determines will be more beneficial to the parties. For the purpose of making this determination, the court may refer the matter to the referee and take into account the referee’s report.

Civil Procedure Code Section 873.520[1] In rare cases where there is more than one parcel involved, part of the property may be sold at public auction while part may be sold at private auction.

What Happens in a Partition by Private Sale?

In the case of Cummings, the court explained that “[t]he word ‘private,’ as used in the term ‘private sale’ in the partition statutes apparently refers to the bidding procedure —i.e., written bids submitted at a designated location, to be reviewed by the referee conducting the sale, presumably in a setting that is private, as compared to a public auction.[2]Cummings v. Dessel (2017) 13 Cal. App. 5th 589, 601.

“A notice of private sale must also state a place where bids or offers will be received and a day on or after which the sale will be made. A private sale may not be completed before the day specified in the notice of sale but shall be made within one year thereafter. The bids or offers for a private sale shall be in writing and left at the place designated in the notice at any time after the first publication or, if none, the posting of the notice.” [3]Cummings v. Dessel (2017) 13 Cal. App. 5th 589, 600.

Does a Private Sale Result in Fair Market Value?

Generally, a private sale should yield a buyer paying fair market value. While not specified in the partition statutes, the practical way that a private sale occurs is that the property is placed on the open market to obtain buyers. This means that residential properties will appear on the MLS, Zillow, RedFin, and other places where buyers will look for homes. In the commercial context, properties would generally be marketed on Co-Star/LoopNet or other applicable websites. In turn, the referee will receive and review bids in “private” just as a seller normally would. If there are multiple offers, the referee would do what most sellers would do, which is to ask for the highest and best offer from the top bidders, then accept the best offer. By doing so, the referee will obtain the highest offer to submit to the court for approval. Often times, the parties have already concluded that the referee has found the highest buyer and will stipulate to the sale order, thereby expediting the process.

Private Sale Bidding Cannot be Limited to Only the Parties

Discussing Cummings, California Jurisprudence explains that: “Interpreting statutes describing partition by private sale as limiting potential bidders to the parties in the individual case, however, would make the transaction effectively identical to a partition by appraisal, and would render meaningless the limitation that partition by appraisal may occur only where the parties have agreed in writing.”[4]48 Cal. Jur. 3d Partition § 86 (discussing Cummings v. Dessel (2017) 13 Cal. App. 5th 589).

Who is Ineligible to Purchase a Property Subject to a Private Sale? Can a Co-Owner Buy the Property at the Sale?

In a private sale, “members of the public receive notice and have an opportunity to bid on property during a partition sale.”[5]Cummings v. Dessel (2017) 13 Cal. App. 5th 589, 590.

“Only three categories of people are identified as being ineligible to purchase property in a partition sale, namely, a referee appointed by a court to divide or sell the property, a party’s attorney, and a party’s guardian or conservator unless for the party’s benefit.”[6]Cummings v. Dessel (2017) 13 Cal. App. 5th 589, 600 (discussing Code of Civil Procedure 873.690).

This means that a co-owner can buy the property at the partition sale by submitting a bid.

What is the Difference Between a Private Sale and Public Auction?

This distinction is best explained by a treatise discussing probate law, where the same public vs. private options appear to exist as follows: “The basic distinction between the two methods is that in a private sale, independent written bids are first solicited and received…, whereas, in a public sale, the bids are first received in open, competitive bidding. In either case, the highest and otherwise acceptable bid must be returned to the…court for further open and competitive bidding before the sale may be confirmed…”[7]Procedures for the sale of real property, 1 Cal. Real Est. (4th ed.) § 2:55.

Talkov Law’s Partition Attorneys Can Help

The complexity of partitions actions, coupled with nuisances of private sales, underscores the necessity of legal guidance. Whether you’re faced with a partition action, just received a notice of private sale, or simply seeking to understand your rights and options in a property dispute, Talkov Law’s attorneys are equipped to provide the guidance and representation you need. As California’s foremost experts in partition action, having Talkov Law’s partition attorneys by your side means legal strategies tailored to maximize your benefits. For a free consultation, call (844) 4-TALKOV (825568) or reach out online today.

References

References
1 In rare cases where there is more than one parcel involved, part of the property may be sold at public auction while part may be sold at private auction.
2 Cummings v. Dessel (2017) 13 Cal. App. 5th 589, 601.
3 Cummings v. Dessel (2017) 13 Cal. App. 5th 589, 600.
4 48 Cal. Jur. 3d Partition § 86 (discussing Cummings v. Dessel (2017) 13 Cal. App. 5th 589).
5 Cummings v. Dessel (2017) 13 Cal. App. 5th 589, 590.
6 Cummings v. Dessel (2017) 13 Cal. App. 5th 589, 600 (discussing Code of Civil Procedure 873.690).
7 Procedures for the sale of real property, 1 Cal. Real Est. (4th ed.) § 2:55.
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