Offsets for Rental Value Against Co-Owners in Sole Possession – Hunter v. Schultz – California Partition Actions

One of the most common disputes in a partition action arise when the co-owner in sole possession has also been paying all of the expenses. That co-owner often believes that they will collect all of their expenses in an accounting in a partition action. Effectively, the issue is whether the co-owner out of possession can claim the rental value of the co-owned property against the co-owner in possession.

The law in California under Hunter v. Schultz (1966) 240 Cal.App. 2d 24, 30–31 is that, “when, in a suit for partition or a sale for division, or other proceeding between cotenants in equity or in which equitable powers may be exerted, a cotenant who has been in possession or use of the premises seeks to obtain contribution respecting improvements made, or amounts expended in protection or preservation of the property, the court, as incidental to the granting of such relief and by way of adjusting the rights of the parties, may charge the claimant, defensively, with at least a part of the reasonable value of his occupancy or use….” Hunter v. Schultz (1966) 240 Cal.App. 2d 24, 30–31.

In Hunter, plaintiff and defendant acquired a home while married. When the couple separated, plaintiff moved out of the property permanently. “After her departure, she paid nothing on the mortgages, taxes, insurance, repairs or improvements on the property.” Defendant continued to live at the property, and a decade after she moved out plaintiff brought a partition action to determine her interest in the property. In determining the reimbursements to the parties out of the proceeds of a partition sale, the trial court gave credit to defendant and his new wife for the mortgage, tax, and insurance payments made after plaintiff’s departure from the property but offset this credited amount by the “reasonable value of the use of plaintiff’s interest in the property.”^[1]Hunter v. Schultz (1966) 240 Cal.App. 2d 24, 30–31. The Court of Appeal affirmed.

As the leading treatise on California real estate law, Miller & Starr, explains:

Witkin Summary of California Law explains Hunter v. Schultz (1966) 240 Cal.App. 2d 24, 30–31 as follows: “If the occupying cotenant seeks reimbursement for payment of interest, taxes, and insurance, the tenant out of possession is entitled to offset the reimbursement by the reasonable value of the occupant’s use.” ^[3]Accounting for Rents and Profits, 12 Witkin, Summary 11th Real Prop (2022) § 48.

California Jurisprudence explains the rule from Hunter v. Schultz (1966) 240 Cal.App. 2d 24, 30–31 as follows:

Although, in the absence of an agreement between them, one cotenant has no right against another cotenant in exclusive possession of the premises to recover the rental value of the premises for the occupancy and use, in a partition suit brought by a cotenant not in possession, an offset for the value of the use of the plaintiff’s interest may properly be allowed against the interest, taxes, and insurance paid by the defendant cotenants in possession.^[4]48 Cal. Jur. 3d Partition (Nov. 2022) § 15. California Jurisprudence also cites Hunter v. Schultz (1966) 240 Cal.App. 2d 24, 30–31 in finding that “a cotenant in possession or use of the … Continue reading

American Law Reports (A.L.R.) cites Hunter v. Schultz (1966) 240 Cal.App. 2d 24, 30–31 as “holding or recognizing that cotenant in possession claiming contribution is chargeable with rents or profits.”^[5]Accountability of cotenants for rents and profits or use and occupation, 51 A.L.R.2d 388.

American Jurisprudence (Am. Jur.) cites Hunter  v. Schultz (1966) 240 Cal.App. 2d 24 as “offsetting reasonable value of use of plaintiff’s interest against payments by defendants for interest, taxes, and insurance.” Accountability in equitable proceedings, 20 Am. Jur. 2d Cotenancy and Joint Ownership (Nov. 2022) § 50, n. 3.

This rule from Hunter v. Schultz is still the law today as reflected by this quote appearing in the 1995 Bankruptcy court opinion of In re Fazzio, 180 B.R. 263, 269 (Bankr. E.D. Cal. 1995) (quoting Hunter v. Schultz (1966) 240 Cal.App. 2d 24, 30–31).

An unpublished 2021 case in California described Hunter as finding that, “in a partition action, where a cotenant in possession seeks contribution for improvements made or amounts expended to protect or preserve the property, the court may award the out-of-possession cotenant the reasonable value of the other’s use of the property as an offset.”^[6]Hofmann v. Hofmann (Cal. Ct. App. July 15, 2021) No. F079977, 2021 WL 2980582, at *20.

An unpublished 2016 decision found that: “A cotenant out of possession may be entitled to the imputed rental value as an offset to a claim for contribution for the maintenance and preservation of the property if doing so would be ‘just and consonant with equitable principles.’ (Hunter v. Schultz (1966) 240 Cal.App.2d 24, 32.” ^[7]In re Marriage of Stone (Cal. Ct. App. May 9, 2016) No. B243240, 2016 WL 2756882, at *8.

An unpublished 2014 decision explained that Hunter represents one of the “three exceptions to the general rule” that “a cotenant out of possession of real property has no right against another cotenant in exclusive possession of the property to recover rental value for occupancy and use of the property, because each cotenant has the right to occupy the property.”^[8]Rodman v. Blake, No. D061434, 2014 WL 4238982, at *11 (Cal. Ct. App. Aug. 27, 2014) (citing Teixeira v. Verissimo (1966) 239 Cal.App.2d 147, 155, and Brunscher v. Reagh (1958) 164 Cal.App.2d 174, … Continue reading

A 2013 unpublished case found that rental value can be claimed defensively even though under-market rent was being paid, finding that: “The fact that cross-complainants did not require David and Nancy to pay greater rent for the property during their co-ownership of the property does not defeat their claim for an offset.”^[9]DeMartini v. DeMartini (Cal. Ct. App., June 28, 2013) No. A133277 2013 WL 3287991, at *6. Indeed, in that case, the Court of Appeal found that “the trial court abused its discretion by failing to reduce the award of reimbursement for capital improvements by the difference between the amount David and Nancy actually paid in rent and the reasonable value of their occupancy or use of the property – which was established by the evidence.”

A 2010 decision from Hawaii agreed with the holding in Hunter, finding that: We concur with those jurisdictions and hold that a court in equity, in a partition action not involving ouster or agreement, has the discretionary authority to allow an apportioned defensive rental offset against maintenance-related and improvement-related contributions, to the extent that the “reasonable rental value of the use of the property by the COTIP … has exceeded his or her proportionate share of ownership,” because “He who seeks equity must do equity.”^[10]Curtis v. Dorn, 123 Haw. 301, 310, 234 P.3d 683, 692 (Ct. App. 2010) The Hawaii ruling explains that: “The apportioned rental offset exception is the counterpart of the equity that the court exercises in allowing the COTIP [co-tenant in possession] credit for unreimbursed maintenance and improvement expenditures…. The analysis focuses on whether one cotenant has a disproportionate share of the benefits or the burdens. An offset could be warranted because if one cotenant enjoys a disproportionate share of the benefits, the other cotenants must be compensated.”

The bottom line is that co-owners out of possession have rights in a partition accounting to ensure an equitable result.

Can I Collect Rental Value from my Co-Owner in a Partition Action?

Adverse Possession and Co-Ownership