Prior to California’s enactment of SB 9, also known as the California HOME Act, a single-family home in a partition action would almost certainly be sold since division of the property would not be allowed under zoning laws requiring certain lot sizes. However, SB 9, which became effective in 2022, mandates that cities approve certain lot splits of single-family residences.
What this means is that certain single-family homes may be eligible for a partition in kind where the property is physically divided. As a practical matter, many parties to a partition action have an adversarial relationship with their co-owner, who may be their former romantic interest or their sibling who refused to buy out their interest in an inherited house or place the house on the market for sale. Accordingly, it’s unclear how many co-owners would truly want to own a house next door to their co-owner. However, those co-owners may have a buyer in tow ready to purchase their interest in the newly divided property.
Examples of a Lot Split Resolution to a Partition Action
A few examples come to mind. Many properties, particularly in denser areas of Los Angeles, are occupied by what are effectively duplexes because there is a front house and a back house. Depending on the configuration, if the lot can be split such that access to the back portion would be possible, a partition in kind may be available.
Yet another example would be a single family residence with enough extra land in the backyard to create a small house. As a practical matter, the value of the improvements of the primary house will be more than 50% of the value of the property. Indeed, most co-owners hold a 50% interest in the property.
Under this example, if the property was paid off such that each co-owner was entitled to 50% of the value of the property, an SB 9 lot split granting one co-owner only the backyard wouldn’t be enough to satisfy their 50% interest. In that scenario, perhaps the defendant would want to pitch in some money to equalize the value of the two parcels, a concept known as owelty of partition.
However, imagine if one of the co-owners is only owed 25% of the value of the home. In that case, the backyard may indeed be worth about 25% of the value of the property.
Third Party Buyers of a Backyard to Solve a Partition by Lot Split
A fascinating new company has emerged in California by the name of Yardsworth. The company pitches itself as a financial services company offering to buy backyards of residences particularly in the major metro areas of California. Indeed, partition actions in Los Angeles often involve single family residences that were zoned near the turn of the century and into the 1970s. During that time, the density of Los Angeles was lower while zoning laws were strictly enforced to ensure minimum lot sizes. However, today, a mere excess portion of a parcel may be sufficient for a trendy tiny house that can be sold separately and apart from the main house. Indeed, the restrictions on ADUs prohibit them from being sold separately from the primary residence.
Areas Where a Lot Split Partition Resolution May Work
The opportunity for such division in kind of a property in a partition action ultimately depends on the configuration of the improvements such that access can be provided to the new parcel. It may also depend on the location of the excess land such that it is in one area of the property, rather than being split between extra land in the front yard and extra land in the back.
Unfortunately, the lot split resolution wouldn’t work for co-owners in areas with no backyard that can be made accessible, like San Francisco partition actions, or where the value of a small portion of excess land simply isn’t enough to solve a partition, like Riverside partition actions. A backyard large enough to settle a partition would exist in areas like Orange County, San Diego, and San Jose.
Pros and Cons of Lot Split as a Resolution of a Partition
One major reason for co-owners to consider such a partition in kind to provide the backyard to a third party buyer is that it allows the party who resisted a partition by sale to stay in the home. Indeed, many partition defendants file answers or otherwise raise what they believe are affirmative defenses in partition actions in an attempt to avoid either selling the home or paying their co-owner for that co-owner’s equity in the home. Indeed, the California Partition of Real Property Act allows for defendants to buy out the plaintiff’s interest, but many are reluctant to do so.
One major drawback of such a partition in kind of voluntary lot split under SB 9 is that the remaining parcel may be less desirable than it was initially given that the backyard will now be occupied by another single-family residence. However, the truth is that the defendant who agrees to resolve a co-ownership dispute by a lot split presumably cannot afford the entire parcel, i.e., the lot without a lot split. Such an outcome would allow the defendant to stay in the primary home but within their budget. Interestingly, a partition in kind even allows and liens or judgments against one co-owner to only become a lien on the interest awarded to that party, providing the non-debtor co-owner with a part of the property free and clear of any such lien or judgment.
Potential Headaches with SB 9 May Limit Its Applicability
One other con has arisen as shown by a report from U.C. Berkeley: SB 9 is simply too expensive and not user friendly such that it is rarely being used. Chances are, future iterations of this bill will loosen restrictions and limit the ability of jurisdictions to create special rules that make it harder for lot splitters to work between cities.
Determining the fastest and most efficient way to end a co-ownership relationship under the ever changing laws of California requires the expertise of a partition attorney in California.
Talkov Law's Partition Attorneys Can Help
If you want to end your co-ownership relationship, but your co-owner won’t agree, a partition action is your only option. With six, full time partition lawyers, Talkov Law is the #1 partition law firm in California and has handled 250 partition actions throughout California. Every case has resulted in a sale to either a third party or one of the co-owners. Not a single court has denied our clients the right to partition or declared our client to be a non-owner. Plus, for qualified cases, there is no fee until we settle or win your case!