A typical example of when a partition action might arise involves the inheritance of a house from deceased parents. Three children inherit their parent’s house and one of the children is living in the house rent free. The other two siblings want to sell the house and also want to charge the sibling rent since that sibling is living in the house. There is a dispute regarding rent as well as whether or not to sell the house at all. Finally, after negotiations fail, one sibling files an action for partition with the ultimate goal of obtaining an interlocutory judgment and, thereafter, a partition referee to sell the house.

The four primary steps in a partition lawsuit are as follows:

1. Filing a partition action pursuant to  Code of Civil Procedure section 872.210;
2. Obtaining an interlocutory judgment pursuant to Code of Civil Procedure section 872.720;
3. Appointing a partition referee to sell the property pursuant to Code of Civil Procedure section 873.060 after the filing of a report of sale by the referee pursuant to Code of Civil Procedure section 873.280; 
4. The sale of the property by the referee subject to the relevant provisions of the Partition of Real Property Act pursuant to Code of Civil Procedure section 874.319.

If one co-owner of real property refuses to sell, and another owner wants to sell, then the owner that wants to sell may file an action for partition. The manner of sale includes three methods as follows:

1. Partition by Sale
2. Partition by Appraisal
3. Partition In Kind

In California, co-owners of real estate may find themselves in disputes regarding the desire to either hold or sell the property. A resolution to such a dispute involves a process known as partition. The partition process is code-driven and the California Code of Civil Procedure provides a road map as to how to accomplish this process. CA Code of Civil Procedure Section 872.210 establishes the statutory scheme that provides for the sale and division of real estate among co-owners when one owner wants to sell and the other doesn’t. The first step is the filing of a Complaint for Partition. The type of partition must be identified in the complaint as well as the property address, the parties, jurisdiction, venue, encumbrances, equity and the right to partition. A prayer for judgment against the defendant should be sought, including for partition of the respective interests in the property, the costs of partition shall be added to the judgment, that an order setting forth disbursement of net sales proceeds according to applicable equitable adjustments as well as other relief based on the details of the specific case.

It is important to remember that in California, there are three methods of partition: in kind, appraisal and by sale. The method of partition must be identified in the complaint. Partition by sale is the most common. However, Stephen Donell, Partition Referee, has experience in the rarely used partition in kind method of partition.

Ultimately, the goal of the filing of a complaint for partition includes obtaining an interlocutory judgment of partition. California Civil Procedure 872.720 establishes the right for a court to enter an interlocutory judgment of partition. This then sets up the process allowing a partition referee to be appointed. The partition referee is the individual vested with the authority to partition the property. It is important to remember that in California, there are circumstances where one party or another may waive the right to partition. An interlocutory judgment may not be obtained if such waiver is in effect. If a court determines that the full set of requirements are met after the filing of a complaint for partition, then the court is obligated to appoint a partition referee. And that starts the wheels in motion to an actual sale of the property.

In California, there are three ways to partition property. They are all defined by statute. The three methods of partition are

1. Partition in Kind
2. Partition by Appraisal
3. Partition by Sale

By far, the most common type of partition is Partition by Sale. Why? A partition in kind results in the physical division of the property. While this might be appropriate where the “property” includes multiple parcels, it would not be appropriate where the property is a single family home. A Partition by Appraisal is effectuated when the owners agree on the value of the property based on an appraisal and then one owner consents to the sale of their interest in the property to the other owner(s) based on the appraised value. This methodology can only be used if all owners agree to it. If not, then one of the other two methods must be utilized.

What does a partition by sale actually mean? It literally means that the partition referee will list the property for sale, a buyer will be found, the property is sold and then the net proceeds after sale are either lodged with the court for distribution or the partition referee will distribute the proceeds. Various issues come into play, including taxes, offsets and respective ownership rights - all of which are typically adjudicated by the court. Sometimes, a partition referee will be vested with the power to implement a claims procedure whereby the referee will recommend a course of conduct by the court to award or reject claims of creditors after a recommendation is made by the referee.

The timeline associated with a partition action involves many variables. After the complaint is filed and the interlocutory judgment is obtained, a partition referee will then be appointed. The partition referee, in accordance with the order, will usually take possession of the property. If there is an occupant in place, often the referee will need to remove the occupant. Depending on whether or not the occupant is cooperative, this process can take anywhere from a few weeks to months. After the property becomes vacant the referee will then have the property cleaned and will obtain a broker opinion of value to establish a baseline valuation for the property. The proposed sale price will be circulated among all interested parties and lawyers. Thereafter, the property will be marketed for sale, assuming there are no major repairs that need to be performed. The marketing process will generally last approximately 30 to 60 days while the selection of the buyer and negotiation of the PSA/inspections will take approximately 30 days.

Generally, the referee will file an ex parte motion with the court seeking an order to confirm sale and assuming no overbid procedures are required, the sale would be approved at the hearing. In California, a 60 day appeal period would generally necessitate either a waiver of the appeal or the escrow could not close until the appeal period is exhausted, which is 60 days from the date the notice of entry of order confirming sale is circulated to all parties. Therefore, based on a variety of facts and circumstances, the time frame involved in selling a property out of partition in California is between 3 months on the low-end to up to potentially a year depending upon a variety of circumstances.

The benefits of a partition action include the ability of one or more owners to sell a property when one or more than one additional owner(s) do not want to sell. This could include family members or partners that do not get along with each other. In addition it could involve one owner stealing money from another or refusing to cooperate in maintaining the property or in funding repairs or paying for insurance etc. Sometimes, common ownership of properties between family members or partners can be very problematic. This remedy allows for the sale of the property over the objection of one or other owners. This is a benefit which allows ownership to be modified in such a way that the property is partitioned. It also will provide a benefit because the cash generated by the sale can be utilized for other purposes including to acquire additional property. One drawback is the fact that a lawyer will generally need to be hired and a lawsuit must be filed. The process can be expensive if it is opposed and it can be time-consuming depending upon a variety of circumstances. In addition, if one owner is living at the property and refuses to vacate, legal action may be required in order to seek to have the other owner removed from the property. Overall, if respective owners do not get along and ownership among the various parties is no longer workable, the benefits far outweigh the negatives as relates to selling property through partition in California.

The cost of partition will depend in large measure on the level of cooperation that the partition referee receives by the owner's. For example, is the property occupied or vacant? If occupied will the occupant voluntarily vacate? Is the referee provided with books and records of the property which will allow the property to be easily valued? Is the property in clean condition and has it been maintained well? Do the lawyers involved get along and will the lawyers cooperate with the Referee or will any of the lawyers actively interfere with the Referee? Also, will the parties agreed to a stipulation where they waive their appeal rights? Or will an appeal be filed? Is insurance in place and are there any problems with title? All of these factors will impact the cost of partition. Generally the cost of partition would vary on the low end of $10,000 to potentially much larger fees depending upon the level of cooperation the referee receives, the condition of the property, whether there are title issues, whether a private sale or public sale with overbid is utilized and whether the referee is required to file monthly reports with the Court.

The receivers and partition referees at FedReciver,Inc. have decades of experience. This includes experience as receivers in state and federal courts throughout the country as well as having served as partition referees cumulatively in more than 900 cases. Based on the extensive experience in real estate including professional designations in property management, real estate brokerage licenses, expert witness work and being recognized as industry leaders in the partition and receivership industry, our professionals provide efficient services based on decades of experience, knowledge and training. This results in cost savings, efficiency and successful case outcomes. Stephen Donell is a RCFE - residential care facility for the elderly which is an accreditation provided by the California Department of Social Services. As such he has experience in being a receiver over assisted living facilities in California. In addition to real estate, our professionals have operated retail businesses, distribution companies, manufacturing and other specialized businesses in many fields including technology, clothing, health care and professional services.

There are no prohibitions against using a realtor as a partition referee. However, a partition referee has specific court mandated duties including the Report of Sale, Motion seeking Confirmation of Sale, potentially filing monthly reports with the court and compliance with the statutory scheme established in a particular state. It is imperative that whoever is appointed as referee, that he/she has the requisite knowledge to perform his/her duties pursuant to court order. This includes understanding that the referee has a duty to all creditors and is working solely as an agent of the court. Knowledge regarding title insurance, property insurance, repairs and maintenance, 1031 exchanges, state tax withholding, FIRPTA, tenant landlord law, risk management and local court rules are necessary. So while there is no prohibition to utilizing a realtor as a referee, unless that realtor has experience in the foregoing areas, this choice may not be advisable.