What is a California partition in kind?

First, let’s analyze the process by which a court analyzes the request for partition. A partition is, in part, an equitable proceeding.  Any co-owner of a concurrent interest in real property may have the property partitioned (Code of Civil Procedure § 872.710, subd. (b).). If the court finds that a plaintiff is entitled to partition, it shall make an interlocutory judgment that determines the interests of the parties in the property and orders the partition of the property and, unless it is to be later determined, the manner of partition. (§ 872.720). The actual partitioning is carried out by a referee (§§ 873.010, 873.280-873.290, 873.510,873.610). Thereafter, the court enters final judgment (§§ 873.290, 874.210, 874.240).

In order to effectuate this process, the court can bifurcate the action into phases including the bench trial on the right to and method of partition, the bench trial on partition accounting, jury trial on any remaining claims and punitive damages if applicable.

Partition in kind is favored in law and in the absence of proof to the contrary the presumption in favor of in-kind division will prevail (Butte Creek Island Ranch v Crim (1982) 136 Cal.App.3d 360,365). Where real property consists of more than one distinct lot or parcel, the property shall be divided by such lots or parcels without other internal division to the extent that it can be done without material injury to the rights of the parties. (§ 873.240). The court may order equalization payments – owelty – when the division in kind cannot be made equally. (§ 873.250, subd. (a).).

The law does not permit a partition sale in the absence of sufficient proof of the equities of such method of partition. Equity favors a sale when a partition in kind would result in a cotenant receiving a portion of the land which would be worth materially less than the share of the money which could be obtained through the sale of the land as a whole. (Id. At p. 367; accord § 872.820.). Upon the Order of the Court to appoint a partition referee to sell a property “in kind”, the Court will issue the order that identifies the duties and responsibilities of the partition referee. These duties can include the following:

• Prepare a report for the court and the parties to the action with the referee’s recommendation as to how the properties should be partitioned in kind, and the amount of any owelty payment or similar payments that should be paid or received, as applicable, in connection with the partition in kind to ensure that each partitioned property and associated payment, whether paid or received, represents equal shares of the fair market value of the properties in the aggregate.

• The fair market value of each property shall be established based upon its current, as is, where his condition, and determined using such evidence of value as the referee shall reasonably determine appropriate.

• Review and consider the information and documentation provided to the referee relative to the properties and their proposed partition, in-kind, including those provided by the parties as well as the parties preference as to how the properties should be partitioned, in-kind; provided, however that the information, documentation and preferences of the parties need not be determinative. The referee shall exercise independent and reasonable commercial judgment in making all determinations pursuant to the order.

• To hire contractors and/or consultants of any kind to inspect conduct investigation, including, without limitation, invasive investigations, into each of the properties in order to obtain the best possible estimate of the actual repair costs needed to bring each of the properties to average condition, in order to assist the referee in making a sound and reasoned recommendation in his report as to how the properties are to be partitioned, in-kind, and to calculate what, if any, owelty payments may be due from or payable by one party to the other as a result of the partition. However, the information and estimates provided by the contractors or consultants pursuant to the investigations need not be determinative. The referee shall exercise independent and reasonable commercial judgment in making all determinations pursuant to the order.

• To hire an appraiser or consultants to assist the referee in making the report to the court and the parties to this action regarding the recommendation as to how the properties should be partitioned, in-kind, including calculations as to what, if any, owelty payment or payments may be due from one party to the other.

As opposed to a partition by sale where the partition referee sells a property to 3rd party buyer and distributes the net sales proceeds pursuant to the predetermined respective ownership percentages of each of the parties and pursuant to later court order, a partition in kind results in a transfer of the interests of property to the existing owners along with an owelty payment as may be necessary. This process may be difficult if properties are in substandard condition or if properties have development potential. A partition referee may or may not also include and consider tax consequences of such transfer. Often, if an owner has an emotional tie to a property because the property has been in the family for many years, courts will favor this form of partition. The calculation of owelty can be complex in the process may be very time-consuming and expensive. Ultimately, the referee will make a recommendation to the court and the court will rule on the division of property and the award of owelty.

Stephen Donell has extensive experience serving as a partition referee in California, Los Angeles, Orange County and in other locations. He also has experience serving as a referee in matter(s) involving  partition in kind.