Partition Referee

In the State of California when more than one person is a co-owner of the property and one of those individuals wants to sell and the other does not want, the law in the State of California allows the sale of property through a legal action known as partition. Read more.

A co-owner of real estate in the State of California may seek to force a sale through the use of a partition referee. This is accomplished by filing a lawsuit for partition and seeking to have a court-appointed referee appointed by the court. It is very common for family members who inherit property from their deceased relatives to end up in disputes. One relative may want to hold onto the property and another relative may want to sell the property. Read more.

This is a process in the State of California that involves a court-ordered sale of jointly owned property. California Code of Civil Procedure Section 872.210 establishes the legal procedures that may be taken in order to compel the sale of jointly owned real estate. This usually occurs as a result of a disagreement between two or more owners of real property when one owner wants to sell the property and another does not want to do so. A typical scenario involves children that have inherited real estate from their deceased parents.

There are 2 primary types of partition actions. One is known as a partition by sale and in this instance, the court divides the property into separate portions based upon a ruling of the court and the partition referee distributes the sales proceeds pursuant to a court order. The 2nd type of partition action is known as a partition in kind. Although there is another method known as partition by appraisal where one party is ordered to buy out the ownership interests of the other, this is not common.

A joint real property owner must file a lawsuit to have respective ownership interests partitioned. This occurs when one co-owner of real property wants to sell the property but the other co-owners do not want to sell. The filing of the complaint permits the forced sale of the property.

A trial occurs thereafter to adjudicate the propriety of the plaintiff’s right to have the property partitioned and seek the appointment of a referee. If the Court approves the plaintiff’s right to seek a court-appointed partition referee, an interlocutory judgment for partition is entered. After entry of the interlocutory judgment, the Court may issue an order appointing a referee.

The Interlocutory Judgment determines the respective ownership interests and how to divide the property to be partitioned, orders the partition of the property, and determines the method of partition.

The property may be sold either via public or private sale pursuant to CCP §873.610 and the referee may make recommendations with respect thereto including the “manner, terms, and conditions of sale”. The Court will only approve the referee’s recommended manner of sale after the conclusion of a hearing upon noticed motion.

Property is typically sold by private sale with the use of a real estate broker. The Court will confirm the sale at a confirmation hearing, at which time, the Court may confirm the proposed sale including all terms/conditions contained in the purchase and sale agreement, or it may reject the proposed sale and direct that a new sale be made. The minimum overbid is an increased offer that exceeds the sale price by 10% on the first $10,000.00 and 5% on the amount in excess thereof and the appeal period begins upon the circulation of the order confirming the sale and expires 60 days thereafter. The referee may only execute the referee’s deed upon receipt of the signed order confirming the sale.

The Court may order an accounting prior to the distribution of proceeds with recommended offsets. This may be a result of waste or nuisance caused by one of the co-owners of the property. It could also relate to rents collected by one party and not shared with another co-owner. The referee will ordinarily file a report with the Court, including the accounting, and recommended distribution. Following the hearing and receipt of an order approving distribution, the referee may proceed with disbursing net sales proceeds pursuant to Court Order.

Sales proceeds shall be distributed in accordance with CCP §873.820 which directs the referee on how to apply priority to such proceeds which includes, in order of priority (1) sales expenses, including referee’s fees (2) other costs of partition, (3) real property liens; and (4) distribution of the balance to the parties as determined by the Court.

The statutory scheme set up in the State of California involving partition actions may result in the ability to force the sale of property jointly owned by family members. Since California recognizes the absolute right to partition in instances of inheritance, it is unlikely that a joint owner of inherited real estate may successfully challenge the appointment of a partition referee and partition sale of jointly owned real property in the circumstance.

In California, the premise that joint owners of real property have the right to partition is summarized in the following case: “Ordinarily, if the party seeking partition is shown to be a tenant in common, and as such entitled to the possession of the land sought to be partitioned, the right to partition is absolute, and cannot be denied, ‘either because of any supposed difficulty, nor on the suggestion that the interest of the cotenants will be promoted by refusing the application or temporarily postponing action, . . .’” Priddel v. Shankie (1945) 69 Cal.App. 2d 319, 325.

In summary, you may indeed be forced to sell your share of a house that you and your siblings inherited.

An Action for Partition is a lawsuit that is filed under the California Code of Civil Procedure § 872.010 when more than one person owns an individual parcel of real estate and the owners cannot agree on a disposition plan for the property (or properties). If the co-owners cannot agree on a sale plan, then one owner can file a lawsuit seeking to have the property sold through a partition action. Initially a determination will be made to verify that the plaintiff in the action has the legal right to partition the property. If the court rules that the plaintiff does have that right, then a judgment is entered in favor of the plaintiff. The judgment is called an interlocutory judgment for partition. The interlocutory judgment confirms not only whether the plaintiff has the right to seek partition, but what the respective ownership percentages are among all owners. Finally the court will determine the method of partition, which is typically a partition “by sale”, where a partition referee sells the property and distributes the net funds pursuant to further order(s) of the court.

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 partition the house.

The steps in a partition lawsuit involve four primary steps 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 and the sale of 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.

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.

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.

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.

A partition referee is appointed in connection with the filing of a lawsuit involving the partition of real property. After an interlocutory judgment is obtained, a partition referee may be appointed. The partition referee takes possession in order to sell the property pursuant to the court order.

The partition referee must be a neutral third party, and court-appointed. The specific duties and responsibilities of a Los Angeles partition referee are set forth in the California Code of Civil Procedure CCP 872, et seq.

There are many similarities between a court-appointed partition referee and a court-appointed receiver. Both of these individuals are neutral and are appointed by the court pursuant to a court order.

A partition referee handles the sale of the property through the sale and distribution of net proceeds to co-owners, a physical division of the property, or the sale of one co-owner’s interest in the real property to the other co-owner. The partition referee takes these actions pursuant to a court order and must use reasonable care to ensure that the actions taken are in the best interest of the estate.

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.

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.

If a property is owned in part by one person and others, one owner may sue for partition and such action filed by a co-owner may proceed to do so pursuant to (C.C.P 872.210(a)(1)). After the Complaint is filed, a determination must be made by the court regarding the right of the co-owner to seek partition. Once that is ruled upon, based on a variety of circumstances including (C.C.P. 872.710(b); C.C.P 872.710(c) and C.C.P. 872.730), partition may then be permitted. The court then may appoint a referee to carry out its orders including, after ruling that a partition may proceed, the issuance of an interlocutory judgment as well as manner of partition per (C.C.P. 872.720(a)). The court may appoint a referee to divide or sell the property per (C.C.P. 873.010(a)). After the referee files the referee bond, the referee’s compensation is fixed (C.C.P 874.010), thereafter the referee may perform the  acts necessary to perform his/her duties (C.C.P. 873.060). The referee would thereafter serve any occupants with notice of appointment as referee, and the process of marketing and listing the property for sale would commence. If the occupancy is not cooperative, then the referee may need to take steps to remove the occupant as mandated by state and/or local ordinance or pursuant to other available remedies such as ejection.

If a co-owner of real property wants to sell, but the other co-owner(s) refuse to do so, an investigation into the availability of seeking partition should be performed. If negotiations fail and the co-owners cannot agree on a sale strategy, a lawyer should be consulted. The lawyer can provide advice regarding applicable statutes/codes and how to proceed regarding a complaint for partition and interlocutory judgment. 

A receiver is a provisional remedy. It is not a cause of action. A partition is a cause of action. A complaint for partition may be filed. No existing litigation is required to proceed with the initial pleadings for partition; however, existing litigation is required in order to seek appointment of receiver. A receiver may or may not have the authority to sell a property, while a partition referee who is appointed in connection with a partition by sale, will always have such authority, subject to an order confirming sale and sale report being prepared and filed by the partition referee. A receiver may or may not involve real property. Sometimes a receiver is appointed over a business or in other circumstances the receiver is only appointed for a limited purpose such as to perform an accounting and to provide additional reports to the parties and the court. However, a partition referee’s duties are very specific and are set for in the California  Code of Civil Procedure. A receivership is a completely unrelated to a partition referee, although from a functional standpoint, if a receiver is provided with the authority to sell a property, there are many similarities to the duties of a partition referee, such as working to reasonably obtain the highest market value, to address creditor claims and to obtain an order confirming sale.

A partition referee in California may be appointed by the court after the filing of a Complaint for Partition and issuance of an interlocutory judgment. Depending on a variety of circumstances, this process may take between 2-4 months.

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.