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Real Estate Partition

Real Estate Partition


Many Californians own land or a business jointly with another individual.  A partnership interest in a business or parcel of land can be a wise investment.  In fact, at times the only way to afford a piece of real estate is to share the cost with others, each person taking a joint interest in the property in question.  In addition to lowering the initial cost of the property, this arrangement also helps to divide the maintenance costs among two or more people.

Why Are There Petition Actions
But what happens when one of the owners decide that it's time to end the partnership or if one person disagrees with the way the business is run or how the real estate is being used? What if one of the parties wants to move away or retire?  In most situations of this sort an agreement amicable to both parties can be reached.  If so, the partition, or division, of property is voluntary and both owners agree to the terms set forth in the contract.
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What Is a Partition Action?
In contrast, when a parcel of real property is jointly owned by two or more parties and the request of one of the owners to divide the interests of the parties is opposed or an amicable agreement cannot be reached, the party desiring the division of interests may do so by bringing an action for "Partition" in Superior Court against the other owners.  When this is the case, hiring an experienced real estate attorney to file a partition action may be the best and only way to settle the dispute in a fair and just manner.  A partition action is a lawsuit that allows the court to divide property equally between interested parties. The partition action may be initiated and maintained by any of the co-owners of a piece of real property.
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What happens in a Partition Action?
In a partition action the court is asked to divide the partnership property equally between interested parties.  Codified in the California Code of Civil Procedure under C.C.P. 872.210, the purpose of a partition action is a way to divide real property between the joint owners.  In addition to its ability to terminate the interest of one of the co-owners, a partition can ter minate the entire ownership of all involved parties through a physical division or sale.  Co-owners automatically have the right to request a partition action, unless they have signed an agreement waiving that right.
To initiate a partition action, an attorney for the petitioner files a complaint in the county in which the property is located. Once the complaint is filed, a Notice of Pendency is recorded with the County Recorder's Office. This notifies anyone interested in the property that a legal action is in process - the court only rescinds the notice once the partition is accomplished or the complaint is dropped.
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How is the Property Divided and Who Gets Paid

Generally the court typically first determines if an equal division of the property is  practical. Can a large piece of land be divided into equal parcels? Is it a single family residence, or for whatever reason impractical to equally divide, the court can order the property sold. And if the parties are not cooperating, can even order a receiver or arbitrator to sell the property.  The court then determines what would be the most equitable way to divide either the property or the value of the business.  In the case of a business the court will determine the value of the business by calculating its assets, including goodwill, and divide the assets in accordance with the interest of the partners in the partnership.   Once the property is sold, the net proceeds from the sale will be distributed in accordance with each co-owner's fractional share of the property  which is also determined by the court.  The court will also take into account any expenditures made by any of the co-owners for things such as necessary repairs, taxes or improvements that enhance the value of the property. The court may use these expenditures to increase the affected owner's fractional share.
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Who Pays the Cost and Attorneys Fees?
The costs involved when filing a partition lawsuit can be substantial.  Attorneys' fees and court costs can add up quickly.  Consequently it is important to understand how these costs will be distributed and who pays.  In California, partition actions attorneys’ fees and costs spent by one party for the benefit of all parties are typically chargeable to everyone  The court will apportion those costs and fees amongst all of the owners, typically on a proportionate basis to their ownership interests.   However,  proportioning costs equally is not always the case.  If there is controversy between parties, and such controversy is causing there to be higher attorneys fees, then these costs are not divided up equally but instead must be paid  by the individuals themselves.
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Married Couples
Married couples usually cannot seek partition actions. In these cases, disputes involving the dissolution of property are considered community property issues, and handled as matters of family law. However, if the property in question was purchased by the couple prior to marriage the parties may retain the right to partition.
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© 2015 by Pirrone & Pirrone LLP  All rights reserved.

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Copyright Information
© 2014 by Pirrone & Pirrone LLP  All rights reserved.