Partitions sales and probate sales are two different ways that a property can be sold. A main difference between the two is that a partition sale is ordered and overseen by the court, while a probate sale is generally overseen by a personal representative, and the court can have minimal involvement. There are also specific steps that the personal representative must take in the probate sale process under California law.
The Partitions Sale Process
Usually, partition sales are ordered by a court. This is because partition lawsuits are often brought before courts by a property owner who wants to force a sale if the parties cannot come to an agreement.
At trial, when a court finds that a plaintiff is entitled to partition, then it will issue an interlocutory (or temporary) judgment ordering a partition. (California Civil Procedure § 872.720) If it is a partition by sale, the court also appoints a referee to oversee the sale. (CCP § 873.510) The court also decides whether the sale will be a private sale or a public auction. (CCP § 873.520) The referee reports to the court and can make recommendations about the sale based on what he or she believes would be most beneficial to the parties, but the court ultimately makes the final call. (Id.) If the sale is a public auction, then it must be held in the county where the lawsuit is pending, though the court can specify a different location. (CCP § 873.670)
Upon ordering the sale, the court must give notice to all parties who appeared in the lawsuit and anyone who wrote to the referee asking for special notice. (CCP § 873.640) The notice of sale must include a description of the property, the time and place of the sale, and a statement of the main terms of the sale. (CCP § 873.650) If the sale is private, it cannot be made before the date specified on the notice, but it must be made within one year of that date. (CCP § 873.680)
After the sale, the proceeds are distributed in the following order of priority: for expenses of the sale, to pay other costs of partition, to pay any liens on the property, and finally distributed among the parties in proportion to their ownership shares as determined by the court. (CCP § 873.820)
The Probate Sales Process
A probate sale happens when the owner of the property dies but does not leave the property to anyone in their will. In this case, a personal representative of the deceased owner’s estate may sell the property. This applies to both real and personal property.
The personal representative must comply with the will if it specifies a mode of sale and which particular property to sell. (Probate Code § 10002.) The court may also allow the personal representative to not comply with the will if the court decides that it is advantageous for the estate. (Id.) Otherwise, the personal representative may choose any property in the estate to sell. (Probate Code § 10003.)
If the will does not have these specifications, the personal representative has discretion as to which property to sell first, whether to sell the entire estate interest or any lesser interest, and whether to sell the property at a public auction or a private sale. (Probate Code § 10003.) A private sale can only happen if the property is sold for at least ninety percent of the property’s appraised value. (Probate Code § 10309.)
The personal representative can petition the court for full or limited authority to administer the estate under the Independent Administration of Estates Act, or IAEA. (Probate Code § 10450.) If granted full authority, the personal representative does not need court approval to make a sale, though the personal representative must exercise ordinary care and diligence in the sale process. (Probate Code § 10503, § 9600.) An IAEA representative with limited authority can only proceed with a sale under normal court supervision. (Probate Code § 10501.) If the IAEA representative is planning to sell the property without court supervision, they must also give notice of the proposed sale to allow for objections. (Probate Code § 10510, 10511.) At any point, an IAEA representative can opt into the court-supervised procedures.
The sale itself has different processes depending on whether the property being sold is personal or real property. In addition to California state rules, local counties may have their own specific rules dealing with probate sales of estate property. It would be a good idea to check with your local county rules to see if there are any additional requirements.
For residential real property, most sellers have to disclose to the buyers certain facts about the property on a “Real Estate Transfer Disclosure Statement” (California Civil Code § 1102.6.) Personal representatives in probate sales, however, do not have to make such disclosures. (California Civil Code § 1102.2.) Personal representatives still have an obligation to disclose known information that affects the value or desirability of the property that is not known or observable to the buyer. (Katz v. Department of Real Estate (1979) 96 Cal.App.3d 895, 900.)
After the sale, the personal representative must report and confirm the sale with the court unless the estate is being administered under the IAEA with full authority. (Probate Code § 10308.) If the personal representative fails to report and confirm the sale within thirty days after the sale, the purchaser can file the report to confirm the sale. (Id.) Local rules may have their own requirements for the petition.
If a court confirmation of the sale is necessary or requested by the personal representative, the court will hold a hearing to determine authorization of the sale. (Probate Code § 10310.) Interested parties can also file objections to the confirmation of the sale. (Id.) Notice of the hearing must be given at least 15 days prior to the time set for the hearing. (Probate Code § 1220.)
At the hearing to confirm the sale, interested parties can make further bids on the property to overbid the reported offer. (Probate Code § 10311.) The court can accept the highest offer if it meets the requirements of the law. (Probate Code § 10311.) The first requirement for a court to accept the overbid is the offer must be at least ten percent more on the first $10,000 of the original bid and five percent more on the amount of the original bid. (Id.) The next requirement is that the offer is made by a “responsible” person. (Id.) The offer must comply with the rest of California law. (Id.) Additionally, the offer must be in writing. (Id.) Local courts will often have forms for overbidding.
If the sale is approved, the court will make an order confirming the sale. (Probate Code § 10313.) The court can also decline the offer and order a new sale. (Id.) After the court confirms the sale, the personal representative can transfer the title to the purchaser. (Probate Code § 10314.) If the estate is being administered under the IAEA, the representative can pass the title of the property to the purchaser without such a court hearing. (Probate Code § 10308.)
Generally, real property sold in probate sales is sold “as-is.” Property that is sold “as-is” means the buyer accepts the property in its current condition and will have to pay for any repairs themselves.
For partitions during the probate proceedings, the representative or any of the affected heirs and beneficiaries can file a petition with the court. (Id.) The petition can be filed at any time before the distribution of the property at issue is final. (Probate Code § 11951.)
Key Differences Between Partitions and Probate Sales
There are several key differences between partitions and probate sales that are important to keep in mind. One difference is the way the sale is initiated. Probate sales happen because someone died and did not leave their property to anyone in their will. Partition sale proceedings can be initiated by any co-owner who sues for partition.
Another difference is the involvement of the courts. In a partition sale, the courts are heavily involved during the process. The court can appoint a referee to advise the court on its decisions regarding the partition of the property and oversee the sale, but the court makes the big decisions, such as whether the sale will be a private sale or public auction. (California Civil Procedure § 873.520.)
In contrast, the big decisions in a probate sale, like whether the sale will be public or private, are made by the personal representative. The court generally does not have much involvement in probate sales. The personal representative does have to follow the deceased’s will, but if the will does not specify a mode of sale or which property to sell, the personal representative has the discretion to decide. (Probate Code § 10003.) In probate sales, it is the personal representative, not the court, that accounts for the sale proceeds. (Probate Code § 10005.)
If the estate is being administered under the IAEA, the court has even less involvement with probate sales. Under the IAEA, the personal representative does not even need court approval or confirmation of the sale. (Probate Code § 10308.) Under the IAEA, the personal representative does not need to give notice of the sale either. (Probate Code § 10503.)
“Shawn” is an aging, rich bachelor with lots of property, including a mansion in Los Angeles County, but no children. Shawn has not named any heirs to distribute property to in his will. Shawn also has nothing in his will directing or authorizing a sale. Eventually, Shawn dies. Shawn’s sister, who was named Shawn’s personal representative for his estate, decides to sell Shawn’s property. She petitioned the court for full authority under the IAEA, which was granted.
Shawn’s sister decides to sell Shawn’s mansion at a public auction and gives notice of the proposed sale. There are no objections. Since the estate is being administered under the IAEA, Shawn’s sister does not need to give notice of the sale. She holds the auction at noon in Los Angeles County, and the mansion is sold to the highest bidder. The highest bidder is “Julie.” Shawn’s sister does not need to request a court confirmation of the sale since the estate is being administered under the IAEA, so she transfers the title of the mansion to Julie. The property is sold “as-is,” so Julie pays for some repairs on the mansion.
Julie decides to become co-owners of Shawn’s mansion with her brother. Julie has a seventy-five percent interest, while her brother has a twenty-five percent interest. After several years, Julie and her brother have a falling out. Julie brings a partition lawsuit against her brother. The court orders a private sale and appoints a referee to oversee the sale. After the court gives proper notice, the property is sold a few weeks later.
The court distributes the sale proceeds for expenses of the sale, to pay other costs of partition, and to pay any liens on the property. The court then distributes the remaining seventy-five percent of the sale proceeds to Julie and twenty-five percent to her brother.
How Can the Attorneys at Underwood Law Assist You?
There are many differences between the partition sale process and the probate sale process. In a partition sale, courts are usually involved with the sale process. In a probate sale, there are many steps in the process where courts do not have to be involved. The personal representative will usually have more say over the probate sale than the court.
As each case is unique, litigants would be well-served to seek experienced counsel familiar with the ins and outs of property taxes and the law surrounding them. At the Underwood Law Firm, our knowledgeable attorneys are here to help. If you are seeking to buy out your cotenants’ interest in your property, are worried about whether you are subject to a tax reassessment, or if you just have questions, please do not hesitate to contact our office.
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