Partitions sales and trustee 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 trustee sale is overseen by a third party in relation to foreclosure proceedings. While the third party is not beholden to a court ruling in a trustee sale, they must still follow the procedures outlined in 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. Read more about partition actions generally here.
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. (CCP § 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 Trustee Sale Process
In California, a trustee sale is related to foreclosure proceedings. When a homeowner fails to make mortgage payments and defaults on their loan, the lender can foreclose and take the property. The lender can then sell the home and attempt to recoup any of their losses if the homeowner missed at least four monthly payments.
The trustee who will be overseeing the sale is usually the party that holds the legal title to the property while payments are made, such as a bank. (Id.) Title or escrow companies can be appointed as trustees. In any event, a trustee sale is considered part of a non-judicial foreclosure proceeding since the sale is not overseen by a court. (Id.)
If a trustee sale happens, a homeowner will be notified with a Notice of Trustee Sale document. (Civ. Code § 2924b) The trustee is required to wait at least twenty days after the notice was sent to make the sale. (Id.) The trustee is also required to post a notice of the trustee sale in a public place in the city where the property is being sold. (Civ. Code § 2924f) Afterward, the property is auctioned off to the highest bidder. (Civ. Code § 2924g)
The sale proceeds first go to the costs and expenses of the sale itself, including trustee’s fees and attorney’s fees. (Civ. Code § 2924k) The next priority is paying off whatever is owed on the loan, then any junior liens or encumbrances on the property. (Id.) The final priority of the proceeds is to the trustor or the borrower. (Id.) If there is any surplus left over, the trustee will send a written notice to anyone with recorded interests in the property, stating that there was a trustee’s sale and that they may have a claim to some of the sale proceeds. (Civ. Code § 2924j)
“Shawn” owns a home in Los Angeles and has missed four monthly payments on his mortgage. The bank initiates foreclosure proceedings and takes Shawn’s home. Wanting to recoup their losses, the bank appoints a title company to oversee a trustee sale of Shawn’s home. The title company sends a Notice of Trustee Sale to Shawn and also posts the notice in a Los Angeles public building.
Twenty-one days after the notice was sent out, the title company will hold an auction of the property. The highest bidder is “Julie,” who ends up as the final owner of the home. The sale proceeds first pay off the title company’s fees and all of the attorneys’ fees. The rest of the sale proceeds goes to the bank to pay off Shawn’s loan. There are no further liens or encumbrances on the property, so Shawn gets the leftover money from the sale.
Julie decides to become joint owners of this home with her boyfriend, and they each have a one-half ownership interest in the property. Unfortunately, the two break up, and Julie files a partition action in LA County against her boyfriend for the home. The trial court decides that Julie is entitled to a partition and issues an interlocutory judgment for partition by sale.
The court appoints a referee, who reports that the sale should be by public auction. The court orders a sale by public auction in LA County since that is where the partitions lawsuit is located. The court also gives notice to Julie and her boyfriend.
A public auction for the home takes place. The highest bidder at the auction is Shawn, who hit it big in Las Vegas after losing his home and used his winning to re-buy the property. After the sale, the proceeds were distributed to pay for the expenses of the sale, the costs of partition, and all other liens on the property. The court decided that since Julie and her boyfriend each have one-half ownership in the sold property, the remaining sales proceeds would be divided in half among the two.
How Can the Attorneys at Underwood Law Assist You?
There are many differences in the process between partitions sales and trustee sales in California law. The main difference is that partitions sales are overseen by a court, while trustee sales are not. Even with the differences, there are some similarities as well, such as how the properties in either sale proceeding can be sold through auction.
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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