How to Stop or Avoid a Partition Sale?

Under California law, co-owners of property who cannot agree on how to divide or manage their co-owned property have an absolute right to partition, which could result in the property’s forced sale. Generally, partition actions can’t be stopped without a valid waiver, however, co-owners can avoid, and even stop, partition proceedings in some circumstances using waivers, buyout agreements, mediation, or other settlement options. Understanding the partition alternatives available to you as a co-owner of shared property can help prevent the disruption and financial strain accompanying forced sales of property. 

What is a Partition Sale?

Partition Sales are the legal process designed to sell co-owned property in the most equitable manner possible. Procedurally, partitions are the laws favored remedy for segregating and terminating common interests in the same parcel of land. (Summers v. Superior Court (2018) 24 Cal.App.5th 138.) Typically, partition sales occur when co-owners of property, often family members, business partners, or unmarried couples, cannot agree on how to manage or divide the property. 

California law favors partition in kind over partition by sale because partition in kind preserves the existing form of ownership and avoids forcing sales against a co-owner’s will. (Williams v. Wells Fargo Bank & Union Trust Co., (1943) 56 Cal.App.2d 645.) Courts order partition by sale when partition in kind would inflict “great prejudice” on the co-owners as a group. (Ibid.) 

Avoiding a Court-Ordered Partition

Generally, once partition actions have started, they cannot be stopped, unless there is a valid waiver or other agreement between co-owners exists allowing them to do so. 

Because California law favors partition in kind, co-owners can attempt to oppose a sale by presenting evidence showing the property can be practically divided among co-owners without a significant loss in value. 

Co-owners may negotiate an agreement to avoid formal partition actions by agreeing to a private buyout, physical division of the property, or other outcomes so long as all co-owners agree. When co-owners cannot agree, mediation may facilitate settlement negotiations. In fact, some states mandate appointment of a mediator to assist in settlement negotiations or partition of interests and rights. 

If, however, mediation fails, parties can proceed with the partition by sale. (Sekaquaptewa v. MacDonald, (1978) 575 F.2d 239.) California law does not mandate mediation in disputed partition actions. 

Waiver

Proof of waiver, either explicit or implied, is the most effective means of stopping or avoiding a partition sale. Under California law, the right to partition is absolute, but can be waived. (Code Civ. Proc., § 872.710(b); Orien v. Lutz, (2017) 16 Cal.App.5th 957.) Thus, co-owners may argue that the right to partition was waived. (LEG Investments v. Boxler, (2010) 183 Cal.App.4th 484.) The burden of proof belongs to the party seeking to invoke the waiver, meaning they must prove the waiver’s existence by clear and convincing evidence. (Id.)

Accordingly, waiver must be proven by clear and convincing evidence of the waiving party’s intentional relinquishment of their known right to partition after obtaining full knowledge of the facts. (City of Ukiah v. Fones (1966) 64 Cal.2d 104.) If the party seeking to invoke the waiver fails to satisfy their burden or otherwise leaves the court with doubt surrounding the waiver, the court will find no waiver exists. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1.) 

Courts hesitate to find valid waivers of the right to partition because co-owners rarely execute formal written agreements that unambiguously document their waiver. As such, cases that find a valid waiver most often include a written agreement or knowledge of a prior agreement that waives the right to partition. (Pine v. Tiedt (1965) 232 Cal.App.2d 733.) Therefore, temporary or implied waivers are unenforceable unless they are for a specific, clear, and “certain period of time.” (Ibid.) 

Right of First Refusal

Agreements including Rights of First Refusal may imply a waiver of the right to partition among co-owners. (LEG Investments v. Boxler, (2010) 183 Cal.App.4th 484.)  A Right of First Refusal requires the selling owner to offer their interest to their co-owners before a partition can occur. (Ibid.) If their co-owners decline or fail to act on the offer within a reasonable time, the selling owner may proceed with the partition sale. (Ibid.) 

Whether the right of first refusal clause is considered an express or implied waiver of the right to partition is dependent on the clause’s specific language. For example, in LEG Investments v. Boxler, a right of first refusal clause included in a tenancy in common agreement was not an express contractual wavier of the co-owners right to partition because it did not mention “partition” or “waiver.” ((2010) 183 Cal.App.4th 484; Code Civ. Proc., § 872.710(b).) The same agreement, which gave rights of first refusal in property held by a tenancy in common, did, however, imply an agreement between co-owners to not bring a partition action instead of selling the property to co-owners first. (Ibid.)  

Buyout of Co-Owners

Similarly, the Partition of Real Property Act (“PRPA”) provides additional procedural safeguards for partition actions filed after January 1, 2023. These additional safeguards include valuation and buyout options to protect co-owners from forced sales while encouraging negotiation and resolutions that do not involve the property’s sale. 

Under the PRPA’s buyout provision, if a co-owner requires a partition by sale, the other co-owners can avoid the sale by buying out the interest belonging to the co-owner seeking the sale. (Code Civ. Proc., § 874.317.) Under California law, a determination of the property’s value must be made before the court may notify the co-owners of their ability to buyout the requesting party’s interest. (Ibid.) If no co-owner exercises the buyout option within 45 days, the partition action continues. (Ibid.) 

What is an Example?

“Shawn” and “Julie,” an unmarried couple, purchased a home together in California. Shawn and Julie purchased the home together as joint tenants, meaning they each have equal ownership of the home. Over time, Shawn and Julie each contribute to the home’s mortgage payments, necessary maintenance, and improvements. 

After several years, Shawn and Julie break up and no longer want to live together, but they have differing opinions on what to do with the house. Shawn wants to sell the house and split the profits equally, while Julie wants to keep the house. Shawn refuses to consider a partition in kind, because the property is a single-family home, and he does not want to continue living with or near Julie.  

Shawn and Julie cannot reach an agreement, and Shawn begins considering a court-ordered sale. So, Julie hires out an independent appraisal of the property to determine its fair market value and offers to buyout Shawn for his share of the home’s fair market value. Shawn accepts Julie’s offer, ultimately allowing Shawn and Julie to avoid a forced partition sale entirely. Now, Julie can keep the house, and Shawn can walk away from the relationship and house with his monetary share of the house’s value, allowing them both to have their desired outcome. 

Conclusion

Forced sales of property are disruptive and financially burdensome. When physical division of land through partition in kind is impossible, negotiating a buyout, exercising a right of first refusal, or invoking a valid waiver, may be the only way to avoid a forced sale. The Underwood Law Firm has a team of experienced lawyers who can help guide you through complicated legal matters like partition. We are here to help.