What if parties do not appear in a lawsuit requesting partition in kind under the Partition of Real Property Act?
Just as there are special provisions for defaulting parties with partitions by sale, so too are there unique rules where some defendants fail to appear in a partition in kind action.
The text of the statute provides that, “if the court orders a partition in kind, the court shall allocate to the cotenants that are unknown, unlocatable, or the subject of a default judgment… a part of the property representing the combined interests of these cotenants as determined by the court.” (CCP § 874.318 (d).)
Put simply, if multiple parties failed to appear, and those parties had a combined 30% interest, for example, then all those parties would receive a collective parcel approximating 30% of the original property’s value.
For once, this Partition of Real Property Act does not add anything new here. In fact, giving a collective parcel to all non-appearing parties was already the law for partitions in kind, prior to the passage of the Act. (CCP § 873.270.)
Under the Partition of Real Property Act, how is the property sold?
With the provisions on partition in kind out of the way, let’s return to partition by sale. Just because the court orders the property sold does not mean the process is over. In actuality, the terms of the sale are often a source of contentious litigation, as parties squabble over what broker to use, whether the property is to be purchased in cash, and a host of other issues.
Prior to the passage of the act, the first determination by the court on ordering a sale was whether the sale would be public or private. Code of Civil Procedure section 873.520 provides that the property must be sold at public auction or private sale, as the court determines will be more beneficial to the parties. Though, often, the court outsources this determination to the partition referee appointed to achieve the sale of the property.
Under the Partition of Real Property Act, however, the Legislature inserted a preference for what it calls “open market” sales. The text of the code states that “if the court orders a sale of the property, the sale shall be an open market sale unless the court finds a sale by sealed bids or auction would be more economically advantageous and in the best interest of the cotenants as a group.” (CCP § 874.320 (a).)
Once the court orders the open-market sale, the parties either agree on a broker or one is appointed by the court. Whatever the case may be, the broker must offer the property for sale in a “commercially reasonable” manner at a price no lower than the appraisal previously conducted by the court.
Under the Partition of Real Property Act, what happens if the property doesn’t sell?
Litigants often approach partitions under the assumption that the sale of the property is a foregone conclusion. And though this may often be the case, a variety of factors can affect the speed at which this process occurs. For example, the semi-rural location of the property paired with a seller’s market may make it difficult to find a worthy buyer.
The Partition of Real Property Act has some provisions to address this exact situation. If the broker appointed to sell the property does not obtain an offer for at least the appraised value in a “reasonable” time, the court will conduct a hearing to discuss a few options with the parties. (CCP § 874.320 (d).)
First, the court can simply approve the highest outstanding offer the broker has received. This may be the most reasonable option where an offer is sitting only a few thousand dollars below the appraised fair market value. Second, the court can re-determine the value of the property, and order that the property continue to be offered for an additional time. In other words, the court can order a new appraisal under CCP § 874.316, and keep the property on the market until the new value is determined. Lastly, the court can order the property to be sold via sealed bids or at an auction. This may be the best option where the parties wish the property to be sold as quickly as possible.
Under the Partition of Real Property Act, what happens after the property receives an offer of purchase?
Under ordinary partition law, the partition referee appointed to sell the property prepares a report for the parties and court once the property is actually sold. (CCP § 873.710.) The report has to have lots of information such as the name of purchasers and sales price, etc.
Under the Partition of Real Property Act, however, the broker in charge of the sale must file a report with the court when it receives an offer to purchase for at least the appraised value. (CCP § 874.321.) And the broker must do this within one week of receiving such an offer. The difference here, though, is minimal. It’s safe to assume that if the broker has received an offer at the appraised value, they will sell the property.
Nonetheless, while broker reports may seem like a mere formality, they are mandatory under the statutory provision. The broker doesn’t have an option to not file a report, unless the parties were to stipulate otherwise, for some reason.
In fact, Texas addressed this exact point. In Rogers v. Coslett (2022) 646 S.W.3d 1, the court ordered the property sold pursuant to the UPHPA. But, the order didn’t specify that the broker would need to file a report with the court. On appeal, the appellate court held that this was an error, and required the issuance of a new order that directed the broker to issue a report in accordance with the provisions of the UPHPA.
How does the Partition of Real Property Act apportion the costs of partition?
In California, every partition naturally includes “costs.” These costs include reasonable attorney’s fees incurred by all parties, the fees of the partition referee, compensation to surveyors or other third parties contracted by the referee, the costs of procuring a title report, and other expenses paid for the “common benefit.” (CCP § 874.010.)
At the end of the action, the court then apportions those costs. In other words, it divides the costs among the parties in proportion to each party’s ownership interest. (CCP § 874.040.) So, for example, in a classic two-party partition, all of the costs would be divided 50/50, assuming both parties were 50% owners.
The Partition of Real Property Act entirely changes this calculus. The code states that the court may apportion the costs of partition pursuant to Section 874.040 (division of costs by ownership percentage), except “that the court shall not apportion the costs of partition to any party that opposes the partition, unless doing so is equitable and consistent with the purposes of this chapter.” (CCP § 874.321.5.)
This is a gigantic deviation from the law of ordinary partitions. Normally, even parties that oppose the partition complaint are nevertheless responsible for their share of total costs. As one California court put it, “the presence and litigation of controversial issues between all parties do not preclude the allowance of attorney’s fees for services connected with such issues…” (Forrest v. Elam (1979) 88 Cal.App.3d 164, 174.)
With the Partition of Real Property Act, however, the presumption is that opposing the partition insulates the defendant(s) from having to pay any portion of the plaintiff’s fees. While it’s certainly feasible that plenty of courts will nevertheless order ordinary apportionment on the grounds of equity, the presumption against that is certainly a scary proposition for plaintiffs.
It would be worth noting how other states interpret such a provision. But surprisingly (or perhaps, unsurprisingly), this section is entirely a product of the California legislature. There is no applicable provision within the UPHPA.
How the Lawyers at the Underwood Law Firm Can Help
While the courts and lawyers attempt to figure out the operation of the Partition of Real Property Act, litigants may feel stressed at the prospect of undertaking a partition governed by a relatively new law. These situations can be stressful, and difficult, especially when the way out is not entirely clear. Fortunately, the lawyers at the Underwood Law Firm specialize in partition actions and solving difficult co-ownership problems through civil litigation, helping good people end bad real estate partnerships. If you have found yourself in one of these situations, then please do not hesitate to contact us today.
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