City high-rise real estate that could benefit from partition if disputes arrise

Partition as a Tool in Real Estate and Partnership Disputes

When two or more persons own real estate together, disputes may arise for a variety of reasons. One owner might accuse another of misusing the property, or of withholding rents or other profits that the property generates. Or the owners may disagree about how to use the property or whether to sell it. When these disputes become irreconcilable, the parties generally need to go their separate ways, which requires them to end their co-ownership.

To address this problem, California law offers a streamlined procedure called “partition.” Partition can mean either physical division of the property or the sale of the property to a third party and division of the net sale proceeds among the co-owners. A court can order partition by sale instead of physical division when a sale would be “more equitable.” For example, the property may be worth more than the sum of the divided parcels if there are improvements on it, or there may be no practical way to divide the property equitably.

Whether an owner pursues physical division or partition by sale, the procedure is a powerful tool in real estate disputes because there are almost no valid defenses to a partition action. Co-owners of real property generally have an absolute statutory right to partition, the only defense to which is a written waiver of the right.

If the requirements for partition are satisfied, a court is required to enter an “interlocutory judgment” – that is, an immediate judgment that takes effect while the parties litigate other claims against each other. As a result, a partition claim can move through the court system with relative speed, which encourages all parties to consider realistic settlement options early in the lawsuit. Another factor encouraging early settlement is that a successful plaintiff in a partition lawsuit can recover attorneys’ fees and costs paid “for the common benefit” of the co-owners.

Partition is also an available strategy in partnership disputes. Where a court determines it to be a suitable remedy and unsecured creditors would not be harmed by it, parties in California can sue for partition of partnership property. Most well-drafted partnership agreements include a written waiver of partition rights, but absent such a waiver, partition is useful way to exert settlement pressure and accelerate a necessary “divorce.”

Partition lawsuits are technical and subject to numerous special rules. A plaintiff must name as defendants all parties with interests in the subject property and file the lawsuit in the county where the property is located. There are special pleading rules not applicable to civil suits generally. And the plaintiff must record a notice of lis pendens (i.e., a public notice of the pending litigation) to make the court’s judgment effective against interests in the property recorded after the lawsuit commenced.

If you need assistance with a real property or partnership dispute, in drafting agreements related to the co-ownership of property, or if you have been threatened with a partition lawsuit, the experienced professionals at Capobianco Law Offices can help.