Partition: When Your Co-Owner Doesn’t Want to Sell the Property
Partition is a legal cause of action stemming from common law, but now a statutory right for property owners (RCW 7.52). If you own a property with another person, you are likely tenants-in-common. Partition allows one owner to force a sale of the property – either at auction or on the market – if your case meets certain legal requirements.
What are Tenants in Common?
When two or more people own real property, they may be tenants-in-common. The exception is often when a deed grants property with a ‘right of survivorship.’ A right of survivorship authorizes the title of the property to pass to the other owner(s) if one of the owners dies. Another exception is where specific portions of the property are exclusively owned by one of the parties. This typically does not apply to a residential home.
So What?
Well, if you are tenants-in-common, you have a statutory right to partition. Partitions can be in-kind or by sale. This is a way to separate the parties’ interest if one party will not agree to be bought out (sell their interest to the other party) or list the property for sale.
A partition in-kind occurs when the property can be divided – typically into separate and distinct plats – and each party becomes an owner of the separate partitioned property. This is often associated with acreage, farmland, or properties that can be subdivided. A partition in-kind cannot cause great prejudice or monetary loss to the owners. Great prejudice means substantial financial loss or a substantial decrease in property value.
Sometimes, this great prejudice can be relieved by owelty which is a requirement that one of the owners compensate the other(s) for the monetary loss. This overcomes great prejudice.
If the property cannot be physically divided or it can, but it will cause great prejudice to the owners, then a partition by sale is a statutory right of the owners.
Sometimes, this question is so muddied that the court will appoint a referee to determine the best court of action.
Partition by Sale
Once the court has determined that partition in-kind cannot be achieved without great prejudice, the court will appoint a referee. A referee is typically an attorney that steps in as the person responsible for selling the property. The referee obtains, via court order, all statutory authority to proceed with sale.
Often, the party moving for partition will request the statutory right for sale at auction. Parties may be able to credit bid their payments toward the property to purchase it outright at auction and remove the other party from title.
Sometimes, however, the parties will sell the property on the market to increase the proceeds.
Either way, once the property is sold, the parties will dispute who gets what percentage of the proceeds. There are various factors that determine this outcome.
It’s My Money!
The first presumption is that the parties own the property as defined by the deed. For example, two people own the property, and the deed specifically says that they own it 50/50. In that case, the parties would equally share in the proceeds.
But, if the deed is silent, then the presumption becomes that the parties intended to own the property in proportion to their contributions toward the purchase price. For example, one party paid 75% of the down payment and the other party contributed 25%. In that case, absent some exceptions, the parties would share 75/25 in the proceeds.
The last exception becomes traceable contributions. If the parties did not purchase the property outright (in this economy?!), then they have likely shared in paying carrying costs – mortgage, insurance, taxes, and maintenance. If these payments can be traced (via bank statements) to one party, then that will shift the percentage of ownership and share of proceeds.
Conclusion
Think carefully about purchasing or owning property with others. If you end up in a pickle, give us a call to learn more about your statutory rights!
If you have additional questions or to request a consultation, please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.