Washington State Rewrites Partition Law… Well, Sort Of.
In Washington, unless co-owners have agreed otherwise, any co-owner of property can file a lawsuit to have the court divide that property. This could be personal property or real estate. For the purpose of this article, we will be discussing the resolution of disputes involving real estate. The court process of dividing property is called “partition.” Upon filing a suit for partition, the court must decide whether the property can be actually divided into separate parcels, called a partition in-kind, or whether the division will be by dividing the proceeds of a public auction of the property. This process was codified in RCW 7.52 and has remained largely unchanged since 1877. That’s right, 12 years before Washington became a state.
Beginning in 2023, a new partition law took effect. It is called the Uniform Partition of Heirs Property Act, and it is codified in RCW 7.54. As you can guess, it deals with property that is inherited, but, receiving the property as an inheritance is not necessary for this law to apply.
What Property Applies? RCW 7.54.010
For RCW 7.54 to apply, the property must be “heirs property.” Heirs property is a property that meets three conditions:
- There is no agreement regarding partition in a record binding the co-owners;
- One or more of the co-owners acquired title from a relative, living or deceased; and
- Any one of the following applies:
- 20% or more of the property is owned by owners who are relatives;
- 20% or more of the property is owned by someone who received their interest from a relative; or
- 20% of the owners are relatives.
“Relatives” is the common understanding of the word. It includes people who are blood-related or related by marriage, adoption or other state law.
Partition In-Kind. RCW 7.54.060 and 070
Co-owners can petition the court for a partition in-kind or a partition by sale. If partition by sale is not requested by any co-owner, the court shall partition the property in-kind unless the court determines that a partition in-kind would result in great prejudice to the co-owners as a group. The court will evaluate the following factors in determining if a partition in-kind is appropriate:
- Whether the heirs property can practically be divided in the appropriate shares;
- Whether the partition into separate parcels would result in a collection of parcels that are worth materially less than the whole property;
- Evidence of the duration of ownership by an owner and the relative who transferred the ownership interest to that owner;
- A co-owner’s sentimental attachment to the property;
- The use of the property and the harm if a co-owner must discontinue that use;
- The degree to which co-owners have contributed to property taxes, insurance, other expenses associated with maintaining the property and contribution to improvement, maintenance and upkeep of the property; and
- Any other relevant factor.
If the court determines that an in-kind partition is appropriate, it will divide the property and can make the parties pay each other to adjust for differences between the in-kind partition and the fractional ownership of each co-owner. For example, if the parties owned the property in a 60/40 split, but the property could only be divided into two equal parcels, the owners with the 40% interest may be required to pay 10% of the value of the property to the other owner to resolve the difference between the fractional ownership and the in-kind partition.
If the court determines that a partition in-kind is not appropriate, the court will dismiss the case unless at least one party requested a partition by sale. If the case was dismissed, the parties could start a new suit for a partition by sale.
Determination of Value. RCW 7.54.040
Unlike partition under RCW 7.52 (the really old law), the courts play a larger role in the process in a RCW 7.54 partition. Before any sale is ordered, the court will determine the value of the property. If the parties cannot agree on a value or a process by which the value should be determined, the court will appoint an appraiser to report back to the court with their determination of value. There is a process for the parties to challenge the appraised value, but ultimately it is the court’s responsibility to determine the value.
Buyout by Co-Owner. RCW 7.54.050
This is where a RCW 7.54 partition differs greatly from a RCW 7.52 partition. After determining the value under RCW 7.54.040, the court can offer for sale the proportional interest of any party who requested a partition by sale. Typically, this would be the plaintiff in a suit for partition, but it could be a request made in a counterclaim by the defendant. There is a process for offering the proportional share for sale to the other owners. If multiple co-owners want to purchase the offered share, the court will allow them to buy based on their ownership percentages.
The statute has a process for dealing with one buyer, multiple buyers or no buyers. It also has a procedure for dealing with the possibility that a buyer does not deliver the money to buy their allotted share in the required time. The legislature even considered how to deal with the interest of owners who were served with the lawsuit, but who have not appeared in the action. After a period of time, the court can offer that interest for sale in the same way it offered the interest of the parties requesting partition by sale.
Partition Alternatives and Sale Process. RCW 7.54.060 and 080
If the buyout process does not resolve the interests of all co-owners (possibly one of the plaintiffs requested an in-kind partition and did not request a partition by sale, or the other owners did not have a way to buy out the available interests), the court may consider alternative options. The court can apply the same analysis as discussed above for an in-kind partition to resolve the remaining interest. If an in-kind partition cannot resolve the remaining interests, the court will order the sale of the property.
The sale must be by an open market sale unless the court finds that a sealed bid or auction would be more advantageous to the owners as a group. The law defines the process for selecting a real estate broker to list the property, which will be listed at a price no lower than the appraised value. The court can determine reasonable terms and conditions for the sale, like owner financing, contingencies for buyers, etc. If the property is not sold within a reasonable amount of time the court can approve the highest offer received, reduce the listing price or order the property be sold by sealed bid or at a public auction. When the broker receives an offer for the property, they report back to the court with certain details of the offer and if the offer is for at least the appraised value of the property and it meets the terms and conditions set by the court, it will be accepted, and the sale will proceed to closing.
Conclusion and Observations.
In theory this new law differs significantly from RCW 7.52, which requires a sale by public auction, however, it does not differ as significantly from RCW 7.52 as it is commonly applied by courts. Courts often order buyouts or market sales in typical partition suits. RCW 7.52.270 states “All sales of real property made by the referee shall be made by public auction, to the highest bidder, in a manner request for the sale of real property on execution.” Some courts apply this statute with a liberal dose of judicial discretion, but at least the Washington State Legislature has made it clear that alternatives should apply in disputes regarding property that was inherited or received as a gift from a relative.
I appreciate the Legislatures great effort to define a “record.” It must have been fun to work on this definition for hours to achieve a very thorough definition. A record is “information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.” So, the obvious ones are included, papyrus scrolls, stone tablets, typed agreements, but it could also be handwritten agreements on a restaurant napkin, agreements formed over email or text or an audio or video recording evidencing an agreement regarding partition. This concept of “perceivable form” is interesting to think about. This definition of record results in a lower standard that would normally be required for agreements that could span years and involve land. The “statute of frauds” generally requires these types of agreements to be in writing and signed by the party who it will be enforced against. Unless the courts combine the RCW 7.54 definition of record with the statute of frauds requirements, this will result in a much lower standard for an admissible agreement to avoid partition.
I don’t recall another statute that has the term “the court shall” written as many times as this statute. Typically, courts do not want to babysit the process of working out the process of what the court ordered. However, this statute requires that the court hire an appraiser, send notice to each party regarding the appraised value, and conduct a hearing (without a motion being made by a party) regarding the determination of the value of the property. Of course, these duties are avoided if the parties agree on a value or a method of determining the value of the property. In the buyout phase of the suit, it is the court that sends notice to the other owners that the fractional share of the party requesting a partition by sale is available for buyout. The court is responsible for telling the owners how much each is entitled to purchase, collect the sale price, re-offer shares that are not paid for, and distribute funds or make refunds at the end of the buyout process.
The guidelines given to the courts are clear and easy to apply, but the court will be much more involved in resolving property disputes with heirs’ property than with real estate that falls under the old partition statute. This detailed process will likely result in parties following a similar process without court involvement. I think this statute makes some outcomes in court more predictable, which should lead to voluntary settlement of disputes without a court enforcing this process on the co-owners.
We will see how this statute works its way through the courts over the next decade or more, but it seems like it has the potential to resolve disputes in a more efficient way that has a bias to keeping family properties in the family.
To learn more about Washington’s Partition Law, please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.
