California Partition Law Blog
While it may not be obvious, a sizeable portion of the work that real estate agents and realtors do is court-ordered. Real estate law is a massive field, and often, the disposition of litigation results in the court forcing the sale of a property, be it a business, home, condominium, etc. As such, many realtors find themselves acting as agents or referees for parties to a lawsuit.
This situation finds its most common form in the partition. The partition is a special type of lawsuit wherein parties take their equity out of a property by putting it up for sale. However, should a real estate agent accept this task, there are a number of considerations they need to take in mind. The Underwood Law Firm handles partitions every day. As such, we’ve come up with 10 helpful items that every realtor should keep in mind if they’re tasked with partitioning a property.
Number 1: What is Partition and How Does a Sale Begin?
As previously stated, a partition action is a judicially-supervised forced sale of real estate. In California, if you’re a co-owner of property (a joint tenant or tenant-in-common) you have an “absolute” right to partition the property. (CCP § 872.210; Priddel v. Shankie (1945) 69 Cal.App.2d 319, 325.) What this means is that by filing a partition suit, you force the real estate to be sold regardless of the requests of the other title owners. After all, the purpose of a partition action is to permanently end all disputes and remove all obstacles to the free enjoyment of land by one person. (McGillivray v. Evans (1864) 27 Cal.92.)
But just because one has the right to partition does not mean they can just go to a real estate agent and have them sell their piece of land without the consent of the other co-owners. Instead, that party needs to file suit and obtain a special order called an “interlocutory judgment.” Once secured, a party can then approach a realtor and ask them to act as a “partition referee” to get the property sold.
Of course, this is easier said than done. In fact, a bulk of partition litigation surrounds the process of obtaining this judgment. It will only be issued once the court definitively concludes who the co-owners are and their exact ownership percentages. (Cummings v. Dessel (2017) 13 Cal.App.5th 589.)
Number 2: The Realtor/ Referee Has Quasi-Judicial Immunity
As the Court of Appeal stated most recently in November 2022, a Realtor who acts as a partition referee and assists the parties with resolving the dispute is entitled to a type of judicial immunity under a case known as Holt v. Brock (2022) 85 Cal.App.5th 611, 620.)
There, a court appointed a Realtor to be a partition referee to sell the property at issue. Later, one of the parties claimed that the realtor did something incorrectly and tried to sue the Realtor. The trial judge and appellate court, however, refused to let the Realtor be sued for something they allegedly did or did not do when acting as a partition referee under a doctrine known as quasi-judicial immunity.
Judicial immunity bars civil actions against judges for acts they perform in the exercise of their judicial functions. (Howard v. Drapkin (1999) 222 Cal.App.3d 843, 851.) The immunity applies to all judicial determinations, “including those rendered in excess of the judge’s jurisdiction, no matter how erroneous or even malicious or corrupt they may be.” (Holt, 85 Cal.App.5th at 621.) Thus, when acting as a partition referee to resolve disputes between the parties, a Realtor has a right to quasi-judicial immunity.
Number 3: Property Sales Can Be Marketed Like Other Private Sales
Once a realtor is appointed a partition referee, they should know that the law permits the sale to occur like any other private sale through a listing on the MLS, Zillow, Redfin, etc., because the purpose of the sale is to capture the highest value for all parties. (CCP § 873.520.)
This feature prevents the sale from losing value like other distressed sales. Additionally, during the process, the law requires that the bids be kept secret. Depending on the condition of the real estate, it may be better to keep bids secret to keep the price as high as possible. In other situations, however, especially if the property is highly desirable, it might be better to make all bids public so as to drive up the price.
Number 4: The Court has to Approve the Manner and Method of the Sale
Another thing that a realtor needs to do as a partition referee is issue a report containing the manner and method of the sale. For example, credit sales are part of the manner and terms of the sale that the court must approve. (CCP § 873.770.) For context, a credit sale is implicated when one of the parties (a person who is already an owner) wishes to purchase the other person’s interests in the partition sale. In so doing, they can use their “credit,” i.e., their existing equity, as part of the purchase price.
Of course, whether to allow a credit sale is just one item a realtor needs to consider. Another common “manner of sale” item is whether the sale is to be for cash only. Whatever the case may be, the Court ultimately is the one to approve the manner, terms, and conditions of the sale, even if it usually ends up adopting what the referee recommends. (CCP § 873.610.)
Number 5: The Realtor Needs to Give Notice of the Sale
Perhaps the most important tip for realtors acting as partition referees is that the referee must give notice of the sale once procedures have begun.
A proper notice requires including a description of the property, the time and place of the sale, the principal terms of the sale, and a place for receiving bids. (CCP § 873.650.) In the case of a private sale, the place of sale will normally be the place of business of the referee. (Id.) The bids or offers for the property must be in writing and left at the place designated in the notice after its posting. (CCP § 873.680.)
Usually, to accomplish this the realtor will provide notice of the date when the sale will occur, including the location of their office, in a newspaper of general circulation where legal notices are available, in addition to noticing all the parties to the action.
This is a crucial step because, without notice, the sale can be repealed.
Number 6: Private Sales of Property Have to Occur Within a Year
When a sale is private, the date of sale must take place no earlier than the date stated in the notice of sale and must occur within 1 year thereafter. (CCP § 873.680(a).) This gives realtors a set deadline, which in depressed markets, may be difficult to meet.
While the deadline may seem rigid to some, it would be unfair to the litigants to force them to wait around for more than a year, despite knowing that the property will ultimately be sold. Interestingly, however, public auctions do not have this deadline. Instead, the realtor has a date on which the auction will be held, and that property is sold that day.
Number 7: Any Sale of Property Requires Court Confirmation
Just because the sale is completed does not mean the lawsuit is over. Rather, any party or the referee must ask the court to confirm the sale for it to be complete by providing a report on the sale. The court may confirm the sale even if there is a variance from the prescribed price or terms of the sale. (CCP § 873.730.) And the hearing on the confirmation must be at least 10 days after giving notice of the sale.
Number 8: Referees Need to Issue a Report of Sale
Any confirmation of sale also requires the referee to make a report to the Court. The referee’s report shall contain the following information:
“(1) A description of the property sold to each purchaser. (2) The name of the purchaser. (3) The sale price. (4) The terms and conditions of the sale and the security, if any, taken. (5) Any amounts payable to lienholders. (6) A statement as to contractual or other arrangements or conditions as to agents’ commissions. (7) Any determination and recommendation as to opening and closing public and private ways, roads, streets, and easements. (8) Other material facts relevant to the sale and the confirmation proceeding.” (CCP § 873.710.)
Number 9: A Partition Sale Can be Set Aside Only Rarely
Usually, once the court issues an interlocutory judgment of partition, the matter is more or less concluded. That said, if they feel the sales price is too low, they can try to set aside the sale entirely. If they wish to pursue this option, then they must give notice of their intent to do so within 10 days of the motion to confirm the sale. (CCP § 873.720.)
At the hearing, the court will examine the report and witnesses in relation to the report. The court may confirm the sale despite a variance from the prescribed terms of sale if doing so will be beneficial to the parties and will not result in substantial prejudice to persons interested in the sale. (CCP § 873.730.)
As mentioned above, if litigants want to fight a sale down to the last possible moment, they can try to set aside the partition sale by claiming the sales price is too low. That being said, the Court will set aside the sale if only if it finds that:
(a) the sale proceedings were unfair (CCP § 873.730), (b) Notice of sale was not properly given, (c) the sale price is disproportionate to the property’s value (CCP § 873.730), (d) a new sale would yield a net increase of at least 10% over the first $10,000 of the sale price and 5% over any excess. (CCP § 873.730(c)(3).)
Number 10: The Court MUST Transfer the Property After the Sale
Finally, the court must confirm the report and sale and order the interests transferred to the acquiring parties upon determining that the proceedings have been regularly conducted, that transfer of title to the interests may regularly be made, and that no facts appear which would make such transfer inequitable. (CCP § 873.960.)
What this means is that if the sale cannot be set aside (and they usually are not), the court has to confirm the sales report. It doesn’t have the discretion to stop the partition process on some other grounds.
How can Attorneys at the Underwood Law Firm Assist You?
As detailed above, there are several legal steps that realtors should take note of to ensure that a partition sale occurs properly and the matter receives court approval. As each case is unique, however, realtors and litigants alike would be well-served to seek experienced counsel familiar with the intricacies of the partitions. At the Underwood Law Firm, our knowledgeable attorneys are here to help. If you are attempting to secure a partition referee, wondering whether you can give any input on sales terms, or if you just have questions, please do not hesitate to contact our office.
Learn more here.