What is a partition action?
A partition action is a court-ordered process that occurs when a property owner forces the sale of jointly owned real estate property. Partitions are designed to determine the final equitable sum of a property owner’s interest in real estate, allowing each co-worker to take their fair share of equity, before going their separate ways. Each owner is entitled to recover their fair share of the property’s value. This means each co-owner is guaranteed to receive their equal share of rents and profits from a property they co-own through an equal division process performed by the court. (Cal. Civ. Proc. Code § 872.510.)
Do each owner’s property contributions affect the partition?
In California, partitions are conducted in accordance with the principles of equity to ensure that each owner’s compensation is distributed fairly. (CCP § 872.010.) An accounting is the process of a court adjusting a co-owner’s compensation according to their contributions and the principles of equity. (California Code of Civil Procedure § 872.140.) This process allows co-owners to recover a division of the sale that accounts for any uneven matters in the ownership such as, uneven mortgage payments between parties, repairs, taxes, insurance, or other improvements. (Wallace v. Daley (1990) 220 Cal.App.3d 1028, 1035–36.)
Can a co-owner directly recover value of their time and services?
The general rule in California is that co-owners cannot profit from their own labor. (Swartzbaugh v. Sampson (1936) 11 Cal.App.2d 451, 455.) But a co-owner could seek reimbursement for improvements they individually made to the property, especially if those improvements increased the property’s value. (CCP § 872.720.)
Typically, a property owner cannot directly recover the value of time or services associated with their ownership of the property in a partition action. This is because partitions are designed to focus on a property owner’s financial contributions instead of their personal ones. A co-owner’s time and services might indirectly affect an accounting if the physical improvements they performed increased the property’s value. (Wallace v. Daley 220 Cal.App.3d at 1036.)
Recovery May be Allowed with an Agreement
An exception to this hard and fast rule might apply if a valid explicit agreement or clearly established mutual understanding, creating an implicit agreement, exists between all owners. (14 Am.Jur. § 30, pp. 98-99.) If this is the case, the value of time or services related to the co-owner’s management of the property is recoverable. (Id.)
To recover compensation for value, the co-owner must perform services beyond the duties they are required to perform by their cotenancy or California law. (Combs v. Ritter (1950) 100 Cal.App.2d. 315, 317.) A co-owner attempting to recover the value of their time or services based on an implicit agreement must provide evidence of a clear mutual understanding between all owners. (Id.) Evidence of a mutual understanding, in lieu of a explicit agreement, must show that the actions taken by co-owners were for the specific purpose of compensating one for the value of their time or services. (Id. at p. 318.)
It is the Court’s duty to determine whether the facts and provided evidence support a co-owner’s claim that an agreement, either express or implied, existed before the exception can be applied. (Neilsen v. Holmes (1947) 50 Cal.App.2d 315.) Generally, routine acts or payments will not evidence an implied agreement due to their broad nature. (Combs, 100 Cal.App.2d. at 318.) Showing the court that co-owners paid the same series of fees each month for property upkeep is insufficient evidence to establish a mutual understanding because of a lack of specificity regarding the payments purpose. (Id.) Individual testimony of the existence of an implied contract through mutual understanding is stronger evidence.
What is an example?
For example, “Shawn” and “Julie” bought a house together, thinking it would be a good investment property. After buying the house, Shawn and Julie decided that Julie would be responsible for all matters associated with the property’s management and maintenance, including leasing and rent. Shawn would be responsible for performing necessary repairs only. Shawn and Julie signed a written agreement later that day stipulating their roles. The written agreement explicitly stated “Julie, as co-owner of 1234 Underwood Street, is entitled to recover the full value of time and/or services put into the property beyond those she is legally required to perform as co-owner.”
Shawn and Julie co-owned the property until Shawn decided he wanted to sell the property. Julie, being against the sale, refused to sell. Because Julie refused to sell the house, Shawn found a partition lawyer who guided him through the process, so that Shawn could sell the house. In court, Shawn testified to the existence of the agreement between him and Julie regarding the value of her time and services. And, both Julie and Shawn brought copies of the signed agreement with them.
Ultimately, Julie and Shawn each recovered their full interest in the house. Julie also recovered the full value of her time and services put into the property as co-owner, excluding leasing efforts, and rents. Julie was able to do so because of the explicit agreement between her and Shawn. Shawn did not recover any additional value for performing necessary repairs because that is a duty expected of him as co-owner.
This scenario illustrates the exception allowing Julie to recover the value of her time and services because of an explicit agreement. Without the agreement, Julie would not have been able to recover anything beyond her equitable interest, just like Shawn.
Conclusion
California does not automatically award the value of time or services in partition actions. The Underwood Law Firm has a team of experienced lawyers who can help resolve your title issues as they related to partition and help you pursue solutions to ensure you recover the entirety of what you are legally entitled to. We are here to help.