California Partition Law Blog
The Uniform Partition of Heirs Act is a new law that changes the procedure for partitions. A partition action is a court-ordered process where a property owner forces a sale of jointly owned real estate. Essentially, a partition action exists to allow people who own real estate together to take their share of the equity and go their separate ways.
With the price of California’s real estate ever-increasing, the Legislature recognized the importance of keeping property within the family and decided to adopt and enact the Uniform Partition of Heirs Act.
The importance of inherited property cannot be understated. It is the key to advancing inter-generational wealth, allowing families to build off a stable foundation, free from the expensive and stressful process of buying property in California.
While partitions can prove to be a necessary remedy in some situations, they often have a detrimental effect on the individuals receiving inherited property. Usually, most inheritors want to keep the property they’ve received. It can have sentimental value or simply provide a free space to live. But under the old partition laws, all it took was one co-owner filing a partition action to force a sale of the property.
With the Uniform Partition of Heirs Act, this problem is somewhat remedied by giving co-owners who don’t want a sale the opportunity to buy-out the interests in the property, preserving their ownership of the property.
What property is affected by the Uniform Partition of Heirs Act?
The Uniform Partition of Heirs Act affects only “heirs property.” In order for real property to be considered heirs property, it must be real property held in tenancy in common which satisfies the following requirements: (1) there is no agreement in a record binding all the cotenants which governs the partition of the property; (2) one or more of the cotenants acquired title from a relative, living or deceased; (3) Any of the following must also apply: (a) twenty percent or more of the interests are held by cotenants who are relatives, (b) twenty percent or more of the interests are held by an individual who acquired title from a relative, whether living or deceased, or (c) twenty percent or more of the cotenants are relatives. (CCP § 874.312.)
The PRPA, on the other hand, affects all co-owned property. The new version of the Code of Civil Procedure section 874.313 states, “in an action to partition real property, the property shall be partitioned under this chapter [the PRPA] unless all of the cotenants otherwise agree in a record.
Thus, absent an agreement governing partition, the PRPA will control all partitions of co-owned property.
What is the partition process under the Uniform Partition of Heirs Act?
Because the Uniform Partition of Heirs Act governs only “heirs property,” the court must first determine whether the property in question falls under the statute. (CCP § 874.313.) If it does, the remainder of the statutory process plays out.
Under both versions of the statute, the court will “shall determine the fair market value of the property by ordering an appraisal.” (CCP § 874.316.) The court doesn’t have to order an appraisal, but only if all the co-owners agree to a different method of valuation.
If, however, an appraisal occurs, it shall be conducted by a disinterested third-party real estate appraiser licensed to determine the fair market value of properties. After the appraisal is conducted, parties may file objections to the value and can even offer additional evidence of value to the court.
After the valuation is complete, parties will be introduced to the key feature of the statutes: the buy-out option. If a co-owner requests a partition by sale, then the court will notify the other co-owners that they may buy all the interests of the cotenant that requested the partition. (CCP § 874.317.)
This is, essentially, a right of first refusal. The co-owners who don’t want the property sold now have the option to simply buy-out the requesting party. Additionally, the buy-out price will be based on the property’s valuation determined earlier in the litigation. And if one or more parties exercise the buy-out, then the court will reapportion ownership percentages based on the price paid.
What if a co-owner cannot buy out the other parties under the UPHPA?
While the buy-out is a much-needed option for partition actions, sometimes parties will simply not have the ability to buy-out the party requesting partition. If this happens, the statutes mandate a partition proceed according to the provisions already in place but subject to another key statutory addition.
Under current partition law, partitions in kind are favored. (Butte Creek Island Ranch v. Crim (1982) 136 Cal.App.3d 360, 365.) A partition in kind is the literal physical division of property in accordance with ownership interest. Under the current law, parties must make a showing that partition in kind is not equitable. But now, the UPHPA and PRPA give explicit guidelines to the court on making this determination.
In determining whether a partition in kind would prejudice the cotenants as a group, the courts shall now consider:
(1) whether a partition in kind is practicable, (2) whether the partition in kind would substantially diminish the fair market value of the property as a whole, (3) evidence of the collective duration of ownership, (4) a cotenant’s sentimental attachment, (5) the lawful use being made of the property, (6) the degree to which the cotenants have contributed their share of property expenses, and (7) any other relevant factor. (CCP § 874.319.)
Thus, parties now have an increased ability to force a partition in kind instead of being subjected to a forced sale of the property.
What is an example of the whole UPHPA process?
As an example of this unique partition process, “Shawn” and “Julie” are siblings who receive ownership of their family ranch through their parents’ will. After a few years, relations between the two sour, as Shawn doesn’t care much for the state of the ranch, forcing Julie to bear the burden of paying the property expenses.
Shawn eventually decided to bring a partition action. Julie argues that the process needs to be under the UPHPA, and the court agrees. Both parties acquired title from a relative, there’s no partition agreement in place, and both cotenants are relatives with an ownership interest that well exceeds the 20% threshold.
The court then orders an appraisal of the property, and the market value is determined to be quite high. In fact, it’s too high for Julie, who is opposed to the partition but cannot afford to buy out Shawn’s interest.
But Julie can still fight a partition by sale. She can argue that the multi-acre ranch is capable of being physically partitioned, that she holds a lot of attachment to the property because it’s where she grew up, and that she’s helped to pay expenses for as long as she has been a co-owner. With the right attorney by her side, these arguments could help sway a judge into ordering a physical partition instead of a judicial sale.
How can the Attorneys at Underwood Law Firm, P.C. Assist You?
Partitions are already fairly common in California, particularly among unmarried couples and business partners. But the changes coming to partition law as a result of the Uniform Partition of Heirs Act could cause additional headaches to first-time litigants. Partitions are already emotional procedures, and the time, money, and legalese associated with getting them started can be a significant barrier to exercising one’s property rights.
As each case is unique, property owners would be well-served to seek experienced counsel familiar with the ins and outs of partitions and co-ownership. At Underwood Law, our knowledgeable attorneys are here to help. If you are concerned about facing a partition action, if you’re interested in seeking one yourself, or if you just have questions, please do not hesitate to contact our office.
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