Code of Civil Procedure (CCP) Section 874.316 – Determination of Fair Market Value; Notice

This section establishes the guidelines in determining the fair market value of the property at issue. The court may order an appraisal if the parties have not otherwise agreed to a value.

Code of Civil Procedure section 874.316 states:

1. Except as otherwise provided in subdivisions (b) and (c), the court shall determine the fair market value of the property by ordering an appraisal pursuant to subdivision (d).
2. If all cotenants have agreed to the value of the property or to another method of valuation, the court shall adopt that value or the value produced by the agreed method of valuation.
3. If the court determines that the evidentiary value of an appraisal is outweighed by the cost of the appraisal, the court, after an evidentiary hearing, shall determine the fair market value of the property and send notice to the parties of the value.
4. If the court orders an appraisal, the court shall appoint a disinterested real estate appraiser licensed in the State of California to determine the fair market value of the property assuming sole ownership of the fee simple estate. On completion of the appraisal, the appraiser shall file a sworn or verified appraisal with the court.
5. If an appraisal is conducted pursuant to subdivision (d), not later than 10 days after the appraisal is filed, the court shall send notice to each party with a known address, stating all of the following:
   1. The appraised fair market value of the property.
   2. That the appraisal is available at the court clerk's office.
   3. That a party may file with the court an objection to the appraisal not later than 30 days after the notice is sent, stating the grounds for the objection.
6. If an appraisal is filed with the court pursuant to subdivision (d), the court shall conduct a hearing to determine the fair market value of the property not sooner than 30 days after a copy of the notice of the appraisal is sent to each party under subdivision (e), whether or not an objection to the appraisal is filed under paragraph (3) of subdivision (e). In addition to the court-ordered appraisal, the court may consider any other evidence of value offered by a party.
7. After a hearing under subdivision (f), but before considering the merits of the partition action, the court shall determine the fair market value of the property and send notice to the parties of the value.

In 2022, the legislature amended this section of the statute. The legislature deleted “if the court determines that the property that is the subject of a partition action is heirs property,” following “subdivisions (b) and (c)” from subdivision (a). This reflects the larger purpose of enacting the partition statutes in replacing the Uniform Partition of Heirs Property Act and expanding the scope of the Uniform Partition Property Act. The legislature also substituted “the State of California” for “this state” in subdivision (d).

The Partition of Real Property Act was an outgrowth of a law review article titled Historic Partition Law Reform (2019) Texas A&M Legal Research Paper Series No. 19-27 by Thomas W. Mitchell (“Law Reform”). (see also Thomas W. Mitchell, Reforming Property Law to Address Devastating Land Loss, 66 Ala.L.Rev. 1, 9, 29 (2014).

The Act’s revamped sales procedure almost assuredly will result in significantly higher partition sales prices than the partition sales prices yielded using the sale upon execution sales procedures and other similar forced sales procedures that have been used in most partition actions decided under general State partition laws. (see Law Reform, p. 75.) As a reference point, the open market sales procedures used in Scotland has yielded much higher sales prices than partition sales previously yielded under the old partition law. (Id.)

Previously, advocates “overestimated the degree to which partition sales have been a source of black land loss.” (Thomas W. Mitchell, Destabilizing the Normalization of Rural Black Land Loss (“Destabilizing”), 2005 Wis. L. Rev. 557, 581 (2005); see Faith Rivers, Inequity in Equity (Temp.Po.&Civ.Rts.L.Rev. 2007) 1, 31 (“There is little empirical data documenting claims of African-American land loss” [due to partitions].) (“Inequity”).) Others have claimed that low will-making rates for African-Americans represent a present day manifestation of the ways in which African Americans after the conclusion of the Civil War were deprived of access to attorneys and even to basic information about estate planning, but this theory has not been verified in any meaningful way. (see Law Reform p. 68.)

Moreover, instead of a court determining the fair market value of property in a partition action that has been determined to be heirs property, the Act enables the cotenants in a partition action to establish the value of the heirs property themselves-whether such value is purportedly at, above, or below the property's fair market value-or to agree upon another method of valuation that will yield a value for the property.

In recognizing that partition by sale sometimes will the most equitable in some partition actions, the Act seeks to ensure that any partition sale that may occur ends up yielding a sales price that maximizes the economic return for heirs’ property owners, thereby preserving as much of the real estate wealth of these families that was associated with their heirs’ property ownership. (see Reforming Property Law, p. 50, fn. 248 citing UHPHA, § 6(b)

The Partition of Real Property Act seeks to address consequences of this type of property ownership, and which California adopted in 2022.

For example, “Shawn” and “Julie” inherited a single-family home. They disagree about what to do with the home leading to Julie suing Shawn for partition. Because it is a single-family home it does not make sense to split the home down the middle physically. As such the court would likely recommend partition by sale (also known as partition in kind). This means the property will be sold and the proceeds from the sale divided according to the interests Shawn and Julie hold in the property. For example, if they had inherited the property as siblings in 50/50 “portions” the sale proceeds would be divided in half. To do so the value of the home must be determined. If the value is easily agreed upon by Shawn and Julie, then that will be used as the sale price. Otherwise, the court will order an appraisal where an objective third-party appraiser will determine the fair market value of the property. Shawn or Julie could object to the appraisal if they disagreed with it. They could also show the court evidence of what the value should be. However, if the value is disputed the court will ultimately have the final say as to what it should be.

Here at Underwood Law Firm, our knowledgeable attorneys are here to help navigate the complex web of case law and statutes surrounding partitions. If you are thinking of filing a partition, are already in the midst of a partition suit, or just have any questions, please do not hesitate to reach out to our office.