Code of Civil Procedure (CCP) Section 874.320 – Court Ordered Open-Market Sale; Sealed Bids; Auction

Section 874.320 of the partition statutes is important because it provides guidelines for conducting an open-market sale for the court and the broker. This section of the statute ensures the property is sold so as to not compromise its value and have an equitable result for the parties.

Code of Civil Procedure section 874.320 states:

1. If the court orders a sale of property, the sale shall be an open-market sale unless the court finds that a sale by sealed bids or an auction would be more economically advantageous and in the best interest of the cotenants as a group.
2. If the court orders an open-market sale and the parties, not later than 10 days after the entry of the order, agree on a real estate broker licensed in the State of California to offer the property for sale, the court shall appoint the broker and establish a reasonable commission. If the parties do not agree on a broker, the court shall appoint a disinterested real estate broker licensed in the State of California to offer the property for sale and shall establish a reasonable commission. The broker shall offer the property for sale in a commercially reasonable manner at a price no lower than the determination of value and on the terms and conditions established by the court.
3. If the broker appointed under subdivision (b) obtains within a reasonable time an offer to purchase the property for at least the determination of value, the following requirements apply:
   1. The broker shall comply with the reporting requirements in Section 874.321.
   2. The sale shall be completed in accordance with state law.
4. If the broker appointed under subdivision (b) does not obtain an offer to purchase the property for at least the determination of value within a reasonable time, the court, after a hearing, may do any of the following:
   1. Approve the highest outstanding offer, if any.
   2. Redetermine the value of the property and order that the property continue to be offered for an additional time.
   3. Order that the property be sold by sealed bids or at an auction.
5. If the court orders a sale by sealed bids or an auction, the court shall set terms and conditions of the sale. If the court orders an auction, the auction shall be conducted under Chapter 6 (commencing with Section 873.510).
6. If a purchaser is entitled to a share of the proceeds of the sale, the purchaser is entitled to a credit against the price in an amount equal to the purchaser's share of the proceeds.

This section is similar to section 10 of the Uniform Partition of Heirs Property Act. This section of the statute was amended in 2022, and the new version made effective as of January 1, 2023. This amendment deleted “If the court orders a sale of heirs property” from subdivision (a), changing it to “if the court orders a sale of property.” This reflects the amendments of all the partition statutes to apply more widely to not just heirs’ property interests.

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 record of enactment success is surprising given that almost none of the real property acts that have failed or otherwise garnered little support have implicated civil rights and racial justice matters in substantial ways. (see Law Reform, p. 76.) The Act has had a remarkable record of success in the years since it was made available to the States for legislative consideration. Those who have advocated for enactment of the Act have been able to frame the reform effort as an effort to protect vital property rights and help families preserve their real estate wealth. (see Law Reform, p. 78.)

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.)

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

If a court does not order partition in kind, the court must order partition by sale, according to this section of the statute. However, if no cotenant requested partition by sale the court will dismiss the action. A court ordered sale must be an open-market sale unless a sealed sale or auction sale is more economically advantageous. An appointed broker or referee managing the sale is required to file a report with the court.

For example, “Julie” and “Shawn” want to partition a shared home. If a sale is approved by the court it should be sold by a broker on the open-market. If the parties have agreed to a private sale that would be managed by the broker. Once a buyer has been found the broker will deliver a report to the court. The proceeds would then be divided proportionally between Julie and Shawn.

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.