Inherited Property Disputes

You’ve lost one of the most important people in your life—one of your parents—but on top of that you are now fighting with a family member over the inherited property. Your parent left the property to each of you, and not just to them. You just want what is fair, but they refuse to be reasonable.

You understand where they are coming from, but they refuse to acknowledge that you have rights too. The only thing that seems to matter to them is what they want. You are between a rock and a hard place with your mortgage, your retirement account, and your children’s expenses. They refuse to listen to the needs that you have, or see that the property represents your inheritance, which could make a substantial difference in your life.

You’ve talked the matter to death, but things just seem to move in circles. You have tried and tried and tried, but you feel stuck. It feels like they only want to manipulate the situation their benefit. Who knew that a gift from a loved one could turn into a burden? Is there no escape hatch out of this trap?

The Underwood Law Firm can help. We are currently handling over 100 partition actions throughout California, and are helping many people just like you to secure their inheritance.

As the partition process currently stands, the process of actually getting the property sold can be a slog. The parties will fight over the terms of the sale, the partition referee and their respective recommendations on selling the property, and whether to confirm a sale once it is done. This process is expensive and time-consuming, eating up the resources of the parties and the courts.

Under the law, the court instead appoints an appraiser to do the heavy lifting. The new statute states that the court “shall determine the fair market value of the property by ordering an appraisal.” (CCP § 874.316.) The court doesn’t have to be the one to order the appraisal, but this is 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 new statute: 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.

Then, if the other party fails to deposit the buyout price as required by the Court, the matter would proceed to a sale of the property so each owner could receive their fair interest for the Property.

The first aspect of this statute is that the buyout is triggered only if the plaintiff requests partition by sale. (CCP § 874.317.) If that is the case, though, the court will notify the other parties to the action that they may request the buyout of the plaintiff’s interest.

Within 45 days of receiving said notice, any other co-owner can inform the court that they wish to buy the plaintiff’s interest. And the purchase price of that interest is the value of the entire parcel, as previously determined under CCP § 874.316, multiplied by the cotenant’s fractional ownership of the entire parcel.

Let’s start with an easy example by returning to Shawn and Julie, each with a 50% interest in the property. Suppose the house’s value was determined by the court to be $100,000. For Julie to buy out Shawn’s interest, she would have to pay: 100,000 (entire parcel value) x (50/100) (Shawn’s fractional ownership) = $50,000.

What if, though, the property is owned by three brothers, and a sister, and the sister wants to get bought out, and all three brothers each separately want to buy her interest so it doesn’t go to the others? How would that work?

This is where things can get tricky. Assume all four siblings own the property in 25% shares, and the property is valued at $100,000. Sister filed the partition, so she obviously cannot participate in the buyout. All three brothers submit notices to participate in the buyout, but they all want to purchase Sister’s entire interest. Under the statute, they’re out of luck.

Instead, the way it works is that the total percentage interest in the property of all potential purchasers who gave notice is 75% (all three brothers own 25% interests). So all three have a right to purchase 25/75ths of Sister’s interest. None of them can buy out more than the others.

Continuing with the example, Sister’s interest in the property would be 100,000 x 1/4 = $25,000. Each brother would then have to pay $25,000 x (25/75) = $7,500. Once the purchase was complete, each brother’s ownership interest would go from 25% to 33%.

While the courts and lawyers attempt to figure out the operation of the Partition of Real Property Act, litigants may feel stressed at the prospect of undertaking a partition governed by a relatively new law. These situations can be stressful, and difficult, especially when the way out is not entirely clear. Fortunately, the lawyers at the Underwood Law Firm specialize in partition actions and solving difficult co-ownership problems through civil litigation, helping good people end bad real estate partnerships. If you have found yourself in one of these situations, then please do not hesitate to contact the Underwood Law Firm.