December 1, 2020
What happens when co-owners of property disagree about what to do with it, such as one wanting to sell, and one wanting to keep it? If they can’t agree between themselves, they can file a partition action in court. “Partition” means to divide into parts, and in a partition action, a court will essentially “divide” the property between the co-owners.
The California Code of Civil Procedure specifies the following three basic methods of partition:
– Physical division of the property. [Code Civ. Proc. §§ 873.210 – 873.290.]
– Sale of the property and division of the proceeds. [Code Civ. Proc. §§ 873.510 – 873.850.]
– Partition by appraisal under which any of the parties may acquire the interests of others at their value as assessed in a court-ordered appraisal. [Code Civ. Proc. §§ 873.910 – 873.980.]
For physical division of property, known as partition in kind, a court will divide property ownership into fairly equal, but separate, pieces, with each co-owner becoming an owner of a fraction of the property. In modern property ownership (where most people co-own a home or other dwelling), it is more common for a court to either order the sale of a property (splitting the proceeds between the co-owners) or order one party to buy out the other’s interest, since it is not feasible to split up a building.
When dividing the proceeds of the sale of a home, or setting the price at which one party will buy out the other, it is rarely as simple as splitting the money 50-50. For instance, one party may have spent significant sums maintaining and repairing the property. One party may have been exclusively living at the property. The court must therefore determine how to divide the proceeds and/or costs between the owners.
In a partition action, the court may order allowance, accounting, contribution, or other compensatory adjustment among the parties, according to the principles of equity. [Code Civ. Proc. § 872.140.] Code of Civil Procedure section 872.140 makes clear the court’s authority to order compensatory adjustment for such items as common improvements, unaccounted rents and profits, and other matters for which contribution may be required. [Cal. L. Rev. Comm. Comment to Code of Civil Procedure section 872.140; see also Wallace v. Daley (1990) 220 Cal.App.3d 1028, 1035-1036 (“Every partition action includes a final accounting according to the principles of equity for both charges and credits upon each co-tenant’s interest. Credits include expenditures in excess of the co-tenant’s fractional share for necessary repairs, improvements that enhance the value of the property, taxes, payments of principal and interest on mortgages, and other liens, insurance for the common benefit, and protection and preservation of title”).]
The court may take any improvements made by one party into account by, for example, making a suitable allowance for them, since an action for partition is essentially equitable in nature. [Ventre v. Tiscornia (1913) 23 Cal.App. 598, 604; Merecola v. Chester (1950) 97 Cal.App.2d 140, 143.] The other co-owner need not have consented to the improvements, but in order for such an allowance to be made for them, the improvements must have been (1) made by a co-owner, (2) at his or her own cost, (3) in good faith, (4) necessary for the preservation of the common property, and (5) permanent, and they must have (6) enhanced the value of the common property and (7) benefitted the other co-owners. [Ventre v. Tiscornia (1913) 23 Cal.App. 598, 601-606; Merecola v. Chester (1950) 97 Cal.App.2d 140, 143; Wallace v. Daley (1990) 220 Cal.App.3d 1028, 1038 (a court’s determination to proceed by sale rather than division will not prevent an improving co-owner from being compensated for improvements made in good faith).]
In determining how much to credit the co-owner for good faith improvements, a court should award the amount such improvements enhance the value of the property. Therefore, a co-owner should receive credit for any improvements made in good faith to the property which have enhanced the value of the property. The credit awarded to the co-owner should be the amount the improvements have enhanced the value of the property. [Wallace v. Daley (1990) 220 Cal.App.3d 1028, 1035-1036.]
Taxes, Insurance, Repairs, and Mortgage Payments:
Courts also routinely award credit for taxes, insurance, necessary repairs, and payments of principal and interest on mortgages and other liens. [Wallace v. Daley (1990) 220 Cal.App.3d 1028, 1035-1036; Southern Adjustment Bureau, Inc. v. Nelson (1964) 230 Cal.App.2d 539, 539-541; Hunter v. Schultz (1966) 240 Cal.App.2d 24, 32.]
Credits for Purchase Price and Down Payments:
A co-owner may be entitled to a credit if they paid more than their share of the purchase price and/or down payment on the property. [See In re Marriage of Leversee (1984) 156 Cal.App.3d 891, 894 (in a partition action, “the court may order an equitable compensatory adjustment to compensate [the plaintiff] for her use of separate funds for the down payment on the residence”); Demetris v. Demetris (1954) 125 Cal.App.2d 440, 444-445 (a co-tenant was entitled to a credit where he paid more than his fair share of the purchase price).]
A co-owner may be entitled to interest on any payments made, but only after they have made a demand on the other co-owner for contribution. [See Willmon v. Koyer (1914) 168 Cal. 369, 374 (“a tenant making payments is only entitled to interest after a demand on his cotenant for contribution”).]
Generally, in the absence of an agreement between them, one owner cannot maintain an action against another co-owner in exclusive possession to recover rent for the latter’s occupancy of the property. However, in a partition action, if a co-owner who has been in possession or use of the premises seeks to obtain contribution respecting improvements made, or amounts expended in protection or preservation of the property, the court, as incidental to the granting of such relief and by way of adjusting the rights of the parties, may charge the owner-in-possession with at least part of the reasonable value of the occupancy or use, even though he could not otherwise be required to account or be held liable for any such benefits. [Hunter v. Schultz (1966) 240 Cal.App.2d 24, 30-32; but see Milian v. De Leon (1986) 181 Cal.App.3d 1185, 1199 (on partition, the court was not required to ascertain the reasonable rental value of the property and balance that against joint tenant’s expenditures for mortgage payments, insurance, taxes, and maintenance after separation of non-married co-owners of house).]
When to Make Credits and Adjustments:
When a co-owner makes advances from their own pocket to preserve the common estate, their investment in the property increases by the entire amount advanced. Upon sale of the property, a co-owner is entitled to be reimbursed for any credits or adjustments before the balance of any proceeds is divided between the co-owners. [Southern Adjustment Bureau, Inc. v. Nelson (1964) 230 Cal.App.2d 539, 541.]
Costs and Fees:
In a partition action, the court apportions the costs (including attorneys’ fees) of partition among the parties in proportion to their interests. [Code Civ. Proc. §§ 874.010, 874.020, 874.040.] For example, if property is partitioned between a two-thirds owner and a one-third owner, the total attorneys’ fees incurred by both parties for the common benefit should be charged to each party at that ratio. [Statz v. Davis (1981) 122 Cal.App.3d 1, 45; California Forms of Pleading and Practice, Vol. 35, Chap. 397, p. 45.] However, if one party has been uncooperative or obstructionist, the court can choose to award costs and fees differently, such as making the uncooperative party responsible for paying the attorneys’ fees incurred by the other side. [Code Civ. Proc. § 874.040.]
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This article is based on the law as of the date posted at the top of the article. This article does not constitute the provision of legal advice, and does not by itself create an attorney-client relationship with Eskridge Law.