Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide.
When multiple people have joint ownership in a property, sometimes disagreements happen. Maybe one person wants to keep the property and the other wants to sell, or perhaps their relationship has dissolved and they both want to be able to walk away from a joint asset.
In either case, a partition lawsuit may be the best way to decide how to move forward. Here we'll explore what a partition lawsuit is, how it works, and how it can assist you in severing joint ownership of a property.
What is a partition lawsuit?
A real estate partition lawsuit occurs when two or more people who have an ownership interest in a piece of property have different ideas about what should be done with it. This type of lawsuit most often takes place when dividing an estate between disagreeable family members, during divorce proceedings, or following a soured business partnership.
A partition suit typically ends in one of two ways. Either the court orders a forced sale of the jointly owned property at auction or by private sale and then each owner is given an equal share of the sale proceeds or the court divides the property into pieces and gives each owner an undivided interest in their own separate piece. In rare cases. the court may also award ownership to one person and order them to buy out the others.
However, the latter option usually only occurs in cases where there's a lot of land or acreage that can be divided easily. Partition lawsuits will usually result in a forced sale if the court is responsible for dividing a single residential property or commercial building.
How does a partition suit work?
The exact process for the lawsuit will depend on the partition statute in your state. You may want to consult with a real estate attorney to make sure you're aware of what you can expect before moving forward. That said, in general, most states tend to follow a similar process, so here's an overview of how a partition case might look.
Filing a petition to partition
The first step in a real estate partition is to file a partition action, or a petition to partition. The partition action must be filed in the superior court where the property is located, and all of the co-owners must be named, as well as anyone who has an existing or future interest in the property, like a lien holder, for example
Typically, a "lis pendens," or default notice, is also filed at the same time as the petition. This document simply notifies everyone who has been named in the partition action that the lawsuit is being filed. The lis pendens is kept on record in the recorder's office in the county where the property is located.
Issuing an interlocutory judgment
The first thing the court will do once a partition action is filed is verify that the plaintiff actually has the right to partition the property. After that has been verified, the superior court will move forward with issuing an interlocutory judgment. This judgment sets forth each person's interest in the property, orders that the property be partitioned, and determines the manner in which it will be partitioned.
Appointing a partition referee
After the judgment has been issued, as long as all parties consent, the court will appoint a partition referee to oversee the division of the property. While hiring a referee is often the best course of action in situations where the partition case is contentious, bear in mind that the co-owners are responsible for paying the referee's legal fees. Like attorney's fees, they are billed hourly, so this solution can become costly.
|Type||Partition in Kind||Partition by Allotment||Partition by Sale|
|Main advantage||Everyone gets a smaller piece of property to call their own.||One co-owner keeps the home, and the others get monetary compensation for their shares.||Since it's easy to divide profits from a sale, this is often the simplest way to sever joint ownership.|
|Main disadvantage||Difficult to do with most residential and commercial real estate properties.||Not all states even offer this type of partitioning as an option.||The property must be sold, even if one party had been hoping to maintain ownership.|
What are the different types of partition actions?
As you can see in the chart, there are three distinct ways in which a property can be partitioned: partition in kind, partition by allotment, and partition by sale. Below is an overview of each one. Read them over so you can get a sense of which method might be best for your property.
Partition in kind
Also known as an "actual partition," a partition in kind is the type where the property is divided up into equitable shares. Each property owner will receive a share equal to their ownership interest in the property. Again, though, this type of partition typically only happens when there is enough land to give each co-owner a decent-sized plot.
Once this is done, a quiet title action will be brought to the court to give each owner the individual ownership rights to their plot of land. Each division will also have to be recorded with the county clerk, and the property taxes will have to be reassessed.
Partition by allotment
Partition by allotment is the rare form of partitioning where ownership is awarded to one person, who is then ordered to buy out the rest of the co-owners. It's not an option in every state.
Where it is allowed, it's usually used in estate cases. Typically in these situations, all of the siblings were awarded joint ownership of the family home by the estate. However, one sibling has remained a life tenant in the home while the others have moved out to places of their own. In this case, the sibling who is the life tenant is usually awarded ownership and told to buy out the rest of the family.
Partition by sale
Partition by sale is the most common type of real estate partition. This is the type of partition where the property is sold at auction or by private sale and the sale proceeds are split between each of the co-owners. Here, the partition referee may bring in a licensed real estate agent or real estate attorney to assist with the sale process.
This type of partition works best in situations where the property would be difficult to divide equitably or where the parties are not getting along and do not want to have individual parcels. After all, it is much easier to divide money equitably than land.
The bottom line
Dividing up property is rarely simple. If you want to avoid paying substantial legal fees, your best bet for finding a solution is to either come to a private agreement or to try mediation. However, partition lawsuits are a dependable option for when you and your co-owners really cannot agree on what should be done. With this route, you're guaranteed to reach a resolution of some kind.
11% of the mega-wealthy swear by this investment…
The richest in the world have made their fortunes in many ways, but there is one common thread for many of them: They made real estate a core part of their investment strategy. Of all the ways the ultra-rich made their fortunes, real estate outpaced every other method 3 to 1.
If you, too, want to invest like the wealthiest in the world, we have a complete guide on what you need to take your first steps. Take the first step toward building real wealth by getting your free copy today. Simply click here to receive your free guide.