How to File and Prosecute a Real Estate Partition Action in California under the PRPA – Part Two

In the previous blog we discussed the filing of a lawsuit for partition of real estate in California and the recordation of a notice of pendency of action. In this blog, we will cover the court’s determination of the market value of the property and the exercise of the co-tenants’ buy-out rights.

After filing the lawsuit and recording a notice of pendency of action, the plaintiff must serve the lawsuit on the defendants in the same manner as in other civil suits. Once all parties have been served and appeared in the action, the court must determine the market value of the property.[2] If all co-tenants have agreed upon the market value of the property or upon a method of valuation, then the court shall adopt the agreed upon market value or the market value produced by the agreed upon valuation method.[3] If the co-tenants do not reach an agreement, the court must order an appraisal of the property unless the court determines that an appraisal is not cost effective. If the court determines that an appraisal is not cost-effective, it must determine the market value of the property after an evidentiary hearing.[4]

If the court orders an appraisal, then the court must appoint a California licensed appraiser to determine the market value of the property. In appraising the market value, the appraiser must assume the property is owned by one person or entity.[5] In other words, the appraiser cannot discount the market value based on the property’s co-ownership. The court must send notice to all parties to the lawsuit of the appraised market value of the property and must make the appraisal available to each party.[6] Any party may file an objection to the appraisal with the court within 30 days after such notice is sent.[7] The court will then hold a hearing at which it will determine the market value of the property based on the appraisal and any other evidence offered by any party to the lawsuit.[8]

Once the market value has been determined, if any co-tenant requested partition by sale (a “requesting co-tenant”), the court must initiate a process that enables any co-tenant that did not request partition by sale (a “non-requesting co-tenant”) to buy out the requesting co-tenants. The court must first give notice of such buy-out right to all parties to the lawsuit.[9] Within 45 days after such notice is sent, any non-requesting co-tenant may give notice to the court that it elects to buy all of the interests of the requesting co-tenants.[10] Thus, the buy-out right is an all or nothing election; the non-requesting co-tenants may buy all (but not less than all) of the interests of all of the requesting co-tenants. The purchase price for the interests of a requesting co-tenant is the market value of the property (as previously determined by the court) multiplied by the co-tenant’s fractional ownership of the property.[11] Thus if the property has a market value of $500,000 and the requesting co-tenant owns a 50% fractional interest in the property, a non-requesting co-tenant may buy out the requesting co-tenant’s property interest for $250,000. If more than one non-requesting co-tenants elects to buy out the requesting co-tenant, the buy-out right shall be allocated among the electing co-tenants based on each electing co-tenant’s fractional ownership divided by the total fractional ownership of all electing co-tenants.[12]

Once the court notifies the parties of the buy-out right allocation, the court will set a date, not sooner than 60 days after such notification, by which the electing co-tenants must pay their apportioned price into the court.[13] If all of the electing co-tenants timely pay their apportioned price into court, the court will issue an order reallocating all of the interest of the co-tenants and disburse the amounts held by the court to the requesting co-tenants.[14] The partition action will then be considered complete except for an award of court costs. If no electing co-tenants timely pays its apportioned price, then the buy-out right is considered waived and the court shall determine whether to partition by sale or in kind (that is, by dividing the property).[15]

If one or more but not all of the electing co-tenants fail to timely pay their apportioned price, then the court shall follow a statutorily prescribed procedure, comparable to that just described, that enables the electing co-tenants that timely paid to acquire the interest that remains to be bought out.[16] If one or more of the electing co-tenants timely pays for such remaining interest, then the court will issue an order reallocating all of the interest of the co-tenants and disburse the amounts held by the court to the requesting co-tenants, and the partition action shall be complete except for an award of court costs.[17] If the electing co-tenants fail to pay for the remaining interest, then the buy-out right is considered waived and the court shall determine whether to partition by sale or in kind.[18]

For additional information, call our partition attorneys at (310) 656-8000.

[1] See “How to File and Prosecute a Real Estate Partition Action in California under the PRPA – Part One”, October 13, 2023.

[2] See Cal. Code of Civil Proc. §874.316.

[3] Cal. Code of Civil Proc. §874.316(b).

[4] Cal. Code of Civil Proc. §874.316(c).

[5] Cal. Code of Civil Proc. §874.316(d).

[6] Id.

[7] Id.

[8] Cal. Code of Civil Proc. §874.316(f)&(g).

[9] Cal. Code of Civil Proc. §874.317(a).

[10] Cal. Code of Civil Proc. §874.317(b).

[11] Cal. Code of Civil Proc. §874.317(c).

[12] Cal. Code of Civil Proc. §874.317(d)(2).

[13] Cal. Code of Civil Proc. §874.317(e).

[14] Cal. Code of Civil Proc. §874.317(e)(1).

[15] Cal. Code of Civil Proc. §874.317(e)(2).

[16] Cal. Code of Civil Proc. §874.317(f).

[17] Id.

[18] Id.