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

In a previous blog [1] 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 our most recent blog, we covered the court’s determination of the market value of the property and the exercise of the co-tenants’ buy-out rights.[2] In this blog, we will assume that the co-tenants did not exercise their buy-out rights (or at least one co-tenant requested partition in kind) and will discuss the partition of the property by sale.

If all of the interests of all co-tenants that requested partition by sale are not purchased by the other co-tenants, then the court must determine whether to order partition in kind or partition by sale.[3] Similarly, if after a buy-out of the co-tenants requesting partition by sale there remains a co-tenant requesting partition in kind (that is, by physical division), then the court must determine whether the property should be partitioned by sale or in kind.[4] The most important factor in this determination will be whether the property can be legally divided as a practical matter.[5] In California, it is illegal to sell, lease, finance, occupy or improve any property unless such property is a legally created parcel under California’s subdivision laws.[6] The division of property by partition in kind is considered a sale for this purpose.[7] Therefore, partition in kind is not legally possible unless the property is first legally subdivided. Since most California property cannot practically be subdivided, in the vast majority of cases, the court will order partition by sale rather than in kind.

After ordering a sale of the property, the court will typically require that the sale be open-market – that is, in the traditional fashion through a broker advertising to, and considering offers from, the entire market. However, the court does have the power to order a sale by sealed bids or by auction if in the best interest of the co-tenants as a group.[8] If the court orders an open-market sale, it will first appoint a California licensed real estate broker who is agreed upon by the parties or, absent such an agreement, selected by the court.[9] The broker must offer the property for sale at a price that is no less than the market value as determined by the court in the first phase of the lawsuit.[10] If the broker receives an offer to purchase the property, the broker must file a report with the court within seven days after receipt of the offer stating the name of the buyer and the proposed purchase price and other terms of the offer.[11] If the offered price is greater than or equal to the market value as previously determined by the court, then the broker may proceed with the sale of the property without any further order by the court.[12] If the offer is for less than the market value as previously determined by the court or if the broker fails to obtain any offer within a reasonable time, then the court must hold a hearing at which it may either approve the highest outstanding offer, redetermine the value of the property and order that the property continue to be offered for sale or order that the property be sold by sealed bids or at an auction.[13]

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 “How to File and Prosecute a Real Estate Partition Action in California under the PRPA – Part Two”, October 19, 2023.

[3] Cal. Code of Civil Proc. §874.318(a).

[4] Id.

[5] See Cal. Code of Civil Proc. §874.319(a)(1).

[6] Cal. Govt. Code §64399.30(a)-(b).

[7] 64 Ops Cal Atty Gen 762 (1981); see also, Cal. Code of Civil Proc. §872.040.

[8] Cal. Code of Civil Proc. §874.320(a).

[9] Cal. Code of Civil Proc. §874.320(b).

[10] Id. For a discussion of the court’s determination of market value, see “How to File and Prosecute a Real Estate Partition Action in California under the PRPA – Part Two”, October 19, 2023.

[11] Cal. Code of Civil Proc. §874.321.

[12] Cal. Code of Civil Proc. §874.320(c).

[13] Cal. Code of Civil Proc. §874.320(d).