When multiple owners are involved, determining how to manage a particular real estate property can become complicated. Things can get so complex and contentious that you need a partition action to resolve the ownership situation.
If you are currently in the middle of a real estate dispute involving your fellow co-owners, you should start learning more about partition actions. We will discuss the legal action throughout this article. Learn more about its intended purpose, the outcomes that may result from it, and how to pursue it in this article.
Continue below to determine if pursuing a partition action makes sense in your situation.
What Is the Purpose of a Partition Action?
Disputes involving real estate properties are fairly common. When there are multiple owners of a single property, there is always a chance that they will eventually disagree about how to manage it.
Plans may diverge in different ways. For example, one owner may want to sell the property to recoup some extra funds quickly, while another may wish to develop their share of the property for long-term gain. Another owner may be open to the idea of developing the property, but their idea of development may be completely different.
When the co-owners of a real estate property can no longer agree on how to manage it, they can turn to the court for assistance. Specifically, they can file a partition action to resolve their current predicament.
The partition action offers a fair resolution to all parties involved. One way or another, the action will divide the real estate property and give each co-owner a way to benefit from it.
Partition actions enable co-owners to take their share of the property and do whatever they want with it.
As you can imagine, pursuing a real estate partition action can be a difficult undertaking. Make sure you consult with a real estate attorney before deciding if this course of action suits your current situation.
Who Should Consider Pursuing Partition Actions?
Does pursuing a partition action make sense for you? In this section of the article, we will highlight the individuals who stand to benefit the most from moving ahead with this legal action.
Unmarried Partners Who Purchased Property Jointly
After dating for some time, you and your partner may conclude that you want to live together. Upon reaching that decision, you put money down on a new home and start beginning your life as partners and housemates.
Unfortunately, issues with your relationship may emerge after you decide to live under one roof. You may wish to break up with your partner, but you first want to settle the matter regarding the property you bought jointly.
In New York, unmarried couples who purchase property together are automatically considered tenants in common.
So, what does being tenants in common mean?
According to the Legal Information Institute, tenants in common own property jointly without having any right of survivorship. That means their share of the property goes to whichever beneficiary they named in their will. However, there is no guarantee that the share will go to their partner.
The owners of the property can also transfer ownership among one another. Furthermore, tenants in common can own unequal portions of a property.
In any case, you cannot do whatever you want with your share of the property as long you are tenants in common with at least one more person. To get out of that predicament, you must pursue a partition action.
Married couples can also pursue a partition action to settle ownership of a real estate property they own together. However, filing for this type of legal action is rarely ever necessary. That’s mainly because real estate assets that married couples maintain joint ownership of are typically divided already during divorce proceedings.
Since the divorce already separates the married couple’s assets, there is often no need for this additional action. Still, it serves as a safety net for couples unable to settle everything during the divorce.
Inheritors of a Real Estate Property
Following the passing of your parent, you may suddenly find yourself as the new co-owners of their old home. In addition, you likely share ownership of that property with your siblings.
The plan you have for that property may differ significantly from the plans your other siblings have in mind. Given the disparity in your desires, there may be no clear way to settle the ownership situation. Your only option in that scenario may be to pursue a partition action.
Allow the court to divide the inherited property so you and your siblings can determine what you want to do with your respective shares.
How Does a Partition Action Unfold?
Does it seem like a partition action is the only way to resolve the issue plaguing your jointly-owned property? If so, please take the matter to court with your lawyer.
The partition action begins when one of the property’s co-owners files a partition lawsuit. All the co-owners will be served with the lawsuit
The court will then set a date for a settlement conference.
During the settlement conference, the co-owners of the party will have an opportunity to respond to the lawsuit. In addition, they can argue for their desired outcomes during the settlement conference and present evidence to bolster their case.
Whether you are the original complainant or one of the co-owners responding to the lawsuit, you should attend the settlement conference with a lawyer. Do not allow any of your co-owners to take advantage of you because you went to court unprepared.
Bringing your lawyer is also recommended because negotiations can occur during the settlement conference. You can talk to your co-owners about a potential solution to the dispute and keep the final call out of the court’s hands.
If you and your co-owners cannot agree to a resolution, the court-appointed referee will note the events during the conference and file a report. That report will also include the referee’s recommendation for a potential resolution.
How Is a Partition Action Resolved?
There are three common outcomes after a real estate partition action goes to court. Let’s talk about those potential outcomes in this section of the article.
Partition in Kind
The first possible outcome for a partition action is a partition in kind.
Partition in kind means they will divide the property into separate parcels, each getting its own title. Before the court decides on partition in kind, it will determine if they can divide the property among the co-owners. Depending on how many owners have a stake in the property, there is a chance that dividing it evenly will simply not be feasible.
If the court deems that physically dividing the property among the co-owners cannot be done fairly, they may still proceed with a partition in kind but include a condition. According to New York State law, the condition may require some of the co-owners to provide additional compensation to their other co-owners so they can recoup equal value from the partition.
Before dividing the property, the court will also consider the co-owners sentimental attachments to it. The court will also note how the co-owners have utilized the property thus far.
The court may also decide that a co-owner buyout is the proper way to resolve a partition action.
As you have probably guessed, the co-owner buyout involves one or more owners purchasing the property from those who have no interest in maintaining control over it. If you want nothing to do with the property anymore, then this could be an ideal outcome for you.
Note that by telling the court that you are okay with selling your share of the property, you are also effectively signing off on a potential buyout. So be careful about the arguments you make early on if you do not want to get bought out.
You should voice your support for a buyout if you want to take complete ownership of the home passed on to you by your parents.
The money you will receive will be based on your ownership stake. It will also be on the property’s established market value.
How is the value of the property established? That can be done in a few ways.
First, you and your co-owners may agree to a reasonable valuation for the property. Then, after you all agree to that valuation, the court will adopt it and factor it into additional decisions.
The court may also enlist an impartial appraiser’s services to determine the property’s value. You and your co-owners can accept that appraisal or dispute it.
You can also determine a valuation through an evidentiary hearing. However, the court will only use an evidentiary hearing to identify a property’s market value if it believes that the cost of appraisal outweighs its evidentiary value.
Partition by Sale
Resolving a dispute concerning the ownership of a jointly purchased property or an inherited home can also be done through partition by sale.
When the court orders a partition by sale, they can do it through an open market sale, an auction, or sealed bids.
The court will appoint a real estate broker to facilitate the open market sale of the property. On the one hand, an open market sale could be advantageous to you because it places someone else in charge of the transaction. However, on the other hand, the real estate broker will be entitled to a commission, reducing the proceeds from the eventual sale to some degree.
If you do not want a third party cutting into your profits, request to have the sale facilitated through an auction or sealed bids. The court may also decide that this is the right way to handle the property based on the commission that the real estate broker could charge.
Can You Stop a Partition Action?
The co-owner of your property may believe they are not getting enough value from it anymore. After coming to that realization, they may decide to sell the property. They may already be planning to file the partition action, too.
Since you are using the property, you probably do not want to see it sold. So, what can you do at that point?
Your only viable option is to negotiate a settlement with your co-owners. Attempt to settle the matter by pursuing a buyout. Find out how much their shares cost and buy them out of the property.
Of course, buyouts are expensive. So even if you want to buy out your co-owners, doing so may simply not be an option for you.
In that case, you can try alternative solutions. For example, offer to pay rent to your co-owners or allow them to profit from the property in other ways so they will discontinue the partition action. Brainstorm with your lawyer until you can come up with a solution.
How to Prevent a Partition Action
The last thing you probably want as a parent is to have your children argue over the property you left behind for them. Instead of the property benefiting your children, it may only create friction between them.
To stop things from getting to the point where a partition action is necessary, you should include plans for your home in your will. Use your will to outline how you want them to handle your home. If you are truly worried that your kids may fight over it when you are gone, mention in your will that you want them to sell the property after your death.
Distribute the proceeds from the sale instead so your children can continue to reap benefits.
We at the Alber Law Group are ready to lend our assistance if you are trying to resolve or file a partition action. Contact us today to determine the best course of action involving your shared property.