This article discusses changes to the procedural and substantive law of real property partition in California enacted to go into effect in 2022 and 2023. This article follows-up on three prior articles by the same author containing an introduction to the real estate partition process and giving an overview of the process to recover certain costs (such as attorney’s fees) previously published in the journal of the Western San Bernardino County Bar Association.
INTRODUCTION TO PARTITION OF REAL PROPERTY
In California, joint owners to real property may file a lawsuit seeking to have their joint interest in the property partitioned. Code of Civil Procedure section 872.210. Historically, partition actions have followed an unusual, two-step procedure in that the court conducts an initial trial to determine whether the plaintiff has a right to partition the real property. Code of Civil Procedure section 872.210. If the court determines that there is a right to partition the property, the court enters an interlocutory judgment for partition. Code of Civil Procedure section 872.720. This interlocutory judgment for partition determines the interests of the parties in the property, orders the partition of the property, and determines the method of partition. In this interlocutory judgment for partition, the court is authorized to either divide the property between the joint owners or order its sale. Code of Civil Procedure section 872.810, et seq. Only after the partition is completed and all costs adjudicated is a later final judgment entered by the court. Code of Civil Procedure section 873.850
During the 2021 and 2022 legislative session, California passed a series of major changes to the procedural and substantive rules governing the partition of real property, and some of these procedural changes impact the traditional rules of the real property partition process.
Effective for actions filed after January 1, 2022, California adopted a slightly-modified version of the Uniform Partition of Heirs Property Act, codified at Code of Civil Procedure section 874.311 to 874.323. The Uniform Partition of Heirs Property Act defines a property called “Heirs Property” that involves title acquired title from a relative (either living or deceased) that currently has at least 20% ownership by relatives. (See, Code of Civil Procedure section 874.312 for the definition of this type of property.) For actions filed on or after January 1, 2022, the provisions of the Uniform Partition of Heirs Property Act will apply, but only for Heirs Property. The traditional rules still apply for all property not defined as Heirs Property.
Effective for actions filed after January 1, 2023, the legislature enacted the Partition of Real Property Act, which expanded the types of property covered under the alternative procedures first enacted only a year prior in the Uniform Partition of Heirs Property Act. The Partition of Real Property Act governs the partition of all real property held in tenancy in common unless there is an agreement between the owners governing the partition of the real property in a different manner. See, Code of Civil Procedure section 874.311 for the definition of included properties. The Partition of Real Property Act completely supersedes and replaces the concept of “Heirs Property” first introduced only a year prior.
Note, though, that the Partition of Real Property Act is limited to actions involving the partition of real property held as tenants in common. The historical procedural rules of partition still exist to govern partition of any property not covered by the Partition of Real Property Act
The end result of the recent legislative changes is that three potential partition systems currently exist in California. For all actions filed prior to January 1, 2022, the traditional partition rules apply. For actions filed during calendar year 2022 (and only during calendar year 2022), property defined as “Heirs Property” follows the new Heirs Property rules, but all other properties follow the traditional rules. For actions filed after January 1, 2023, any property held as tenants-in-common (whether by heirs or not) are governed under the new rules, but all other properties follow the traditional rules.
Because the Heirs Property rules govern only actions filed during one calendar year, and because those rules were completely subsumed after January 1, 2023, into the new rules in the Partition of Real Property Act, the remainder of this article will focus on the rules in the new Partition of Real Property Act.
NEW PROCEDURAL RULES UNDER THE PARTITION OF REAL PROPERTY ACT
If the real property in question is held as tenants in common, then the procedural rules for its partition sale will be governed by the new rules in the Partition of Real Property Act for all actions filed after January 1, 2023.
The most striking change in the Partition of Real Property Act is a procedure for existing owners to stop the partition sale of the property by buying out the interest of the owner seeking partition. If the owners of the property are not able to agree on the value of the property, then the Court will appoint a disinterested real estate appraiser to determine the fair market value. Code of Civil Procedure section 874.316. Following issuance of the appraisal report and court determination of the fair market value of the selling owner’s interest, there is a limited period of time for existing owners to buy-out the interest of the owner seeking partition at the fair market value by “paying the entire price into the court”. Code of Civil Procedure section 874.317. In this same section, the purchasing owners may also seek court permission to purchase the interests of co-owners who were served with the complaint but did not appear in the action. If the fractional property interests are sold through these buy-out provisions, then the partition process ends without the traditional sale of the entire property.
If the fractional interests of the owners seeking partition are not purchased by the other owners, and if the court does not find that partition in kind (division of the property rather than sale) is appropriate under Code of Civil Procedure section 873.318, then the Court shall order the entire property sold under Code of Civil Procedure section 873.320. If the court orders an open-market sale (rather than a sale by auction or sealed bids), then the Court shall appoint a real estate broker to conduct the sale. The court-selected broker shall offer the property for sale for no less than the fair market value established by the appraisal proceeding earlier in the case. If the broker is not able to obtain an offer at or above the court-established fair market value within “a reasonable time”, then the court may approve lower offers, may approve lowering the listing price, or may order the property sold at auction.
ROLE OF A PARTITON REFEREE IN THE PARTITION OF REAL PROPERTY ACT
The Partition of Real Property Act retains the potential role of a Partition Referee in sales of real property. None of the prior statutes dealing with appointment or conduct of a Partition Referee were repealed by the Partition of Real Property Act. Code of Civil Procedure section 873.313(b) under the Partition of Real Property Act states that the new act “supplements the other provision of this title”, which would include all of the rules relating to appointment and conduct of a Partition Referee. The Court’s ability to appoint a Partition Referee is explicitly allowed by Code of Civil Procedure section 874.315 of the new act, which states that if a Court appoints a Partition Referee, the Referee “shall be disinterested and impartial and not a party to or a participant in the action”.
Even under the new sale rules of the Partition of Real Property Act, a Partition Referee would be necessary if one of the property owners refuses to cooperate with the court-appointed real estate broker by signing necessary listing and sale documents or refuses to cooperate by allowing access to the property. The Partition Referee has historically had that power in partition actions, and that power remains in new actions in the Partition of Real Property Act. Indeed, that is one of the primary roles of the Partition Referee under the prior statutory scheme, and it remains one of the primary roles of the Partition Referee under the new statutory scheme. Under the new Partition of Real Property Act, there is no mechanism other than the appointment of a Partition Referee to deal with sales involving uncooperative or missing co-owners.
Matthew L. Taylor is an attorney based in Rancho Cucamonga, California. In addition to being an attorney, he has also acts as a Superior Court Receiver and Partition Referee and is a licensed real estate broker (DRE #02189284) in California.