Tip 2: Determine Investment Interests

Ownership types also determine ownership interests. This is important because it will determine what percentage you will receive of the property if it is divided or what proceeds you will receive from the property if it is sold. 

For example, if two co-owners hold a property title as a Joint Tenancy, they will likely have a 50% interest in the property. So, each party would be entitled to receive 50% of the property if it is divided or 50% of the proceeds if it is sold. 

Conversely, if two or more parties hold a property title as Tenants in Common, they may have differing investments. For example, one individual may hold 60% interest in the property, while another holds 30%, and another holds 10%. In such situations, when the property is divided or sold, it is distributed based on each owner’s investment interests. 

Thus, when considering partition as a legal remedy, you should evaluate each owner’s investment interests as well as the different ownership types. This will help you make informed decisions and partition the property fairly.

Tip 3: Assess the Accounting

Partition often involves an accounting of each party’s credits and debits. An accounting assesses whether a co-owner has the right to seek reimbursement(s) for expenses that benefit all co-owners. Some examples of expenses include mortgage payments, property taxes, property insurance, and repairs.

For example, consider a scenario where two co-owners share a property title as a Joint Tenancy. Each owner has a 50% share in the property and shares the same rights and benefits. 

However, although one co-owner has a 50% interest in the property, they paid 100% of the property taxes. In such situations, the co-owner can seek reimbursement for 50% of the property tax payments through accounting.

Assessing the accounting of each party’s credits and debits can provide a clearer picture of each owner’s investments in the property and mitigate against potential property disputes. As a result, accounting can help owners make informed decisions and protect their rights.

Tip 4: Evaluate Goals

Partition, by nature, arises because of ongoing conflict or disagreements among joint owners regarding how they want to use, manage, or sell the property. Thus, when considering a partition action, it is important to note each party’s goals to determine the best course of action for everyone involved. Some common co-owner goals include:

• Sell their interest(s) and cash out.
• Prepare for inheritance or divorce.
• Buy out the interest of other co-owners.
• Avoid further conflict or potential risks of co-ownership.

The goals of each co-owner, as well as the property type, will affect whether the asset is partitioned in kind or by sale. Parties should communicate with other owners about their goals and intentions. This will help establish transparency and efficiency in the partition process. Seeking counsel from a partition attorney can facilitate mutual comprehension of the agreement among parties, ensuring clarity and alignment of interests. 

Tip 5: Two Appraisers, One Property Value

Property must be assessed to determine its value and a fair distribution method among co-owners. Particularly in instances where one co-owner wants to sell against another owner’s wishes, it is recommended that both sides obtain an appraiser. 

In this way, if both appraisers arrive at valuations within 10% of each other, the final valuation would be the average of the two appraisals. Conversely, if both appraisers’ valuations differ by more than 10%, then the two appraisers would collaborate on selecting a third appraiser. The third appraiser would issue their valuation and determine a binding fair market value.

Additionally, agreeing to these terms in writing is essential when using this approach. All details and conditions should be clearly defined and reviewed by a legal expert. This can ensure the process is done fairly and in the best interest of everyone involved.

Tip 6: Consult an Attorney

In each step of the process, a partition attorney can be of significant value. Consider the following benefits an attorney can provide:

• Provide legal advice.
• Assert your property rights.
• Help you safeguard your investments.
• Draft and review written agreements.
• File appropriate documents with the court.
• Negotiate agreements and contracts.
• Mediate settlements outside of court.
• Represent you in court, if necessary.

The list goes on and on. Partition is an intricate, formal process with many moving pieces. For this reason, it is recommended that you consult an attorney to guide you on the best course of action. Especially once caught up in litigation, an experienced attorney is necessary to resolve the matter while securing an outcome in your best interest.

Tip 7: Evaluate Viable Options

The two types of partition are partition in kind and partition by sale. In a partition in kind, the property is physically divided among co-owners; each owner receives an ownership percentage. In a partition by sale, the property is sold. The court may order a public auction or private sale, and the proceeds are distributed among co-owners according to their investments in the property.

It is recommended to partition in kind when the property is easily divisible into distinct portions, such as a large piece of land or a building with multiple units. On the other hand, partition by sale should be used when it is not practical to divide the property physically, such as in the case of a single-family home. 

At any rate, parties should consult a legal professional to understand which option is best suited for their unique situation. An attorney can help you consider the facts, related factors, and additional considerations to make the most informed decision.

Tip 8: Consider Costs & Tax Implications

Costs and tax implications of partition actions will vary by case complexity, type of partition action, and state of jurisdiction. Each party is responsible for paying these expenses. Some examples of costs include attorney’ fees, court and filing fees, renovation or repair expenses to sell the property, and other sale costs.

In partition in kind, where each owner receives a distinct portion of the property, tax implications are limited to ownership transfer. This means co-owners have no loss or gain if their share values are equal before and after the partition action.

Conversely, in partition by sale, where the property is sold, co-owners may be liable for paying capital gains taxes. These taxes are calculated as the difference between the property’s sale price and the original purchase price, including any renovations made to improve the property.

Moreover, the average partition action costs about $15,000. Depending on each case’s complexity and the parties’ cooperation, this cost can be significantly greater or lesser. Additionally, attorney’s fees can be recovered, especially against uncooperative co-owners.

It is imperative to consider the costs and tax implications of each option. In this way, co-owners seeking partition can weigh the pros and cons of costs and make informed decisions.

Tip 9: Negotiate and Mediate

Because partition actions can escalate to lengthy and expensive litigation, mediating settlements outside of court is highly recommended. Consider the following tips:

• Communicate: Consider the factors mentioned above and communicate your goals to other co-owners. 
• Understand: Try to listen to other co-owners and understand their interests and goals. Discuss what all parties intend to achieve and try to reach a mutually acceptable resolution.
• Explore: Consider different options to mediate the disputes, such as buying out another owner’s interest in the property.
• Mediate: Consider hiring a third-party mediator to facilitate negotiation. 
• Compromise: Be flexible in this give-and-take negotiation process. Do not compromise your rights or jeopardize your interests; simply keep an open mind and be willing to compromise.

Moreover, it is recommended to stay organized and document evidence to support your position. Without the facts, it is easy to misinterpret situations and perspectives. However, if each party cooperates and compromises, it is possible to reach a fair and favorable outcome.

Tip 10: Buy More Time Against Forced Property Sales

Generally, a partition action cannot be stopped once initiated because each owner is entitled to assert their rights and protect their investments. However, preventing or slowing down a forced property sale is possible. Parties can do this by:

• Ensuring the person initiating the partition action has the right to do so.
• Ensuring a breach of contract never occurred. 
• Reviewing the co-ownership agreement to ensure there is no waiver of the right to partition.
• Reviewing related documents to evaluate each party’s obligations and interests in the property.
• Buying out other owner’s interests in the property.

All things considered, if co-owners cannot agree to mediate a fair settlement, then you must initiate a partition action and consider securing legal counsel. 

Conclusion

Any partition action aims to balance each party’s interests and maximize the sale’s value. As such, it can be an effective legal remedy for co-owners who experience significant property disputes. 

By following the top 10 partition tips, co-owners can navigate the process’s complexities, work towards a fair and amicable partition agreement, and achieve a solution in their best interests.