What is a partition action?
When two or more people jointly own real estate, for whatever reason, they are like business partners. Ideally, like business partners, they will enter into an agreement that spells out their rights and obligations. If they take title in the form of a limited liability company, this would be an operating agreement. The most important component of such an agreement would be a “buy-sell” provision, which provides a mechanism for one party to buy out the other when they want a “business divorce.”
However, parties do not always have the resources or foresight (or some would say pessimism) to plan for a business divorce. Absent such an agreement, joint ownership in real estate follows Newton’s first law of motion, roughly paraphrased that an object in motion stays in motion unless acted upon. In this context, joint ownership generally continues until resorting to the courts. Just like deadlocked owners of a business can ask the court for a judicial dissolution, joint owners of real estate can ask the court for a “partition.”
What happens in a partition action? Under the controlling Arizona statute, the procedure is for the court to hold a hearing at which it determines the shares or interests of each owner, and appoints three commissioners to determine if a fair division of the property can be made. For example, if there are two joint owners, and the property is vacant land that can be split, the court can award part of the land to each owner.
More commonly, the property is a house, which obviously cannot be “divided,” and a report from commissioners is unnecessary. In that case, the court can simply order the sale of the property. The court will appoint a “real estate special commissioner,” usually a real estate broker, to list the property for sale.
Under the statutory procedure, the court cannot give one party the right to buy out the other party, or permit a party to make a credit bid, unless the other party agrees. Also, each owner may not necessarily receive the same amount of proceeds when the property is sold. The court may consider contributions and expenditures made by each party in acquiring and improving the property.
Connecticut and New York have enacted versions of the Uniform Partition of Heirs Property Act, which applies when one of the joint owners inherited their interest from a relative. The law seeks to ensure that heirs have the necessary due process to prevent a forced sale and preserve the "heirs property," including notice, appraisal, and right of first refusal.