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Co-ownership of Real Property – Fighting the Partition Action Can Cost You.

Landlord & Tenant Law and Real Estate Law by Peter N. Brewer, Esq.

There is a fundamental premise in California law that a co-owner of real property has the right to sever the co-ownership at any time by forcing a sale of the property through partition.  The only exception is if the co-owners have expressly waived the right to partition in a contract, such as part of a Co-Tenancy Agreement (“condo-ized” properties in San Francisco, for example).

People become a co-owner in usually one of three ways, 1) they inherited the property jointly with other family members; 2) they purchased the property jointly with family, friends or co-investors; or less commonly, 3) they have foreclosed on a fractional interest or received the interest through an assignment for the benefit of creditors.

Partition actions usually arise because the owners cannot all agree on the costs of maintaining the property.  What ends up causing friction between the owners is that usually one owner wants to occupy the space, whereas the other owner(s) want to rent it out.  A co-tenant is not required to pay rent because even though the co-owner may only have a partial interest in the property, they are entitled to use the entirety of the property.  If there is a mortgage, inevitably, one owner or another ends up making all the mortgage payments, and/or property taxes and insurance.

In a partition action, the party filing it is entitled to attorney’s fees pursuant to California Code of Civil Procedure Section 874.040, which states: “…the court shall apportion the costs of partition among the parties in proportion to their interests or make such other apportionment as may be equitable.”

So imagine Jack and Jill own 50% of a house in Palo Alto.  Jack lives in the house with his family and pays no rent, but does pay the property taxes and insurance.  Jill wants to sell the property.  Jill sues for partition by sale.  The house cannot be divided “in kind” the way unimproved land can be so it must be sold.  The court can award Jill 50% attorney’s fees since that is her percentage of her interest in the property, or the court can make an equitable adjustment—essentially an award based on fairness.

If Jack causes the costs of the litigation to escalate, he will not only incur attorney’s fees of his own, but he will have to pay half of Jill’s attorney’s fees.

In the recent case of Lin v. Jeng, the California Court of Appeals made an equitable finding and instead of awarding attorney’s fees to the plaintiff proportionate to her share of the ownership, denied attorney’s fees and awarded them to her siblings, the defendants.

“Jane” Lin co-owned a property in Alhambra, California with her brother “Jack” Jeng.  Jane sued for Jack for partition and then her other siblings intervened in the action claiming equitable interests in the property.  As it turns out, all the siblings had either put some money down for the purchase or serviced the loan since the house was for their parents.  After the parents had passed away, one of the siblings refused to move out and Jane had demanded “rent” from that sibling living in the home.

The litigation was protracted and costly and the trial court concluded that while Jane was on title for 85%, she actually only owned 15.45% of the property and she was ordered to grant the remaining interests to her other siblings.

Later, both sides submitted attorney’s fees requests.  The defendants spent $79, 626 and Jane had spent $106,768 in attorney’s fees.  The trial court granted defendant’s request for fees and ordered that it be apportioned among the parties in proportion to party’s interest in the property. The court then denied Jane’s request for fees on equitable grounds.  Accordingly, Jane had to pay 15.45% of the other side’s attorney’s fees on top of the $106k she spent.

On appeal, the appellate confirmed the awards finding that the plain language of the statute allows for exactly that type of result, where a court could determine that one side unfairly prejudiced the other and that the fees can be apportioned on equitable grounds.  [Lin v. Jeng, 2012 DJDAR 2498, Filed Feb. 23, 2012.]

Takeaway lesson –>  family partition actions are best resolved in mediation.  When in litigation, if one party tries to unreasonably disadvantage the other party, the court has discretion to apportion the attorney’s fees based on fairness considerations.

If you think you or someone you know may need legal assistance regarding such matters, don’t hesitate to contact Brewer Offord & Pedersen LLP at (650) 327-2900, or on the web at www.BrewerFirm.com.

 

 

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