Sunday, April 28, 2013

What is a Real Estate Partition?

Here’s the situation:  You and a friend purchased a home together.  You are both listed on the deed which conveyed title to you both, and you are both borrowers on the mortgage loan secured by the property.  But all of a sudden, life isn't happily ever after.  One or both of you want to leave the home, and you can’t reach an agreement on how to equitably or legally accomplish this.  What do you do?

First of all, try to remember that an agreement between the two of you BEFORE the property purchased is the best way to confirm what will happen if something goes wrong.  Consider hiring a real estate attorney to draft a management or operating agreement.  An existing agreement will alleviate the need for the courts to intervene with regard to title to the property.  It’s cheaper in the long run to spend the money on an attorney up front, rather than face the expense of protracted litigation later on if things don’t work out.

Action For Partition

If, however, you do find yourself in an impossible situation, you can hire a Denver real estate lawyer to file a legal action with the district court in the county in which the property is located.  This is called an action for partition of the property, and it is commenced and prosecuted in the same manner as any civil litigation in accordance with the Colorado Rules of Civil Procedure.  Article 28 of Title 38 of the Colorado Revised Statutes governs actions for partition, which can involve either real or personal property.  So if you bought a car, rather than a house, you can still avail yourself of the remedies provided by these statutes.

An action for partition may be maintained by any person having an interest in the subject property.  You may be wondering about post-divorce partition, if you have a situation where the court ordered in your decree that someone would have possession of the home, but have a certain amount of time to sell it or refinance the mortgage and remove the other spouse from the loan.  This seems to be a common situation with the current economic conditions and real estate market.  Case law holds that it is permissible for the court to divide martial property after a divorce, but the order must not conflict with the divorce decree. Therefore, although this remedy is available post-divorce, it is limited by the terms of your final divorce decree.

In an action for partition, you must name all persons having any interest in the property, known or unknown, as the court will make a complete adjudication of the rights of all parties in interest.  For example, if you commence an action against the person who holds title to the property with you to divide it, you must also list as a party the mortgage holder on your loan.  The court will include in its order what the ultimate interests of you and the mortgage holder will be in relation to the property.

Once you have initiated the action, served process on the parties and obtained an order for partition from the court, the court will appoint one or more commissioners to make partition of the property in writing.  The report will assign to each party in interest its share, and the report is submitted to the same court for confirmation.  The appointed commissioners may divide the property into lots or parcels, streets and alleys and file a map or plat thereof with the appropriate agency in compliance with laws and ordinances.  If the commissioners report to the court that partition of the property cannot be made without “manifest prejudice” to the rights of any interested party, the court may order the property sold upon terms that the court may fix.  This sale, and notice thereof, is done in the same manner as required for sales of property upon execution (sheriff’s sale).  The court will direct execution of documents of conveyance and distribution of the net proceeds of the sale and undistributed income from the property to the persons entitled thereto, in accordance with the court’s order.  Payment for services of the commissioner(s) and the person making the sale may be deducted from the sale proceeds along with the costs, expenses and attorneys’ fees prior to distribution.

Property Liens

The court has the power in these cases to make any order with regard to property interests and may direct the payment and discharge of liens to have the property sold free and clear, and may apportion amounts evidenced by property interests among the persons to whom partition is made.  For example, if there is a mechanics’ lien on the property that you own for $5,000, the court may order the property sold, but may first require that each of you pay $2,500 to the lien-holder so that the property will be sold free and clear of any liens.

The law does require that the court must assign equal shares in the property initially, and then offset amounts for contribution of each for amounts owing on the property.  Improvements made by a party are given the amount of enhanced value of the property due to the improvements, and not the cost of the improvements.  The courts have wide discretion in partition cases but the statute does not grant carte blanche to the courts to provide partition remedies.

At the end of the day, a partition action should result in an equal division of ownership interests and equitable allocation of amounts due that are evidenced by property interests. 

Eric L. Nesbitt, Esq.
Linda Zimmerman (Paralegal)
Law Offices of Eric L. Nesbitt, PC
Phone 303-741-2354
Email Us
Nesbitt Law Offices Website


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