Partition Attorney Insights: Partition And The Right Of First Refusal

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Los Angeles partition attorney Laine T. Wagenseller explains the interplay of the statutory right to partition with the right of first refusal granted by contract.

Partition in Los Angeles and throughout California is governed by California’s Code of Civil Procedure.  Los Angeles lawyers who handle partition lawsuits must be familiar with the statutory procedure in order to successfully guide a partition lawsuit through the courts.

What Is Partition?

Partition allows co-owners of property to get out of their co-ownership.  In other words the law will not force co-owners to remain co-owners in a property against their will.

“A co-owner of real or personal property may bring an action for partition.”  (Code Civ. Proc. §872.210.)  “The original purpose of partition was to permit cotenants to avoid the inconvenience and dissension arising from sharing joint possession of land.  An additional reason to favor partition is the policy of facilitating transmission of title, thereby avoiding unreasonable restraints on the use and enjoyment of property.”  [LEG Investments v. Boxler (2010) 183 Cal.App.4th 484, 493].

When Does Partition Make Sense?

Partition Attorney LitigationA partition attorney will most commonly see partition arise within families.  Siblings often inherit family property together but end up fighting over the property.  In many communities parents and children often transfer a property among the family members, either as a means of estate planning or due to credit issues.

The second most common partition scenario is in failed relationships.  An unmarried couple may purchase a property together and, when the relationship ends, they are left owning a property together.

A third scenario where partition arises is when business partners purchase a property together as co-owners but the business relationship dissolves.

The allegations in the LEG Investments case presented a case ripe for partition:  “The relationship between the parties has so deteriorated that the absolute right to partition by sale is the only available remedy.  Defendants have refused to pay for an provide reasonable and necessary maintenance, cleaning, and repairs, and otherwise pay for the reasonable expenses incident to ownership of similarly situated properties.”

What Is The Most Common Method of Partition?

California’s partition statutes actually give preference to partition by kind (dividing the property).  However, the most common method of partition is partition by sale.  This is especially true in an urban setting.  Homes cannot typically be split in two and must be sold.  In  a partition lawsuit the court shall order the property sold and the proceeds divided among the parties in accordance with their interests in the property.

Who Has A Right To Partition?

A co-owner of property has an absolute right to partition unless barred by a valid waiver.  (Code Civ. Proc. §872.210, subd. (b).)  The right to partition may be waived by contract, either express or implied.

Most co-ownerships do not have written contracts governing the relationship.  However, in a small amount of cases, usually among sophisticated owners, the co-owners have agreed to a Tenants-In-Common Agreement.  Such an agreement can explicitly waive the right to partition among the co-owners.

What Is A Right Of First Refusal?

In some Tenants-In-Common agreements, the co-owners will agree to a right of first refusal.  In other words, the selling party must offer the co-ownership share to the other co-owner on identical terms as proposed by the potential buyer.

In the LEG Investments case noted above, the TIC Agreement included a paragraph 6.1 which read “If and when either Owner decides to sell their [i]nterest in the Property and that Owner receives a bona fide offer for its purchase from any other person or entity, the other Owner shall have the first right of refusal to purchase the selling Owner’s Interest in the Property for the price and on the terms provided for in such bona fide offer.”

The contract also spelled out the procedure for exercising such a right of first refusal.

Does The Right Of First Refusal Waive The Right To Partition?

The issue before the California Court of Appeals in the Leg Investments case was whether the right of first refusal as set forth in the TIC Agreement waived the right to partition?  The trial court said yes but the Court of Appeals reversed that decision.

The appellate court held that “construing the right of first refusal as a perpetual—at least for the terms of the TIC agreement—implied waiver of the right to partition is a disfavored interpretation.  “A restrictive covenant is to be construed strictly; where it is subject to more than one interpretation, that consistent with unencumbered use and alienation of the property is to be preferred.”

The court noted that “the policy behind a partition action is to permanently end all disputes about property and to remove all obstructions to its free enjoyment.”  The interpretation of the implied waiver advanced in the LEG Investments case and accepted by the trial court “would defeat this policy.”

California law holds that a first of right refusal is proper and acceptable as a modification of the statutory right to partition, and a co-owner may be required to offer the property to the other co-owner under such a right of first refusal.  However, the modification does not constitute a permanent waiver.

Los Angeles Partition Attorney:  When Do You Need An Experienced Partition Lawyer?

California’s partition scheme is a specific statutory process.  Not all real estate attorneys in Los Angeles are familiar with the requirements of the process and many real estate litigation attorneys have never even handled a partition lawsuit in the Los Angeles Superior Court or the neighboring courts in Ventura, Orange County, San Bernardino or Riverside.

Wagenseller Law Firm regularly handles partition lawsuits among family members, ex-boyfriends and ex-girlfriends, and investors.  We have extensive experience in the legal process, including the stipulated judgment, working with the Referee, finalizing the accounting and more.  Moreover, our partition lawyers have extensive experience in negotiating settlements among co-owners so that the process can move forward more quickly and at less cost.

You can contact a partition attorney at Wagenseller Law Firm at (213) 805-7445.

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