California Adopts the Uniform Partition of Heirs Property Act

California Adopts the Uniform Partition of Heirs Property Act

By: D. Keith Dunnagan, Esq.

September 14, 2021

Oftentimes parties that co-own real estate find themselves in the midst of dispute. More often than not, the parties have no written agreement that govern how to resolve the dispute and what to do with the real estate that is creating the dispute. Generally, the law resolves these disputes through the partition method that is governed by Civil Code Section 872 et seq. The law generally states that parties cannot be compelled to co-own real estate so when a dispute arises the court will either (1) partition the property by sale (force the parties to sell the real estate on the open market); or (2) partition in kind (if the real estate is large enough split the property between the parties); or (3) if the parties agree partition by appraisal (one party buys out the other based upon the appraised value of the real estate).

Co-ownership in real estate can be acquired many ways. One common way is partners who invest in real estate assets. Another common way is cohabitating couples that acquire real estate together. Yet another common way is for parties to inherit property. Many partitions that we see come up when siblings inherit real estate and cannot agree on what to do with the real estate. One sibling may want to live in the home, one may want to rent to a tenant and another may want to sell. Under the current legal framework, the court would generally partition the real estate by sell and distribute the proceeds to the owners according to their ownership interest. However, with the passage of AB 633, partitioning “heirs property” will be changing.

Under the new law several new procedures will be put in place. The first thing to understand is that this new law only relates to “heirs property” which the statute defines as real estate where (a) the owners do not have a written agreement addressing partition of the real estate, (b) at least one of the owners received their interest in the real estate from a relative (it does not matter if the relative is living or deceased); and (c) 20% of the interest are held by owners that are relatives; or 20% of interests are held by an owner who received their interest from a relative, or 20% of the owners are relatives. It is important to understand that both (a) and (b) must be satisfied and one of the items in (c) must be satisfied. If the real estate is determined to be heirs property then the new Uniform Partition Act will apply to the partition of that real estate.

The new law, which will take effect on January 1, 2022 specifically states that it will apply to partitions that are filed after January 1, 2022 and will require several new procedures.

First and most importantly, before the court can issue a party any relief in the partition the court must now determine if the property to be partitioned is heirs property. There are procedural mechanisms that must be complied with that we will address in a later article. But the main issues we will address today is how the outcomes will be determined. Under the new law, once the court makes the determination that a property is subject to the provisions of AB 633 the court is required to order an appraisal and the appraiser must file the appraisal with the court.

Once the appraisal in on file the court will make a determination of fair market value after notice and parties have an opportunity to object to the appraisal. One that value determination is made, the parties who do not want to sell will be given the opportunity to buy out the parties that want to sell based upon the fair market value of the real estate. If the all the selling interests are bought out the court orders the money distributed to the sellers and property distributed to the buyers. If the buying parties are unable to or refuse to deposit the money necessary to buy out the sellers, then the court will move into a process to partition the real estate through a further judicial process. This could result in parties having to sell that may not want to sell. This new law will change some of the strategies that lawyers and owners have used to dispose of inherited real estate and as with all law, it will remain unsettled until appellate decisions interpret and apply the new statute.

Agents and owners will want to be mindful of the new laws affecting co-owned inherited real estate and seek competent legal counsel for issues that they may be facing. The attorneys at BPE Law have been litigating and advising clients on partition lawsuits for over 25 years and are well versed on the laws related to disputes between co-owners. In our next installment on partitions we will examine the differences between traditional partitions and partitions related to heirs property and will address some of the key time frames that will be important to keep in mind.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.

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