Revisiting Partitions and Accounting – Part Two

April 5, 2022 | Category: BPE Newsletter, Real Estate, Real Estate Law

Revisiting Partitions and Accounting – Part Two

By: Alexander J. Hinman, Esq.

April 5, 2022

In, Part One of our 2022 Partition series defined what Partitions are and how they work, Part two will focus on the accounting stage of the partition and how the proceeds of the partitioned property will be divided between the former owners in court.

The real battle in partition actions generally center around the accounting aspect. As held in the seminal case of Wallace v. Daley (1990) 220 Cal.App.3d 1028, 1036, “[e]very partition action includes a final accounting according to the principles of equity for both charges and credits upon each co-tenant’s interest.” Further, Civil Code of Procedure section 872.140 states that, “[t]he court may, in all cases, order allowance or other compensatory adjustment among the parties in an action for partition according to the principles of equity.” These charges and credits typically include payments on the principal and interest of the mortgage, taxes, insurance, necessary repairs, and value adding improvements. These credits are taken out of the net proceeds before the balance is divided equally. (Southern Adjustment Bureau, Inc. v. Nelson (1964) 230 Cal. App. 2d 539.)

While mortgage payments, taxes, and insurance are fairly cut and dry so long as it can be shown that these expenditures were made in excess of the cotenant’s fractional share, value adding improvements are a stickier issue. For example, it is not unusual for a co-tenant to make improvements to the property without seeking consent of the other cotenant. The general rule is, “[a] cotenant who has in good faith made improvements to the property necessary for its preservation is entitled to reimbursement in the partition action even though the improvements were made without the knowledge or consent of the other cotenants.” (4 Cal. Real Est. § 11:19 (4th ed.).) As stated in Milian v. De Leon, 181 Cal.App.3d 1185, 1191, the party that made the improvements “is entitled to reimbursement of one-half of her expenditures made to maintain, improve, or protect the property…”. Thus, the other cotenants who share in the benefits of the improvements are chargeable with their proportionate share of the cost even though they were made without their consent. This rule can often come as a surprise to owners as they are now being asked to reimburse a co-owner for improvements the client never consented to.

With the aforementioned rule as a baseline, there are ways to rebut these demands, and the Accounting stage of a Partition is often hotly contested. Part three of our Partition series will discuss expenditures that may not be recoverable in a partition action.

The reality is that Partition actions in California are complicated, and every person’s situation is different. If you are facing a legal issue of any kind, it is important to get competent legal advice immediately so that you can best protect your interests. If you are trying to begin a partition or have received a demand letter from a co-owner, contact a legal professional today to discuss your options and the best path forward.

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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