Real Estate Partition: Forcing a Jointly-Owned Home Sale

Jointly owning property can bring a unique set of challenges, particularly when your circumstances change. Maybe a romantic relationship fizzled out. Maybe you co-own a business and want to move on to bigger, better things. Maybe you and your siblings have different views on whether to keep an inherited property. Regardless of the specifics, joint ownership can lead to a thorny tangle: you want to sell, but your co-owner doesn’t.

However, even if you’re in the minority when it comes to selling a co-owned property, all is not lost. While majority rule would seem logical, individual co-owners can force the sale of jointly owned property. This is called a partition action or partition lawsuit.

On the other hand, bringing the matter to court isn’t necessarily your best option. Let’s explore how you can go about selling a jointly owned property when your co-owner doesn’t agree.

For informational purposes only. Always consult with an attorney, tax, or financial advisor before proceeding with any real estate transaction.

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Key Takeaways for Selling Jointly Owned Property

Legal Structures Matter: Understanding the type of joint ownership (e.g., joint tenancy, tenancy in common, community property) is crucial as it dictates rights and processes for selling the property.
You Can Force a Sale: The law protects co-owners’ “absolute right to partition.” No one can force you not to sell what you own.
Legal Action Might Not Be the Best Option: While you can force a sale, the courts may adjust the amount of the profit that each co-owner gets based on who took on more financial burden or who enjoyed more benefits of ownership. You’ll also have to deal with legal fees, and homes sold at auction typically don’t fetch as high a price as they would otherwise.
Consider Alternate Routes: Solutions like co-owner buyouts, exchanges of equity for other assets, or financial incentives can resolve disagreements without resorting to legal actions.

Understanding Joint Property Ownership

Joint property ownership comes in various forms, each with its own legal implications and rules, especially concerning the sale of the property. Here’s a closer look:

Joint Tenancy

Joint tenancy involves equal rights and responsibilities among all owners. Every owner owns the entire property. A defining feature is the “right of survivorship,” where if one owner passes away, their share automatically transfers to the remaining joint tenants. This is one of the most common forms of co-ownership.

Tenancy in Common

Tenancy in common allows owners to have distinct, potentially unequal shares. For example, one owner may own 50% of the property, another 35%, and the third 15%. There’s no right of survivorship; shares go to heirs or designated beneficiaries upon an owner’s death.

Owners can sell their individual shares without others’ consent, offering more flexibility. However, if you’re a co-owner in a tenancy in common situation, you can’t force other owners to sell their shares or force the sale of the entire property—you can only sell your share.

Community Property

Relevant in 12 U.S. states, community property laws consider assets acquired during marriage as jointly owned, regardless of the individual contributions. This includes income earned in the state, real estate paid for with such income, funds in retirement and savings accounts, and even debts. Anything owned or earned before the marriage, however, doesn’t count as community property.

All community property assets must be split 50/50 unless both parties agree otherwise. Often, this requires the sale of jointly owned property so that each party can be given half the profit. Prenuptial agreements override community property law.

Nine U.S. states have community property laws:

Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin

Three other states have “opt-in” community property laws:

Alaska
South Dakota
Tennessee

In California, Nevada, and Washington, registered domestic partnerships also fall under community property laws.

The remaining 41 states operate with “common law property.” Basically, if you buy it and your name is the only one on the title, it’s yours, not yours and your spouse’s. During a divorce, these states use equitable division rather than a 50/50 split. “Equitable division” considers property ownership inherently unequal based on factors such as education, earning potential, custody of children, etc. Some states also take into account the cause of the divorce, such as infidelity.

When a couple in a common law state cannot come to a mutual agreement on how to distribute their property, equitable division aims to create a fair, but not necessarily equal, distribution while considering the financial position of each party after the divorce.

If a couple owns property in both a community property law state and a common law state, all of their property is subject to the law of the state in which they permanently reside. So, for example, if you’re selling your house during a divorce in Washington, you and your spouse (or domestic partner) will each receive 50% of the proceeds and be responsible for 50% of the selling costs. If you’re selling your house during a divorce in Oregon, on the other hand, you’re subject to common law and may receive more or less than 50% as judged by the court.

Understanding the type of ownership is crucial for determining the rights and processes involved in selling jointly owned property.

How to Avoid Having to Force a Sale: Reaching an Agreement With Your Co-Owners

If you’re looking up how to force the sale of a jointly owned property, it’s likely that one or more of your co-owners is against the idea. Addressing these conflicts effectively requires a nuanced approach, considering both the legal framework and the interpersonal dynamics involved. While you can legally force the sale, it’s almost always preferable to reach an agreement outside the courtroom.

Find Out Their Reasons for Not Wanting to Sell

If you want to craft a persuasive argument for selling the property, you need to understand what’s motivating the opposing party. For example, If it’s an emotional attachment, you may want to angle for a co-owner buyout instead of monetary incentives.

A co-owner might refuse to sell a jointly owned property for various reasons. Emotional attachment is one of the most common factors, particularly if the property in question is a family home or an inherited home. These properties aren’t just buildings; they are repositories of memories and emotions. Understanding and acknowledging this emotional value is crucial in these discussions.

Financial motivations also play a significant role. A co-owner might view the property as a significant financial investment, expecting its value to appreciate over time. They might also be concerned about capital gains tax, the inability to find a comparable property, or changes in mortgage rates. In such cases, it’s important to objectively evaluate the financial implications of both selling and holding onto the property.

Practical Solutions That Don’t Involve the Courtroom

Resolving disputes over the sale of jointly owned property often requires creativity and a willingness to explore various solutions. Here are some practical approaches that can help co-owners find a mutually agreeable path forward:

Co-Owner Buyout

One common resolution is a buyout, where one co-owner purchases the other’s interest in the property. This solution works well in situations like tenancy in common, where there are defined shares in the property, or joint tenancy, where the shares are assumed to be equal. It’s essential, however, to get a fair valuation of the property to ensure an equitable buyout.

Exchange Equity for Another Asset

In cases where a direct buyout isn’t feasible, exchanging equity for other valuable assets can be an alternative. This approach is often used in divorce settlements, where one spouse may keep the property in exchange for relinquishing their share in other assets like investments or retirement accounts.

Financial Incentives

Sometimes, offering financial incentives can motivate a reluctant co-owner to agree to a sale. This could involve covering all real estate agent fees, offering a larger share of the sale proceeds, or even providing a cash bonus. While this might mean sacrificing some of your potential profits, it can be a cost-effective solution compared to lengthy legal battles.

Each of these solutions has its pros and cons, and the right choice depends on the specific circumstances of the property and the relationships involved. Engaging professionals like real estate attorneys or mediators can also provide valuable guidance and facilitate a smoother resolution process.

Emotional Factors in Selling Jointly Owned Property

Emotional ties to a property can heavily influence decision-making processes, leading to disputes or impasses in agreeing to sell. Navigating these emotions to reach an optimal result requires sensitivity and empathy—our emotions can hinder us from rational decision-making.

Understanding and respecting the sentimental value attached to the property and engaging in open, respectful dialogue is often key to resolving conflicts and finding a solution acceptable to all parties. Failing to handle the emotional aspect in a sensitive way can result in messy emotional fallout and strained interpersonal relationships long after the sale.

Effective Negotiation Tactics

When it comes to negotiation, the key is to engage in open and honest communication. Discussing each party’s intentions and understanding their motivations can help find common ground. Patience is vital, as these discussions can take time, especially when emotions are involved.

Finding a resolution usually involves compromise. If a buyout is not currently feasible, other options like renting instead of selling or agreeing on a future sale date might be considered. In some cases, involving a mediator can help facilitate these discussions, providing a neutral perspective to help find a solution that works for everyone.

Successfully addressing co-owner disagreements requires a delicate balance of legal knowledge, emotional intelligence, and effective communication. The aim should always be to reach a solution that respects the rights and needs of all parties involved.

Legal Recourse: Forced Sale Options

If all else fails, legal recourse through a partition action might be necessary. This legal process can either divide the property among owners (partition in kind) or lead to its sale and the equitable distribution of proceeds (partition by sale). However, this should be seen as a last resort due to the potential for significant legal costs and strained relationships.

Understanding Partition Actions

A partition action is a court-driven process that is initiated when co-owners of a property cannot agree on its sale or division. There are two main types of partition actions:

Partition in Kind: This type is used when the property in question is large and can be physically divided, such as farmland or undeveloped land. The property is divided into portions that correspond to each owner’s share. However, it’s important to note that dividing the property can sometimes reduce its overall value, leading to financial losses for the co-owners.
Partition by Sale: More common with residential or indivisible properties, this involves selling the property and dividing the proceeds among the co-owners according to their ownership stakes. The court may appoint a real estate agent to handle the sale, ensuring that the property is sold at a fair market price.

Cost of Partition Actions

One of the biggest reasons why forcing a sale through legal channels should be a last resort is the cost. Attorney fees alone are usually over $5,000 and only go up if the sale is contested or even just complicated. This can be paid from the proceeds of the sale, but if an alternate solution is reached and the property doesn’t sell, you still have to pay the fees. DIY legal forms are available but can still cost hundreds of dollars.

There’s also the timeline to consider. Generally, a partition action takes a minimum of six months to complete, and anywhere from a year and a half to two years is considered average. Considering that the average time to sell a house is less than three months and a cash buyer can close in two weeks, negotiating with your co-owners for a voluntary sale can be the faster option by far.

It can also be the more profitable option. When you force a sale, you’re at the mercy of a court-ordered auction and have less control over the eventual sale price. A cash home buyer can give you a fair market price quickly, while taking more time, effort, and money to list with a real estate agent can lead to an even higher price.

The Legal Process of Partition Actions

If you must resort to legal action, the court’s involvement ensures that the property is dealt with fairly and in accordance with legal standards. Here are the steps you’ll take:

Confirm the current ownership and who owns what. You may need to obtain a title report from a title company, which usually comes with a flat fee. If you end up filing a partition action, you may also need a copy of the deed.
File and serve a partition lawsuit. Many owners prefer to hire an attorney at this stage, but it’s not legally required. The defendants include all co-owners plus anyone else with an interest in the property, such as mortgage lenders and lien holders.
The court will determine whether dividing the property is possible. This decides whether the action will be a partition in kind or partition by sale.
The court will appoint an appraiser. If your co-owner exercises the right to buy out your share, this appraised value will determine your proceeds. In many states, this also determines the starting bid at auction, as the property can’t be sold for less than two-thirds of the appraised value.
If the partition action is approved, you’ll coordinate to sell the property at auction. You may have to do the legwork of marketing the property yourself or hiring a real estate agent to do it—the fewer bidders that show up, the lower your sale price is likely to be.
The proceeds are divided among the co-owners after subtracting fees, debts, liens, and costs. Generally, this is a division by ownership share—if you own 50% of the property, you get 50% of the proceeds. However, if a co-owner calls for an accounting, the division may be adjusted by the court. For example, if one owner took on the majority of the mortgage payments or other ownership costs, they may be granted a greater percentage of the forced sale proceeds. Keep in mind, though, that calculating the new division costs the time of attorneys, so weigh the probable attorney fees versus the extra profit you stand to get.

While a forced sale through a partition action provides a legal solution to deadlock situations, it is generally considered a last resort due to the potential for high legal costs, lengthy processes, and the emotional toll on the parties involved. Before pursuing this option, it’s advisable to exhaust all other avenues for resolution.

The Challenges of Selling Jointly Owned Property Can Be Overcome

When disagreements arise, exploring amicable solutions such as buyouts, asset exchanges, or financial incentives is typically the most constructive approach. These methods not only preserve relationships but also provide a more cost-effective and less stressful resolution compared to legal proceedings.

However, when all else fails, a partition action stands as a legal recourse to resolve deadlocks, albeit with its own set of challenges and costs. It’s a path that requires careful consideration.

Seeking professional advice and considering the use of mediators can be invaluable in these scenarios, guiding co-owners toward a resolution that aligns with their interests and preserves their relationships.