What is the Partition of Real Property Act (Formerly Known as the Uniform Partition of Heirs Property Act (UPHPA)) in California?
The Partition of Real Property Act is a new bill that will go into effect on January 1, 2023 which replaces the Uniform Partition of Heirs Property Act. The Act allows for added opportunities for non-partitioning parties to buy out partitioning parties’ interest in a property through partition by appraisal. Previously, the Uniform Partition of Heirs Property Act only allowed non-partitioning co-owners of heirs property, which is inherited property as defined below, to retain their share of an inherited property by ensuring that they have the necessary due process to prevent the forced sale of the property. The updated Partition of Real Property Act makes it easier than ever to solve co-ownership disputes between co-owners of property through a California partition action.
The bottom line is that the Partition of Real Property Act allows co-owners of property a much easier way to buy out their co-owners, expanding even further upon the Uniform Partition of Heirs Property Act. Owners of property that is resided in by their co-owner now have a nicer way to ask that their co-owners to buy them out or move on so that everyone can obtain their equity. The Partition of Real Property Act in California accomplishes these goals by forcing a partition by appraisal where it would otherwise not be allowed.
When Does the Partition of Real Property Act Go into Effect?
Governor Gavin Newsom signed Assembly Bill No. 2245 in July 2022. The bill will apply to any partition actions filed after January 1, 2023. The bill also expands the Uniform Partition of Heirs Property Act “to apply to any real property held in tenancy in common where there is no agreement in a record binding all the cotenants which governs the partition of the property.” Notably, the Partition of Real Property Act removes the condition under the UPHPA requiring the property to be heirs property. This expands the scope of partition actions far beyond those included in the UPHPA.
When Did the Uniform Partition of Heirs Property Act in California Go into Effect?
Uniform Partition of Heirs Property Act (UPHPA) went into effect on January 1, 2022. California Governor Gavin Newsom signed Assembly Bill No. 633 on July 2021, which added the UPHPA to the California Partition Statutes in the California Code of Civil Procedure. California now joins many other states that have already adopted the UPHPA, including New York, Texas, Illinois, and 13 others. The act governs partition actions filed on or after January 1, 2022 involving heirs property as defined under California Code of Civil Procedure 874.313.
What is the Purpose of the Partition of Real Property Act in California?
The predecessor of the Partition of Real Property Act, the UPHPA, “preserves the right of a co-tenant to sell his or her interest in inherited real estate, while ensuring that the other co-tenants will have the necessary due process to prevent a forced sale: notice, appraisal, and right of first refusal.” Even further, the Partition of Real Property Act seeks to “expand the scope of the Uniform Partition of Heirs Property Act to apply to any real property held in tenancy in common where there is no agreement in a record binding all the cotenants which governs the partition of the property.” The act aims to prevent dispossession of property by way of a forced sale. For many, property is their most valuable asset. Being forced to sell this asset can potentially negatively impact those who co-own the property.
For example, perhaps one co-owner has sold their interest to a real estate investor. As a co-owner, the investor can now force the sale of the property below fair market value, just to buy it back in full. The non-partitioning co-owners are now left without their inherited property and with little cash to show for its sale, while the real estate investor walks away with the heirs property.
According to the author of the Act, this issue is unfortunately common in lower to middle class individuals, especially rural African-American families, who die intestate or who do not have the resources to create sophisticated wills or estate plans. State intestacy laws and less sophisticated estate planning documents will name heirs as tenants in common. Any tenant in common who has no need or desire to maintain ownership in the property may file for a partition action. However, under the UPHPA in California, co-owners who wish to retain their ownership in the inherited property have more opportunity to do so, thus preserving generational property wealth that may be otherwise lost in a partition by sale.
What are the requirements for the Partition of Real Property Act in California?
In addition to the requirement that the partition action must have been filed on or after January 1, 2023 in California, the Partition of Real Property Act applies to: “any real property held in tenancy in common where there is no agreement in a record binding all the cotenants which governs the partition of the property.” . That’s it!
What are the Requirements for the UPHPA in California?
By contract, the UPHPA had stricter specifications. In addition to the requirement that the partition action must have been filed on or after January 1, 2022, the Uniform Partition of Heirs Property Act in California only applies to: 1) heirs property 2) in which there is no written agreement governing partition among the owners. If these conditions are met, the UPHPA will afford protections for non-partitioning co-owners of heirs property.
What is Heirs Property under California Law?
Contrary to what some people may believe, the definition of “heirs property” under the Uniform Partition of Heirs Property Act in California applies to more than just property that is inherited after death by “heirs” as that term is commonly understood. Rather, “heirs property” is defined in Code of Civil Procedure Section 874.312(e) as follows:
“Heirs property” means real property held in tenancy in common which satisfies all of the following requirements as of the filing of a partition action:
(1) There is no agreement in a record binding all the cotenants which governs the partition of the property.
(2) One or more of the cotenants acquired title from a relative, whether living or deceased.
(3) Any of the following applies:
(A) Twenty percent or more of the interests are held by cotenants who are relatives.
(B) Twenty percent or more of the interests are held by an individual who acquired title from a relative, whether living or deceased.
(C) Twenty percent or more of the cotenants are relatives.
This requirement that one or more of the co-owners acquired title from a “relative” includes relatives that are “living,” meaning the Uniform Partition of Heirs Property Act in California even applies if you purchase a property from your living parent, cousin, or otherwise. In other words, the “heirs” portion of the act is a misnomer as the act really applies to any property acquired from a relative. The only exception would be if those who meet this qualification are less than 20 percent of the ownership. Accordingly, the Act should assist many inter-family disputes.
What is the Partition Action Process under the Uniform Partition of Heirs Property Act in California?
Normally, in a partition action in California, a co-owner of a property has the absolute right to force the sale of the jointly owned property. However, under the UPHPA: “If a cotenant requests partition by sale, the bill would give cotenants who did not request the partition the option to buy all of the interests of the cotenants that requested partition by sale, as specified.” In other words, this creates a right of first refusal for non-partitioning parties. The default procedure for co-owners of heirs property requesting a partition by sale is now as follows:
- The court will determine whether the property is heirs property
- If the court determines that the property is heirs property, the court will order an appraisal of the property to determine its fair market value (FMV) OR if all parties have agreed to a value of the property or another method of valuation, the court will adopt that valuation
- Importantly, this step acts as a partition by appraisal, which is otherwise rarely found in partition actions
- Any party may file an objection to the appraisal within 30 days after notice is sent
- If an appraisal is ordered, a third party real estate appraiser will determine FMV no sooner than 30 days after the notice is sent whether or not an objection to the appraisal has been filed
- If a partition by sale has been requested, the court notifies all co-owners who did not request the partition by sale that they may buy the interests of the partitioning co-owner
- A non-partitioning co-owner has 45 days exercise their right of first refusal by giving notice that he or she intends to buy the interests of the partitioning co-owner
- If more than one non-partitioning party elects to purchase the interests of the partitioning party, the court will then allocate the right to buy the interests among the purchasing parties according to their fractional ownership percentages
- The parties who expressed interest in purchasing the partitioning parties’ interest (ie exercised their right of first refusal) then have 60 days from when the court sent the notice to arrange financing
The partition process under the Uniform Partition of Heirs Property Act creates added opportunities for non-partitioning parties to maintain an interest in the property they have inherited.
What if the Non-Partitioning Parties Do Not Purchase the Interests of the Partitioning Parties in California?
If the non-partitioning parties are unable to or do not want to exercise their right to purchase the interests of the partitioning parties, the court will then partition the property in kind or by sale (depending on what is appropriate) just as it would for non heirs property.
Can you Appoint a Referee Under the UPHPA?
A partition referee may be appointed under California Code of Civil Procedure 874.315 pursuant to California Code of Civil Procedure 873.010. These statutes allow a referee, who is a neutral, third party, to oversee the equitable sale or division of a property. However, it is possible that defendants can raise appointing a referee under the UPHPA as an issue and they may ask for an appraisal.
Additional Appraisal Procedures Under the UPHPA in California
Additionally, “In an action for partition of heirs property, the court may apportion the costs of partition, including an appraisal fee, pursuant to Section 874.040, except that the court shall not apportion the costs of partition to any party that opposes the partition unless doing so is equitable and consistent with the purposes of this chapter.” Indeed, non-partitioning parties will not bear the costs of partition unless the court deems it equitable for them to do so.
Even further, “The bill would permit the court to apportion the costs of partition among the parties in proportion to their interests, but would prohibit the apportionment of costs among parties that oppose the partition, except as specified.” Put another way, costs will be apportioned among partitioning parties in accordance with their ownership percentages.
Contact an Experienced Partition Attorney in California
If you want to end your co-ownership relationship, but your co-owner won’t agree, a partition action is your only option. Our experienced partition lawyers have years of experience ending co-ownership disputes and can help you unlock the equity in your property. For a free, 15 minute consultation with an experienced partition attorney at Talkov Law, call (844) 4-TALKOV (825568) or fill out a contact form online.