July 31, 2023
The complexities of "Heirs Property" - jointly owned real estate without a written partition agreement - have long posed challenges for co-owners. Disagreements over property management, unpaid expenses, and strained relationships often lead to partition actions, where a court determines the division of interests among cotenants. However, on July 21, 2021, California passed the Uniform Partition of Heirs Property Act ("Act"), reshaping the partition process for a more equitable outcome. Applicable to actions filed on or after January 1, 2022, the Act introduces significant amendments, granting co-tenants the right to buy out the filing cotenant, supporting "partition in kind" with consideration for non-economic factors, and establishing revised sales procedures for a fair market sale. If you own Heirs Property or are contemplating estate planning involving co-ownership, this article explores the Act's impact and the benefits it offers in fostering smoother co-ownership experiences.
"Heirs Property" is defined as property (i) for which there is no written agreement regarding partition that binds the cotenants of the property, (ii) where one or more of the cotenants acquired title from a relative, (iii) where 20% or more of the interests are held by relatives, or by an individual who acquired the interest from a relative, or (iv) 20% or more of the cotenants are relatives.
Owning Heirs Property as "tenants in common" with others can be problematic. Cotenants can disagree on what to do with the property (one or more cotenants may want to sell the property, while the other cotenants may want to keep the property), one or more cotenants may fail to pay their share of the property expenses, or the cotenants may simply not get along with each other. Such disputes may result in a partition action being filed with respect to the Heirs Property.
What is a partition action? A partition action is a legal process by which a court determines the division of real property between cotenants, resulting in individual ownership of the interests of each owner.
1. Partition in Kind: The division of the Heirs Property into physically distinct and separately titled parcels. Partition in kind is normally used when the Heirs Property is empty or raw land where equally equitable portions of the land can be physically divided.
2. Partition by Sale: A court ordered sale of the entire Heirs Property, whether by auction, sealed bids, or open market sale. The proceeds of the sale are divided among the owners according to their equitable interests.
3. Partition by Appraisal: Courts may order a partition by appraisal if at least one party is willing to keep ownership of the Heirs Property. The owner wanting to keep ownership of the Heirs Property will buy the interests of the other owners. In order to determine a price for the ownership interests, the court will appoint an appraiser and the appraiser's valuation will set the official purchase price.
Under prior law, there was only one available process to partition real property: an owner of an estate in real property would file anaction for partition of the property against all person having or claiming an interest in the estate and this would force the sale of the property at auction, most times at a below market price, unless the property could be partitioned in kind. However, on July 21, 2021, Assembly Bill 633 was signed into law in California which enacted the Uniform Partition of Heirs Act ("Act") which governs the partition of Heirs Property and is applicable to partition actions filed on or after January 1, 2022. The Act amends Section 872.020 of, and adds Chapter 10 to Title 10.5 of Part 2 of, the California Code of Civil Procedure.
The three major amendments contained in the Act are:
If you own Heirs Property and you would like to initiate a partition action, are concerned that another owner may or has initiated a partition action, or if you own real property and are considering leaving the property to several individuals in your estate planning, one of whom is a relative (making it an Heirs Property), you should consult with an attorney to understand the disadvantages of co-ownership of real property and estate planning alternatives to co-ownership as tenants in common.
January 25, 20242024 California Real Estate Law Update: What REALTORS® Need to Know
Explore the latest 2024 updates in California real estate law with Tyler Law, LLP. Our comprehensive guide covers everything from ADU regulations, landlord/tenant law changes, to new rules for property flippers and vacation rentals. Stay ahead in the real estate industry with our expert insights and analysis.
December 4, 2023Beyond the Sale: How REALTORS® Create Exceptional Value for Clients
Discover key strategies for realtors in our November 2023 article, 'Value Proposition'. Learn about Local Market Expertise, Negotiation Skills, and the importance of a Professional Network. Uncover how realtor associations enhance Advocacy and Education. Essential reading for agents and brokers committed to excelling in the dynamic real estate industry.
November 17, 2023New and Revised C.A.R. Forms for December 2023
Discover the latest updates from the California Association of REALTORS® with Tyler Law, LLP's comprehensive guide on new and revised real estate forms set to release in December 2023. Learn about the critical Buyer Homeowners’ Insurance Advisory, changes in lease agreements, property questionnaires, and more. Stay informed and ahead in the real estate market with expert insights and detailed summaries of these essential updates for real estate professionals.