Partition by Sale
In a partition by sale, a joint property is sold and proceeds from the sale will be divided among co-owners[i]. Partition by sale is conducted only when a property cannot be physically divided into separate parts. It can also be conducted when it is not profitable to divide a property because the total value of the divided pieces of the property would become very low considering the value of the property as a single piece[ii].
Usually partitions by sale are conducted by courts. Proceeds from a sale will be distributed proportionately among the joint owners according to their respective shares. A partition by sale is complete on a distribution of the proceeds from a sale.
Generally, partition by sale is an absolute right when the statutory conditions for a sale exist[iii]. But the right of partition by sale may not be available if it cannot be done equitably and fairly. A partition by sale will be ordered only if it protects the interest of all owners and not only one of the owners.
A partition by sale will be conducted upon establishment of necessity of sale[iv]. The burden of proof is on the party who asserts necessity of sale of a property. But in certain jurisdictions it is statutorily provided that when a plaintiff seeks partition by sale, it will be allowed unless the opposing party proves that partition in kind would be equitable.
The determination of a necessity of sale must be based on the consent of the parties or on obtaining competent evidence[v]. The determination can be made with the assistance of court appointed referees or commissioners. A court may also direct the sale without seeking the service of a commissioner when it is apparent from records that a partition in kind is not practical. On appointment, a commissioner is required to submit a report to concerned court regarding division of property. A commissioner who submits to a court that a property cannot be divided without injury to its value must provide factual details in support of that decision[vi].
Right of partition by sale is not determined by the relationship or financial status of the parties. The costs that may be incurred in a partition in kind compared to partition by sale of a property may be considered by a court in determining whether the land should be partitioned in kind or by sale.
Statutes with regard to the procedure or requirements of sale are different in different jurisdictions. In a partition by sale, a court has the discretion to decide the method of conducting a sale. A referee appointed by a court can also exercise discretion to decide the manner of sale, reasonably in accordance with the statutes.
A sale may be conducted at a public auction or a private sale. Any officer conducting the sale must secure the highest receivable price for the property sold. A sale must be beneficial to persons lawfully entitled to the proceeds of the sale. In some jurisdictions, all partition by sale must be at public auction. An appraisal of property is required depending on the statutes before conducting sale[vii].
Parties to a partition by sale are entitled to be given a notice with regard to the sale. A reasonable notice of sale like notice by publication is to be given to the parties. If the parties to a sale do not waive the right of service of notice of a sale, they should be given notice other than notice by publication.
Property in a partition by sale may be purchased by any person legally competent to contract. It is not an impropriety or misconduct for an attorney who previously represented one of the parties to participate in an auction sale. However, a judge who has ordered the sale of land cannot become a purchaser at the sale. The relatives and interested parties in good faith have opportunity to purchase property sold at partition. A co-tenant can attend or participate in an auction sale and may purchase the property.
A partition by sale is subject to confirmation of a court. Courts also have the power to refuse to confirm a partition by sale where an interested party files an objection alleging unfair or inequitable sale. A court has the discretion to order resale in order to receive adequate price for the property. The discretion of a court to confirm a sale or not has to be exercised logically or reasonably[viii].
An allegation of irregularities in a partition sale must be raised as soon as the irregularities become known to the parties. However, it is generally sufficient to raise these objections before the approval of a report of sale.
A partition by sale may be set aside under different circumstances. Generally, it may be set aside when it is conducted by fraud, or unfairly and inequitably. It may also be set aside where the description of property is wrong or if an unauthorized attorney files an action for partition. Inadequacy of price is not a sufficient ground to set aside a partition by sale. A court presumes that commissioners set a price for a property in good faith and with judgment and discretion. Therefore, a court may set aside a sale only when it is apparent that a confirmation would cause injustice to the parties.
A court has authority to decide how the proceeds from a sale have to be distributed. In most jurisdictions, statutes provide for the manner in which distribution of proceeds from a sale is to be made. A person who had made improvements on a property may be given certain allowances from the sale proceeds[ix]. Expenditures made for the benefit of all co-owners by a co-owner may be given to him/her. A court may distribute equal shares where equal interests exist or shares in proportion to the interests of the respective parties.
[i] Hall v. Hamilton, 233 Kan. 880 (Kan. 1983).
[ii] Hegewald v. Neal, 20 Wn. App. 517 (Wash. Ct. App. 1978).
[iii] McGee v. McGee, 495 So. 2d 1081 (Ala. 1986).
[iv] Hall v. Hall, 250 Ala. 702 (Ala. 1948).
[v] Keaton v. Terry, 93 Ala. 85 (Ala. 1890).
[vi] Venetta v. Arrowood, 1997 Ohio App. LEXIS 925 (Ohio Ct. App., Ross County Mar. 10, 1997).
[vii] Bechert v. Bechert, 435 N.E.2d 573 (Ind. Ct. App. 1982).
[viii] First Nat’l Bank v. Critel, 251 Neb. 128 (Neb. 1996).
[ix] Bishop v. Lynch, 8 Wn.2d 278 (Wash. 1941).