- On December 3, 2015
- Business law and litigation, Timothy Lyons
When a co-owner of real estate decides they want to segregate their interest in the property, to the objection of the other owner(s), practical and legal issues quickly arise. So what remedy does one have to withdraw from co-ownership of real estate?
The law provides a person may withdraw from marriage by divorce, or from business ownership by resignation or dissolution of the company. However, withdrawal from, or division of, real estate when it is co-owned by tenants in common can only be remedied by partition of the property. Ownership by tenancy in common usually arises from separate parties obtaining their interest through inheritance or from succession of small business entities, commonly closely held companies. In either event, the owners do not have the right to survivorship, and therefore the title interest in the real estate will pass by transfer either through inheritance, succession or negotiated transaction. Due to these circumstances an owner as a tenant in common, at times, reaches the point where they no longer wish to continue ownership of the property, and thus want to either segregate or liquidate their partial interest. Their remedy is to file a court action for partition of the land.
New Jersey law provides that partition may be achieved either by a physical division of the property amongst its owners in title, or by sale of the property and thereafter distribution of the monies to the title owners in their respective shares. When partition litigation becomes necessary, the action is filed in the Chancery Court and usually includes expert testimony from licensed surveyors, real estate appraisers, and court appointed neutrals to marshal any revenue the property may generate through rents or otherwise. A partition action is normally not a time intensive or protracted lawsuit.
A division of the property is available, but very rarely obtained.
While actual physical partition of real estate, known as a “partition-in-kind” is provided for under the law, it is by its very nature both impractical and uncommon. That is due to the obvious restraints, hurdles and obstacles faced in pursuing such a remedy including the necessity of drawing new boundary lines, recording new lot and block numbers for the municipal plot, as well as revised tax assessments. In addition, creating unequal contours of resulting parcels where the landscape cannot be identically reflected is historically disfavored by the court since it is rare that the subject property could be divided into equal box lots amongst the title owners.
Liquidation of the property by sale is most common.
The remedy of partition is more typically granted as “partition by sale”, where the property is sold in whole to a third-party and the sale proceeds subsequently distributed to the title owners in their respective title shares. Ultimately, in a partition action the property is normally subject to sale through a private sale, negotiated with a third-party buyer which would be approved by Court Order under satisfactory circumstances to all of the owners. In the alternative, the court may order a public sale and set the terms by which the property must be offered to the public for sale, such as a firm deadline to solicit third-party offers, a minimum price listing for the property, appointment of a fiscal agent to supervise and effect the transaction, and other potential conditions of sale.
The focal point is that the law does not require a property owner to suffer continuously through unwanted ownership of real estate which they share in interest, or in use, with another party who may even be a stranger. Accordingly, a partition action is the remedy for a party who wishes to sell their interest in real estate, and who does not necessarily wish to retain a fractioned parcel of the original land.