Partition actions, simply put, divide a piece of real estate among its co-owners. The property can be divided in kind, which means physically dividing the property, or by a partial ("allotment") or full sale. The Virginia legislature made several changes and additions to the partition statutes, which took effect on July 1, 2020.
Who can compel the partition of property?
The following types of parties can compel (or be compelled by) a partition action in court:
- Tenants in common
- Joint tenants
- Executors with the power to sell (only if the power of sale is properly exercisable at that time under the circumstances)
- Coparceners (joint heirs)
- Lien creditors
- Any owners of undivided estate in real estate
Note that tenants by the entirety, which is how spouses typically own their property, cannot use a partition action to divide their property. The Virginia Supreme Court has also held that a life tenant cannot bring a partition action against the holders of the remainder interest.
What type of property can be partitioned?
Any real property, including mineral rights east and south of the Clinch River, can be subject to partition by a tenant in common, joint tenant, executor or coparcener.
Lien creditors or any other owner of an undivided interest can also compel the partition for the purpose of subjecting the estate of their debtor, or the rents and profits from the property, to the satisfaction of their lien.
Does the court need to determine the value of the property?
In almost every partition action, the court will order an appraisal of the property to determine the fair market value of the property.
The court will not order an appraisal if all parties have agreed to the value of the property or to another method of valuation, or if the evidentiary value of an appraisal is outweighed by the cost of the appraisal.
If the court orders an appraisal, the court will appoint a disinterested real estate appraiser licensed in Virginia, calculating the value of the property as if there was a sole ownership of the property. Upon completing the appraisal, the appraiser will file a sworn or verified appraisal with the court. Within three business days of the filing, the appraiser must also mail a notice of the filing of all of the parties' attorneys. A party can object to the appraisal no later than 30 days after the notice is sent.
The court will then hold a hearing regarding the fair market value of the property, not sooner than 31 days after the appraiser's notice is sent. The court can consider any other evidence of value at the hearing. The court will then enter an order determining the fair market value of the property.
What does it mean for the court to partition the property in kind?
The court will order partition in kind, which is the physical division of the property into separate parcels, if it can be practicably divided. For example, this may work for a large tract of undeveloped land, but may not be practicable for a small lot with a single family home.
Any two or more of the parties can agree to have their shares of the property laid off, or combined into a new separate parcel, if that partition can be conveniently made in that way.
If the court orders partition in kind, it can require that one or more of the parties pay one or more of the other parties' values in the property, so that the partition in kind is just and proportionate in value of the fractional interests held. For example, if the land is not easily dividable into equal-sized parcels, the court may require the owners receiving larger-sized parcels to compensate those who receive smaller parcels.
If there any parties that are unknown, unlocatable, or the subject of a default judgment (the party was served with the partition action but never responded), the court will create a parcel that represents the combined interests of all those parties, and that parcel will remain undivided.
What if division in kind is not practicable?
If division in kind of the property is not practicable, then the court will consider allotment or a sale in lieu of partition. Division by allotment is where ownership of the property is awarded in full to one or more party, who must then pay the rest of the parties for the value of the property that they will lose. Division by sale is selling the entire property, and then dividing the proceeds of the sale among the parties.
How is a property divided by allotment?
If partition in kind is not practicable, the court will next consider an allotment of the entire subject property to any one or more of the parties who will accept it, for a price equal to the value of the property as was determined by the court, who must then pay to the other parties the value of their interest in the property. The court will make the distribution of the proceeds, taking into consideration the creditors of any party who is deceased.
If multiple parties seek allotment and there are disputes between them, the court will consider the following, weighing the totality of the circumstances and in addition to any other relevant factors, in making an allotment determination: (i) the collective duration of ownership or possession of a party, including ancestral ownership; (ii) a party's sentimental attachment to the property; (iii) a party making lawful use of the property, and the harm that would occur to them if they no longer owned the property; and (iv) the degree to which the parties contributed their pro rata share of the costs of ownership, such as property taxes or insurance.
After the court decides who will take ownership by allotment, the court will notify all of the parties of its decision, and the amount each party is to pay or receive. The court will also set a date, no sooner than 60 days after its notification, by which payment must be made. If a party fails to pay by this date, the court may order a partition sale, or allow another one of the parties to take ownership by allotment.
How is a property divided by sale?
If the court finds that an allotment of the property is not practicable or equitable, and if it promotes the interest of the parties, the court can order a sale of the property. The court is also allowed to order allotment of part of the property and a sale of the rest.
If a court orders a sale, the sale will be an open-market sale, unless the court finds that a sale by sealed bids or at auction would be more economically advantageous and in the best interests of the parties as a group.
If the parties can't agree on which real estate broker to use to market and sell the property within 10 days, the court will appoint a disinterested real estate broker and determine a reasonable commission for the broker.
The broker must then offer the property for sale in a commercially reasonable manner at a price no lower than the value determined by the court, based on terms and conditions set by the court, such as a reasonable time period for marketing.
If the broker is able to get an offer for at least the value set by the court, the broker will a file a report with the court detailing the offer. The court will then hold a hearing to approve the sale, and appoint a special commissioner to actually make the sale and prepare a deed.
If the broker is not able to get an offer for at least the set value of the property, the court will hold a hearing, where it may (i) approve the highest offer, if any; (ii) redetermine the value of the property, and allow the broker additional time to market it; or (iii) order that the property be sold by sealed bids or at auction.
Can I contest the title of a co-owner or lien creditor during the partition action?
Title issues relate to the validity of a claim to ownership or interest in the property. The court hearing the partition action, which is any court having general equity jurisdiction (cases would begin in the relevant circuit court), has the power to take cognizance of all questions of law affecting the legal title that may arise in any proceedings.
Is there any way to avoid litigation?
Attempting negotiation between the co-owners before any litigation is filed can be advantageous. It spares all parties the cost of litigation and attorney's fees, and helps keep the matter more private. Negotiation is always recommended before resorting to litigation. This can be done between the parties (and their attorneys) themselves, or with the help of a mediator.
Published November 13, 2020.