What if two people pooled their resources and began investing in real estate. Like many partnerships things progress smoothly for a while and then a dispute arises.
What if they have an undivided interest in a fourplex. They want to end their investing enterprise, but they can’t agree on the disposition of the property?
An action for partition may be the only solution. That means one of the investors turns to the court to decided how and when the interest in the property will be divided.
In a partition action the owner or claimant of real property or any interest in the property may compel a partition (division) of the property between him and other owners. It may vary from state to state, but in Arizona the partition complaint is filed in the superior court of the county in which the property is situated.
The court will hold a hearing to “determine the share of interest in the property sought to be divided of each of the owners or claimants, and all questions affecting the title…”
In other words… when those who have an undivided interest in a property can’t agree on disposal the court can do it for them.
Here’s another example of partition in action:
If an ex-wife or ex-husband refuses to sell their home or deed their interest to the other (and the real estate is not mentioned in the divorce decree) the only way the home can be sold is through a partition action.
When a husband and wife buy a home together, they own it as “tenants by the entirety”. Upon the death of one spouse, the surviving spouse automatically becomes sole owner of the property. This is known as the “right of survivorship”.
When there is a divorce, the tenancy by the entirety is dissolved into a “tenancy-in-common”, whereby each spouse has a one-half interest in the property without the right of survivorship. The tenancy-in-common differs from the “joint tenancy”, which is common ownership with the right of survivorship.
Generally, tenants-in-common and joint tenants “in possession of real property” have the right to partition of the property. But if the separation agreement or divorce decree grants exclusive possession of the home to the wife, the husband usually is denied his right to partition.
In a partition action, real estate is either divided into distinct portions or sold at a public auction and the proceeds distributed among the co-owners (if it is not possible to divide the property).
Sometimes there is an opportunity for an investor in such a situation. If you are a cash buyer you may be able to negotiate separately with each party and buy the property. If not you can suggest partition and try to buy at the public auction.
Another opportunity comes when the two parties receive their share of the proceeds from the auction. You might be able to sell or rent them one of your homes.