When two or more people co-own real property and they cannot agree on what to do with it, one or both parties can seek partition of the property. In New York, any co-owner of real property (whether a joint tenant or a tenant in common) has an absolute statutory right to compel the division or sale of jointly held real property, regardless of the other owners’ wishes. This is governed by Article 9 of the Real Property Actions and Proceedings Law (RPAPL). This proceeding, however, is still equitable in nature and therefore, courts apply equitable principles to partition actions.
A New York partition action proceeds roughly as follows:
Commencement: The action is commenced by filing a Summons and Complaint in Supreme Court in the county where the property is located. All persons with an interest in the property — co-owners, mortgagees, lienholders — must be named as defendants.
Interlocutory Judgment: After the pleadings are resolved, the court issues an interlocutory judgment establishing the parties’ respective ownership interests and directing the manner of partition (in kind or by sale).
Referee Appointment: If the court orders a sale, it appoints a referee to conduct the sale. The referee is typically an attorney selected by the court. A referee can also be appointed earlier on in the matter to assist the court with determining the rights of the parties with respect to the property.
Sale: The referee markets and sells the property, either through private sale or public auction, as directed by the court.
Final Judgment: The referee reports the sale to the court, and after accounting for liens, encumbrances, carrying cost credits, and referee’s fees, the court issues a final judgment distributing the net proceeds.
The entire process can take anywhere from several months to several years, depending on the complexity of the ownership interests, the nature of any defenses raised, and the court’s calendar.
WHAT IF I CO-OWN REAL PROPERTY WITH A RELATIVE?
How you own the real property that you would like to partition, or how you came into ownership of the same, may also affect how the partition action proceeds. In 2019, former Governor Andrew Cuomo signed into law the Uniform Partition of Heirs Property Act. This legislation is now codified at RPAPL § 993, and it changed the way property is partitioned for real estate that qualifies as heirs property.
In order to qualify as heirs property under RPAPL § 993, the real property in question must be held as tenancy in common, and also meet the following criteria: (1) there is no agreement binding all of the co-tenants governing the partition of the property, (2) any of the co-tenants must have acquired title from a relative, (3) the property is used for residential or agricultural purposes, and (4) any of the following exists: (i) twenty percent or more of the interests in the property are held by owners who are relatives, (ii) twenty percent or more of the interests in the property were acquired from a relative, (iii) twenty percent of the owners are relatives of each other, or (iv) an owner of the property who acquired title from a relative lives in the property.
Once a partition action is filed under RPAPL § 993, the court is mandated to hold a settlement conference with the parties to discuss and determine their rights and obligations. The statute requires that the parties negotiate in good faith at this settlement conference to try and reach a mutually agreeable resolution, and allows the court to dismiss a complaint if the plaintiff fails to do the same. If the parties do not reach a settlement, then the referee, judicial hearing officer, or other designated court staff hosting the settlement conference shall make a report to the court of findings of fact and recommendation for relief.
As part of a partition action concerning heirs property the court shall also order an appraisal of the property to determine its value. Once an appraisal is obtained and filed with the court, the court then holds a hearing to determine the value of the property.
Within 45 days of the court’s determination of the value, a co-owner of the property may elect to buy out the other co-owners of the property. This allows for a co-owner living in the property or otherwise wishing to keep the property to buy out the other owners. If none of the owners wish to purchase the property, then the court must first determine whether the property can be partitioned in kind, meaning whether the property can be physically divided among the other co-owners. In most cases (specifically partition matters relating to a single family home), a partition in kind will result in great prejudice to the co-owners, and therefore, if the court does not order a partition in kind, it shall order a partition by sale. Here, if a court orders a partition by sale, the property is sold on the open market, and offered at a price not lower than the value of the property as previously determined by the court.
RPAPL § 993 is intended to provide a more streamlined process that allows persons who inherited real property with others to either continue to own that property, or to receive the full value of their interest in the same. Because this statute is relatively new, there is very little case law interpreting it. Thus, the legal landscape governing heirs property may change as courts interpret the statute.
ARE THERE ALTERNATIVES TO LITIGATION?
Partition litigation is expensive, time-consuming, and often destructive to family relationships. Before commencing an action, co-owners should seriously consider whether the co-owners of the property can (1) negotiate a buyout, (2) will voluntarily sell the property, or (3) enter into a separate agreement governing the parties’ use of the property. Resolutions in this manner however only become effective if all co-owners of the property reach an agreement relating to the same.
The litigation attorneys at Evans Fox LLP are experienced in handling partition matters and can assist you if you find yourself in this situation.