Posted: May 23, 2017 / Category Client Q & A
Client Q&A: I jointly own property with a partner and I want to get out.
“I jointly own property with a partner and I want to get out. Is this possible?”
Partition Actions in New York State
From time to time, people who jointly own property get into disputes, or want to monetize their share of the investment. You may think that if their co-owners do not agree to a division or sale, they are stuck indefinitely. But in fact, New York has a statutory remedy for this problem: an action for partition.
Partition actions enable property owners to end their joint tenancy seeking a court-ordered division of the property. This division can take place in two ways. The preferred method is for courts to divide up the property among the owners, assuming it is feasible to divide it physically. Once divided, the former joint owners now retain individual ownership of their piece of the property. If it is not feasible to divide the property—as the statute defines it, this arises where the partition cannot be made without “great prejudice” to the other owners—courts have another remedy. They can order a judicial sale (most commonly, they will appoint someone to conduct a public auction) of the entire property, with the sale proceeds typically allocated to the owners based on their ownership shares. Examples of situations best served by a judicial sale, as opposed to a partition, are if there is a building on the property that cannot be physically divided (either vertically or laterally), if dividing the property would substantially reduce its value, if the partition would cause the subplots to violate zoning ordinances, or if the parcel of land has only one access point.
Though governed by statute, partition actions are equitable in nature, which means that courts have great flexibility in deciding whether, and how, to divide up property. Courts must balance the equities of all the individual owners before awarding a partition. For example, they may consider disputes among the owners about how the property is being used or managed. That said, it is not necessary to show that the relationship between the owners is acrimonious, that they are in deadlock, or that the property has been mismanaged for a partition claim to succeed. This is in sharp contrast to a dissolution action, which is required where property is jointly owned through a corporation, an LLC, a partnership, or another entity.
Defending a Partition Action
Is there any way to defend against a partition action? First, courts will enforce agreements not to partition; a binding agreement, therefore, is a valid defense to a partition action. But it should be kept in mind that an agreement against partition, like all contracts governing real property, must be in writing (or their enforcement will be barred by the statute of frauds). Second, courts will enforce testamentary restrictions on partition. This often occurs when a parent leaves property to several children in a will, but wants to ensure that none of them try to take a piece of the land for themselves without the agreement of the rest. Testators have the option to prohibit or postpone partitions (in the latter case, either for a reasonable amount of time, or until a specified event occurs) in their wills, and these provisions will be enforced by courts.In the absence of a contractual or testamentary restriction, parties can still argue that they will be greatly prejudiced by the partition based upon their individual circumstances. This may result, however, in a sale instead of a partition. Judicial sales will not be set aside unless a party can show unfair or oppressive conduct.
Partition actions are not widely known or understood, but they can be a powerful tool for someone looking to separate their individual interest in property held with other owners. Schlam Stone & Dolan LLP has extensive experience bringing and defending partition actions. Please reach out if you would like to speak with us on this topic.