What is a partition action or lawsuit? Under Oklahoma law, a partition action forces the sale of jointly owned property and divides the sale proceeds. Less commonly, a partition lawsuit divides the property itself into pieces, such that each co-owner receives 100% ownership of a fractional piece. In many cases, a partition lawsuit results from inherited property, disagreeable siblings, divorced spouses, or disenchanted business partners.
TWO OPTIONS: FORCED SALE OR LITERAL DIVISION OF PROPERTY
When one of the co-owners of jointly owned property no longer wish to remain as co-owners, a partition action puts an end to the co-ownership. The co-ownership terminates in one of two ways. Most commonly, the Court forcibly sells the jointly owned property at auction and divides the sale proceeds among the owners. Less commonly, the Court literally divides the jointly owned property into pieces and gives each co-owner 100% ownership of a fractional piece.
How does the Court determine whether to sell the property or literally divide it up?
Courts prefer to literally divide the property and give each owner a piece. However, literal division really only happens with rural properties and acreages. It cannot happen with a residential home or building.
Obviously, literal division of a building would destroy the property value. Splitting the baby does not make either party happy, so Courts usually resort to a forced sale with division of the proceeds.
WHAT HAPPENS IN A PARTITION ACTION? MECHANICS UNDER OKLAHOMA LAW.
More precisely, exactly what is a partition action? The exact partition process depends on state law. But the general process looks the same everywhere. In Oklahoma, the partition process stems from 12 Okla. Stat. Section 1501, et al. To simplify, the process begins when one of the co-owners files a Petition to Partition. The Plaintiff must name all co-owners as parties, along with any party holding a lien or mortgage. A court-appointed appraiser places a value on the property. After required notice periods, the property goes up for auction with the Sheriff. At the action, the property cannot sell for less than 2/3rds of the appraised value. If no one bids 2/3rds of the appraised value, then the plaintiff must try again at a second auction.
To avoid a failed auction, the Plaintiff should work with a real estate attorney and real estate agent who both understand the partition process. Although the auction process brings the sale price down somewhat, a decent sale price can still occur through competent marketing of the property prior to auction.
HOW DOES THE MONEY GET SPLIT? WHO GETS WHAT?
Usually, the Court divides sale proceeds in proportion to ownership interests. If you own 25% of record title, you get 25% of sale proceeds after deduction of fees, costs, and liens.
However, the profit split can change based on "fairness" factors. Basically, the profit splits should be adjusted according to the benefits and burdens of ownership.
For instance, suppose one of the co-owners bears all the burdens of ownership. He paid the mortgage, taxes, and insurance. He invested thousands into property improvements. And yet, he only owns 25% of the property. When it comes time to divide the money, he should receive credit for his financial investments in the property.
By the same token, maybe one party received disproportionate benefits from the property. Maybe this person paid the mortgage, but they also enjoyed exclusive use and control of the property while paying the mortgage. In this case, the Court should take into account the unequal division of benefits each party received from the property.
DEMANDING AN ACCOUNTING IN PARTITION.
An "accounting" occurs when the Court takes stock of how the benefits and burdens impact profit splits. The Court "takes into account" each person's level of investment and benefit to determine a fair sharing ratio. Normally, any co-owner can demand an accounting as part of the partition process. However, do not demand an accounting unless it greatly increases your share of profits. Fighting over numbers costs a lot of attorney fees. Typically, attorneys get paid from the proceeds of the sale. So the more you fight over numbers, the less profit remains for you. Make sure the accounting justifies its own cost. Don't throw good money after bad.
COST OF AN OKLAHOMA PARTITION ACTION.
What is a partition action? A lawsuit. And lawsuits aren't cheap. The cost of a lawsuit depends heavily on whether another party shows up to contest the lawsuit. If you file a partition action and no one disputes your claims, the lawsuit could be over without much trouble. However, even an uncontested partition action should cost upwards of $2,000.00 if done properly. A contested action would cost much more. Legal fees vary widely, because the amount of work required to complete the partition varies widely.
However, Oklahoma law allows the attorney to collect fees from the partition sale. When the property sells at action, the Plaintiff's attorney can seek an award of fees from the sale proceeds. In most cases, the Court grants this award. This means that all co-owners share legal costs equally, because legal costs reduce the net proceeds before distribution to owners.
ALTERNATIVES TO A PARTITION ACTION
Considering the cost and time required to complete a partition, you should evaluate all other options before proceeding. When I assist clients who desire to exit a co-ownership situation, I begin with a letter to the other co-owners. The letter explains the problems with co-ownership and the reasons my client wishes to exit co-ownership. Sometimes, the other co-owners can buy my client out of the property, which solves the property. Other times, a letter might convince the other owners to sell the property voluntarily. By explaining the legal right to file a partition, you can put pressure on the other co-owners to sell voluntarily.
Basically, you can send an ultimatum letter to the other co-owners. The letter gives the other owners a few options: (1) buy out my interest; (2) sell the property voluntarily; or (3) prepare for a forced sale via partition action. Since no one wants a lawsuit, this approach often results in a voluntary agreement to sell the property.
CONTACT AN OKLAHOMA PARTITION ATTORNEY.
As a real estate attorney, I specialize in property law, including partition actions. Contact me for a free quote on legal services related to partition lawsuits.