Detailed Answer
When co-owners of real property in Alabama cannot agree on a buyout price, they have several pathways to resolve the dispute. Options include informal resolution methods—like negotiation, mediation or arbitration—and, failing those, a court-ordered partition under Alabama law. Each route has its own process, timing and potential costs.
1. Negotiation and Mediation
Begin by discussing a fair market value. Co-owners may hire a neutral mediator to facilitate talks. Mediation is voluntary and allows parties to craft flexible solutions, such as phased buyouts, without court intervention.
2. Appraisal and Buy-Sell Agreements
If co-owners signed a buy-sell agreement, it may specify how to determine value—often via one appraiser chosen by each owner and an umpire if those appraisals diverge. Even without a written agreement, co-owners can agree to an appraisal process to establish a benchmark buyout price.
3. Arbitration
Arbitration is a binding process where an arbitrator or panel decides the property’s value. It is more formal than mediation but usually faster and less costly than litigation. Parties must agree in advance to arbitrate and accept the arbitrator’s decision.
4. Court-Ordered Partition
If informal methods fail, any co-owner may file a partition action under the Code of Alabama § 6-6-500 et seq.. The court then oversees dividing or selling the property:
Partition in Kind
The court divides the property into physically separate portions, allocating parcels to each co-owner in proportion to their ownership interest. This is most feasible when the property can be divided without substantially reducing its value.
Partition by Sale
If a physical split is impractical, the court orders a sale—public or private—and distributes net proceeds among co-owners according to their shares. The court may appoint a commissioner to conduct the sale and handle bidding and closing.
5. Sale and Distribution of Proceeds
Under partition by sale, once the property sells, the court deducts expenses (e.g., commissions, taxes, liens) and distributes the remainder. Co-owners receive their proportional share; any surplus or deficiency over a proposed buyout price is absorbed as part of the sale process.
Disclaimer: This article is for educational purposes only and does not constitute legal advice. For guidance tailored to your situation, consult a qualified attorney.
Helpful Hints
- Review any existing co-ownership or buy-sell agreement for dispute resolution clauses.
- Obtain multiple independent appraisals to support or challenge buyout offers.
- Consider mediation before incurring court costs and delays.
- Understand that court-ordered partition can be time-consuming and may require a commissioner’s fees.
- Consult an attorney early to evaluate your rights and procedural requirements under Alabama law.