Detailed Answer
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for advice on your specific situation.
When co-owners of real property in California cannot agree on a buyout price, several paths exist to resolve the dispute:
1. Negotiation and Appraisal
Co-owners can hire a neutral, licensed appraiser to determine fair market value. Each owner may then use that valuation to negotiate a buyout. A written buy-sell agreement or unequal ownership percentages can guide the process.
2. Alternative Dispute Resolution
If direct talks stall, co-owners often turn to mediation or arbitration. A mediator facilitates discussion but does not impose a decision. An arbitrator issues a binding determination on valuation or other terms if the parties agree in advance to arbitration.
3. Court-Ordered Partition
Under California Code of Civil Procedure section 872.010 et seq., any co-owner may file a partition action when no agreement emerges. The court evaluates whether to order a partition in kind or by sale:
- Partition in Kind (Division of Property): When the land’s physical features permit, the court divides it into separate parcels for each owner. Cal. Code Civ. Proc. § 872.210 (CCP 872.210).
- Partition by Sale (Sell and Split Proceeds): If the property cannot be fairly split, the court orders sale by a court-appointed referee or commissioner. Net sale proceeds get distributed according to ownership interests. Cal. Code Civ. Proc. § 873.010 (CCP 873.010).
During a partition sale, interested parties can bid, and the court confirms the transaction. Each co-owner shares sale costs and any surplus or deficit according to their percentage interest.
4. Buy-Sell and Shotgun Clauses
Many co-ownership agreements include a buy-sell or shotgun clause. If one owner offers to buy at a specified price, the other must either sell at that price or buy the offering party’s share at the same rate. This encourages fair value offers up front.
Helpful Hints
- Obtain at least two independent appraisals to support your valuation.
- Consider mediation before filing court papers to save time and costs.
- Review your title documents for any existing buy-sell or shotgun clauses.
- Factor in attorney and court costs when assessing buyout or partition.
- Document all negotiations and offers in writing to preserve evidence.
- Consult a real estate attorney early to understand procedural deadlines and fees.