Options for Co-Owners When They Can’t Agree on a Buyout Price in Delaware
Disclaimer: This article is for educational purposes only and does not constitute legal advice. Consult a qualified attorney for guidance specific to your situation.
Detailed Answer
When co-owners cannot agree on a buyout price for jointly held real estate in Delaware, they have several paths to resolution:
1. Negotiation and Mediation
Begin with open negotiation. If talks stall, engage a neutral mediator. Mediation helps preserve relationships and often costs less than litigation.
2. Independent Appraisal
Hire a certified appraiser to determine fair market value. Co-owners can then agree to a buyout based on that appraisal.
3. Buy-Sell or Shotgun Clauses
If your co-ownership or operating agreement contains a buy-sell provision (sometimes called a shotgun clause), one owner sets a price and gives the other the option to buy or sell at that price.
4. Court-Ordered Partition
If voluntary methods fail, a co-owner can file a partition action in the Delaware Court of Chancery. Under Del. Code tit. 10, § 6521, any co-owner with an undivided interest in property may seek partition. The court may order:
- Partition in Kind: The property divides into separate parcels. Each co-owner retains a physical portion (Del. Code tit. 10, § 6524).
- Partition by Sale: The court sells the entire property at auction or private sale. Proceeds divide according to ownership interests (Del. Code tit. 10, § 6525).
The court appoints a commissioner to manage valuation or sale logistics. Costs and timing vary based on property complexity.
5. Alternative Dispute Resolution (ADR)
Consider binding arbitration if co-owners agree. An arbitrator can set the buyout price or decide on sale terms without formal court proceedings.
Helpful Hints
- Review your co-ownership agreement for any built-in buyout or dispute resolution clauses.
- Obtain a professional appraisal early to establish market value benchmarks.
- Use mediation to save on legal fees and keep negotiations constructive.
- Understand that partition actions in the Court of Chancery can be time-consuming and incur court costs.
- Discuss the implications of partition in kind versus sale with a real estate attorney.