You own real property with others. What do you do if continued co-ownership of the real property is no longer viable or desirable?
Divorce allows one to disengage from a marital relationship and property issues between spouses are addressed in Family Court. Hawaii law allows co-owners of real property who are not married to each other to terminate their co-owner relationship. This is done by a partition action.
Can anything be done before you are required to go to court? What happens if you have to sue the other co-owners
A. Anticipate Problems.
Think ahead!! Some disputes can be avoided if the parties have a written agreement before acquiring the property as co-owners. The agreement should clearly set forth each owner's duties, responsibilities and benefits. There should be procedures for resolving disputes and a process to follow if an owner wishes to sell.
Such agreement should be in writing and signed by all the co-owners. It should be drafted by someone who is experienced in these matters and who can anticipate potential areas of concerns. The mere preparation of these agreements can sometimes be the source of heated disagreement for the prospective co-owners. It can sometimes even cause the parties to reconsider whether the co-ownership is a good thing. It is better that this occurs before the property is acquired.
B. When a Problem Arises.
When a problem arises, the parties should first attempt to communicate and see if there can be an amicable or acceptable resolution of their differences. The parties are co-owners. While they may have disagreements, the mere fact that they are co-owners suggests some commonality of interests. If the co-owners can reach a mutually acceptable agreement, it will not only resolve the problem, but it can often result in substantial savings in legal fees and the avoidance of the stress of dealing with the unknown.
C. When the Parties Cannot Agree.
If an agreement cannot be reached, a partition action may be necessary. A partition action is a lawsuit by one or more of the owners against the remaining owners. The Complaint includes all lenders and anyone else who may have an interest or a claim in the property.
The court can order the parties to physically divide the property if that is fair and legally possible. While this may be a possibility for vacant land or large agricultural lots which can be subdivided, it typically is not practical for homes and condominiums.
During the course of a partition lawsuit, the parties can reach an agreement.
D. What Happens in a Partition Action?
If the parties cannot reach an agreement, the Court will ultimately order a sale of the property. A neutral person (commissioner) is appointed by the Court to sell the property, typically, by way of an auction. Prior to the auction, there are publicized notices of open houses and the auction date. On the date of the auction, the property is sold to the highest bidder. The sale must still be confirmed in a confirmation hearing a few weeks later. At the confirmation hearing, the Court will allow people to reopen the bidding. This is to ensure that the highest price for the property is secured.
During the partition action, the parties would have an opportunity to present their claims. The Court will make a decision as to the merits of each party's claim, such as lack of contribution, over contribution or allocation of payment. The net sales proceeds will be divided per the Court's order.
Partition actions can be costly depending upon the extent of the parties' disagreement. The commissioner is compensated for his/her services in showing the property, publicizing the sale, auctioning the property, and appearing in Court. The sale of property by auction does not always generate the highest sales price. It is common for parties in a partition lawsuit to be represented by their attorneys. The legal fees will further reduce each party's share of the net proceeds.
Partition actions sometimes do not proceed through the entire Court process. Factors such as the cost of litigation, the costs of the commissioner's fees and the reduced sales price from a forced sale often encourage the parties to work out a resolution that is in everyone's financial best interests.
A partition action is not the ideal way of resolving co-ownership problems, but it does provide a means of resolving a situation when the parties reach an impasse. |
