Sunday, March 22, 2015

Partition Suits In Virginia

A partition suit is a cause of action created by statute in Virginia which allows a person or entity that co-owns real estate with others to force either (1) the dividing of the property such that each owner will own a portion of it solely (called an "in-kind" partition), (2) the sale of the property, or (3) a buyout of or by the other co-owners of the property (called "allotment").

Partition suits are common in estate and probate situations.  A typical scenario is a parent dies, with their spouse having previously died, and the real estate is inherited by a group of family members. While typically the children of the decedent inherit the property, there are many times when more distant relatives, such as aunts, uncles, nieces, nephews and cousins inherit an interest in the property. 

The smaller the group that ends up owning the property together, the more likely some agreement can be reached on what to do with the property.  The larger the group, it sometimes becomes very difficult if not impossible to reach an agreement.  I have had cases where as many as 40 or 50 heirs inherited some interest in real estate, even though some of the interests were quite small (like 1/256th).  These larger groups are mostly in situations where someone dies without a will and their estate is inherited by his or her heirs.

If the group of owners cannot reach an agreement on what to do with the property, with some wanting to sell the property and others wanting to keep it, a partition suit is often the result.  With a couple of exceptions, any co-owner of real estate can force one of the three options above through the filing of a partition suit.

The partition suit statute (Virginia Code Sec. 8.01- 81, et. seq) requires the court, if possible, to divide the property "in-kind", i.e., into separate parcels, with each co-owner owning one of the parcels individually at the end of the process. While this can often be done with larger rural tracts, in many cases it is simply not feasible for the property to be divided.  The easiest example is a single-family residential home on relatively small acreage.  But, factors such as the sometimes large differences in ownership interest of the owners, and the topography or relative value of different parts of the real estate, make and in-kind division difficult if not impossible.

One or more co-owners buying out the remaining co-owners is called "allotment".  This is fairly common, and the negotiations or disputes focus on the value of the property, and often the reimbursement of various expenses paid by some of the co-owners.

If neither an in-kind division nor allotment is workable, then the property is ordered sold, with the co-owners splitting the net proceeds according to their interests.  Absent an agreement by the parties, the court can order the manner in which the property will be sold (auction, listing with a realtor, etc.), and a minimum sale price.

In my experience, most partition suits in Virginia ultimately settle before a judge has to make a final ruling.  It is almost always better for the parties to reach some type of agreement rather than let a judge decide, and most involved in a partition suit ultimately realize this.  But, sometimes it takes the filing of a partition suit to get to that point.

Partition suits almost always also require a full title examination on the real estate, appraisals, and in many cases, survey work.  While the concept of a partition suit is simple, they do require a fair amount of work to get to the ultimate result.

Accordingly, the legal and other costs associated with a partition suit can become significant, particularly when no agreement can be reached early on in the process.  But, the alternative of doing nothing and letting time go by will only create a more complex situation for someone at some point in the future.