Partition – Ending Co-tenancy

The situation

Ten parcels of ranch property owned by one partnership with about 25 members, one LLC with three members, a family trust with 20 heirs and four individuals including one who was deceased and still on title.

 

That was the status of our ranch in year 2003. We owned an undivided interest equivalent to 949 of the 2,540 acres and we owned different portions of each parcel. It was a mess.

 

Our first attorney couldn’t even get out of the box before he admitted we needed somebody else. Our second attorney got us half way there and decided to retire. Our third attorney took over and completed the job.

 

Now it’s over. All that’s left is to sign a few deeds. The judge signed a stipulated judgment (what all the parties agreed to through mediation) and  that agreement is on its way to the Alameda County Recorder’s office.

 

Why choose the partition route?

Partition is the last thing one must do to resolve untenable property ownership. All other options should be explored first. For ten years we attempted to work out an arrangement to have co-petitioners in a partition suit so we wouldn’t have to take everybody on by ourselves, but that attempt failed and in the end we were forced to go alone.

 

What’s the legal basis?

In general, every co-owner of property who owns property in co-tenancy and doesn’t have some type of partnership agreement has the right to sue for partition. If the property can be subdivided and distributed to co-owners (in kind distribution) the law says that’s the best resolution. If the property cannot be divided up into appropriate parcels, the law says you sell and divide up the money proportionate to each ownership interest.

 

We evaluated our situation. Although some said it could be done, we decided that there was no way to subdivide the ranch. The parcels ranged in size from 20 acres to 640 acres. Zoning laws did not allow parcels to be split. Ownership interests couldn’t be fit into the existing parcels without major ownership changes.

 

We held firm that the ranch would have to be sold.

 

Why didn’t we leave things the way they were?

One family group owned 5% of the ranch. They had at least five people hunting and each could kill two bucks. They showed no interest in conservation of the deer herd. If all the owners killed deer at a proportionate rate we would be taking more than 100 bucks per season. The ranch didn’t have 100 deer on it, let alone 100 bucks. Similar issues existed with at least one other owner.

 

The ranch was (and still is) suffering from disrepair. Since nobody claimed the ranch as their own, nobody took responsibility for doing the little maintenance things that are necessary to keep things working properly. Ponds dams needed work, fences were patched with temporary fixes, gates were held together with bailing wire etc. The few buildings on the property were ready to fall down.

 

Once we initiated the action, all the partners had to respond to the law suit or default on the action. If they defaulted, they would have no say in the outcome and would be forced to accept the judge’s decision.

 

Just getting the case ready for and in front of a judge took about two years. Once we got a court hearing, we then went through a year of delays as attorneys for the defendants sought extensions for any or no reason during the first few court dates.

 

Finally, mediation was scheduled for the spring of 2007. Getting meetings arranged took a few months, but the mediator was efficient and knowledgeable. He made it clear to each owner that if a mediation solution could not be reached that the ranch would be put up for sale. At least one of our co-owners was so angry with us that we thought the mediation might not be successful.

 

However, ultimately everybody realized that there was a solution to fit all. We bought out two owners of a total of 400 acres. Another co-owner bought about 250 acres. We agreed to take four parcels that approximated our ownership share and others did the same. We gave some property to another co-owner.

 

One year after completion of the mediation, the suit is over. After about four or five years of effort, the ranch will have four ownership entities. Everybody is better off. The guy who owned 94 acres and hunted on 2,540 may not have as good a hunting scenario, but he now owns 160 acres by himself and he got it without paying anything for the additional acreage.

 

Along the way we had to resolve ownership by one co-owner who was deceased and we gave another individual a five-year right to use one of the cabins on the property. Another individual received five years grazing rights on a section of ground.

 

Instead of 949 acres co-owned and unmanageable, we now have 1,300 acres we can manage as we see fit. I haven’t calculated the legal fees, but we paid attorneys two to three thousand dollars a month for several years. Whatever it cost, it was worth it.

 

Create a functional partnership agreement

The best way to prevent this problem is to enter into a partnership or co-tenant agreement whenever you become co-tenants with anybody. The partnership agreement must describe the process for selling whenever an individual wants to opt out of ownership. Keep in mind that not all partnership agreements are fair and equitable. I’ve seen some agreements that left the co-owners with fewer rights than they would have without an agreement.

 

Please keep in mind that I’m not an attorney and the purpose of this information is to give you the benefit of our experience. However, before you take action on your own, hire an attorney to tell you to resolve your issues. A good attorney may appear to be expensive, but in the long run good legal advise can be invaluable.