Partition sales of jointly owned property

Partition Sale of Joint Property

This page will explain the process of forced partition sales of real property in Maryland. A partition sale is a legal process that can be used to force the sale of jointly owned real estate or other property. A partition sale is most commonly used when real estate is owned jointly by one or more people and one of those joint owners wants to sell their interest but the others do not want to sell.

A joint owner can go to court and force the property to be sold in a “partition sale” and have the proceeds disbursed to the joint owners. This page will explain the basic law on partition sales and the court procedure for how a partition sale is done in Maryland.

Joint Owners Can Force a Partition Sale

When real property is owned by multiple parties and they hold title as “tenants in common” – Maryland law gives any individual owner the right to go to court and force a sale of the property through a partition sale action. So let’s say Jack, Jill, and Bob are joint owners of a house as tenants in common. Bob needs money and he wants to sell the house, but Jack & Jill are refusing to sell. Bob has the right to go to court and force a partition sale of the house under the authority and supervision of the court.

The law of partition sales is set forth in the Maryland partition statute, which is found in the Real Property Article of the Maryland Code. Md. Code Ann., Real Prop. §§ 14-701 et seq. The partition statute, which was recently rewritten and reorganized, lays out the basic law of partition sales in Maryland. It makes it very clear that any co-tenant owner of real property has a clear right to partition.

The right to a partition sale is an absolute right and it makes no difference how many other joint owners of the property there are or whether the other joint owners agree to a sale. So even if you have real property that is jointly owned by 10 people and only 1 of the 10 joint owners wants to sell, that single joint owner has a right to force the sale over the objection of the other 9 co-owners.

Of course, as a practical matter the other 9 joint owners can easily resolve the situation by simply “buying out” the interest of the joint owner who wants to sell. So going back to our example above with Jack, Jill and Bob. If Bob wants to sell and Jack and Jill do not, Jack and Jill can simply buy Bob out by paying him an agreed amount of compensation in return for him conveying his interest in the property to them.

In many cases, however, the co-owners do not have the financial resources to buy out the other owner’s share in the property. Or there may be other reasons that prevent a buyout from being negotiated. That is when a partition sale is the only option.

Partition Is Only for Tenancy in Common

When real property is owned by more than one party, Maryland law recognizes 3 different types of joint ownership (referred to as “tenancies”) by which the co-owners can hold title to the property: (1) tenancy in common, (2) joint tenancy, and (3) tenancy by the entireties.

Tenancy in Common: Tenancy in common is the most common and the simplest form of joint ownership of real property. The co-owners each own percentage shares in the property and the joint-owners are referred to as “tenants in common.”
Joint Tenancy: In a joint tenancy, each co-owner has an undivided interest in the property (there are no separate shares like in a tenancy in common). The main difference with joint tenancy is that when one of the joint tenants dies, their interest in the property automatically transfers back to the other joint tenant(s).
Tenancy By the Entirety (TbyE): This is a special form of ownership that applies only to a married couple. Each spouse owns an undivided interest in the property that transfers to other spouse on death.

The right to force a partition sale of real property in Maryland only applies when the property is jointly owned in tenancy in common. Partition sales are not permitted if the property is owned by a married couple as tenants by the entireties (those are usually handled in a divorce anyway).

If the property is owned in a joint tenancy, a partition sale cannot be requested until the joint tenancy has first been severed. When a joint tenancy is severed it reverts to a tenancy in common and the co-owners become tenants in common. In practice, joint tenants are treated the same as tenants in common when it comes to partition sales because the joint tenancy can be “severed” by the act of filing an action for partition.

How to File for a Partition Sale in Court

The procedural rules for how to file an action in Maryland to get a court-ordered partition sale are set forth in 12-400 thru 12-410 of the Maryland Rules. Below is a summary of the step-by-step process for pursuing a partition sale in court.

Step 1: Complaint for Partition Sale

The first step in the process is filing a “Complaint for Partition Sale” in the appropriate Circuit Court in Maryland. The appropriate court would be the court for the county where the property is located. As set forth in Md. Rule 12-404, the Complaint for Partition Sale must contain the following information:

A description of the property (this means both the “legal description” and the address)
The fractional interest of the plaintiff in the property and the basis of this interest (i.e., what percentage do you own and where is the deed showing that)
The names of all other cotenants (co-owners) and the names of anyone else that has an interest in the property
If the name and/or interest of a person required to be named as a defendant is unknown, uncertain, or contingent, a statement explaining this
If all cotenants have agreed on how to value the property, a copy of that written and signed agreement should be attached.
The complaint should end with a request for an order from the court granting a partition partition by sale.

The plaintiff should also attach as an exhibit to the complaint a title report supported by an affidavit by the person who conducted the title search. The affidavit should state that full 60 year title search was performed in accordance with industry standards.

Step 2: Serving the Complaint on All Parties

After the partition sale complaint is filed the court will issue a summons to each of the named defendants and parties. The plaintiff must have the summons and a copy of the complaint served on each defendant. Service usually must be accomplished by personally delivering the papers to the defendant and then filing an affidavit with the court confirming that this was done. Learn more about the service of process rules in Maryland.

In a partition sale, if certain parties cannot be located or personally served, the court can order an alternative type of service called in rem service. The process for service in rem is set forth in Md. Rule 2-122.Service in rem can be accomplished by having a notice posted by the sheriff on the courthouse bulletin board, posting notice in a conspicuous place on the property (e.g., the front door), and publishing the notice in a local newspaper.

Step 3: Court Determines Fair Market Value of the Property

Once the complaint has been served on all parties, the next step in the process requires the court to determine the “fair market value” of the property. To do this, the court will order a verified appraisal to be done by a licensed property appraiser. The cost of that appraisal will be split between the parties.

Alternatively, the plaintiff (or any other party) can submit a previously completed appraisal. It has to be done by a licensed appraiser and less than 6 months old. If none of the other parties object to the use of this prior appraisal, the court will accept it as proof of fair market value. If any party objects to the fair market value as stated in an appraisal, the court will hold a hearing to determine the fair market value of the property.

The rules and alternative methods for determining the fair market value of a property in a partition sale action are set forth in Md. Code, Real Prop. § 14-707 and Maryland Rule 12-406.

Step 4: Opportunity for Cotenant Buyout

After the value of the property has been set, the court will allow an opportunity for one or more cotenants (joint owners of the property) to buyout the interests of the plaintiff or plaintiffs. This is basically a court-supervised buyout process. One problem with the way the partition statute is written, however, is that is does not give the plaintiff the right to buyout the non-filing co-tenants.

Step 5: Sale of the Property

If there are no buyouts, the court will move forward and order that the property should be sold on the open market. The court will appoint a licensed real estate agent to list the property for sale. First the parties will be given an opportunity to jointly agree on a real estate agent. If they cannot agree on a real estate agent, the court will select one.

Once a real estate agent is appointed, they will list the property for sale. Once an offer is received it must be submitted to the court along with a report explain the general terms of the purchase offer. The purchase offer will then be reviewed by the court at a status hearing and approved or rejected.

The practical problem with this method of selling the property is that it is slow and cumbersome. In the real world, potential real estate buyers don’t have weeks or even months to wait around for their offer to be approved by the court after an evidentiary hearing.

Step 6: Distribution of Sale Proceeds

The final step in the process involves the distribution of the proceeds from the sale of the property. As explained below, normally the sale proceeds are divided equally according to each co-tenants fractional interest. So if you have 2 co-tenants the default rule is that the sale proceeds are divided equally between the 2. However, if one co-tenant can show that they contributed a greater share to the expenses related to the property (e.g., mortgage, taxes, insurance, etc.) they will usually be entitled to a credit for the amount of their contribution.

The Co-Tenant Contribution Rule

The co-tenant contribution rule is an equitable doctrine. It seeks to reimburse a co-tenant who advances money for the property beyond their required share. For example, if X and Y are co-tenants, and X pays the mortgage, taxes, and various carrying charges of jointly-owned property, then X is entitled to contribution from Y.

The Maryland courts will apply the doctrine of co-tenant contribution when dividing the sale proceeds from a partition sale. A cotenant who pays the mortgage and taxes related to jointly owned property is almost always entitled to contribution for those expenses from the co-tenant.

The only very limited exception to the doctrine of co-tenant contribution is when there has been an “ouster” of the other co-tenant from the property. “Ouster” is defined as actively preventing or blocking a party’s use and enjoyment of property with the actual intent to claim an exclusive right.

Sample Partition Sale Pleadings / Filings

Sample Partition Sale Complaint: This is an example of the complaint that is filed in circuit court to initiate a partition sale action. The Partition Sale Statute and applicable rules require a complaint for sale by partition to include certain things, such as the “legal description” of the subject property, and a statement of all current owners/interest holders.

What To Expect In Partition Sale Cases

PLF handles a lot of partition sale cases, so we have extensive experience with how these cases tend to unfold. Around 80% of partition sale cases end up getting resolved out of court by way of settlement or agreed resolution. In most partition sale cases there is usually 1 joint owner who refuses to sell or do a buyout. Usually after the partition sale lawsuit is actually filed in court, that reluctant joint owner quickly gives up their resistance and agrees to cooperate in selling the property or buying out the other owner(s). If the reluctant joint owner agrees to a sale or buyout, the parties can enter into an agreement and dismiss or stay the partition sale case.

In many cases, the joint owner is willing to sell or participate in a buyout, but there is a major dispute between the joint owners about how the sale proceeds should be divided and who gets credit for what. These cases are much more likely to get resolved through the full partition sale court process, especially if the amount of money in dispute is significant. Going through the court sale process means that the court will ultimately resolve the dispute as to division of the sale proceeds, and who gets credit for what.

Contact Us About a Partition Sale Case

If you need to get a court to force a partition sale, contact our Maryland real estate lawyers today. We have extensive experience assisting clients with partition sale cases.