Forced sale

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A forced sale is an action taken in a civil court forcing the owners of a piece of real property to sell their property and to divide the profits. A forced sale is generally the result of a petition to partition action.

Why forced sales occur[edit]

Forced sales generally occur because tenants are unable to agree upon certain aspects of the ownership. The owners may disagree on how to use the property, on the amount of money to invest into the property, or on their right to occupy and use the whole of the property. If the parties cannot come to an agreement, the case moves to court through a petition to partition action.[1] As the number of co-habitants increases in the United States, the petition to partition action has become more common as a remedy to divide real and personal property.[2]

Property may be owned by more than one person either as joint tenants, tenants in common, and in some states tenants by the entirety.[3] The choice of which tenancy to enter into is made by the parties at the time of purchase. With each type of tenancy, each owner has the right to occupy the whole. That means that an owner is not allowed to designate certain rooms as their own and so on. Each element of the property is enjoyed fully by all parties.

Petitions to partition[edit]

Partitioning is a legal right and is commenced by filing a petition to partition with the court. Specific partition law varies from state to state; however, the premise can be generalized according to the type of deed. Owners of Tenants in Common (TIC) and Joint Tenants with Rights of Survivorship (JTWROS) deeds can file for partition.

When partitioning a JTWROS deed, all proceeds are split equally among co-owners as JTWROS deeds grant all owners equal shares. No credits would be given for any excess contribution to purchase price; however, credits may be given for utilities and maintenance. Credit may also be given for improvements if the improvements resulted in an increase in the property value.

When partitioning a TIC deed, owner shares are considered. For example, if owners A, B and C own property as tenants in common, where A owns 50%, B owns 25% and C owns 25%, a sale of $100,000 would be split $50,000 to A and 25,000 to B and C. However, after the initial determination of shares, the court may consider other contributions by the owners. For example, if A made reasonable and necessary renovations and was never reimbursed, the court may reimburse A from the awards to B and/or C. Generally, frivolous improvements to the property are not reimbursed as they would not substantially increase the value of the property.

Some states allow one tenant to buy out the other tenants to prevent a public forced sale. Some states also allow multiple tenants to join their shares together to form a majority ownership which will prevent a public forced sale.

References[edit]