Partition Actions For Commercial Co-Owners
Owning commercial property with business partners, family members, or investors can be profitable until disagreements arise. When co-owners cannot agree on whether to sell, how to manage the property, or how to divide profits, a partition action may be the only solution.
This blog is thanks to our friends at Volpe Law LLC, who understand the challenges commercial property owners face. If you’re dealing with co-ownership disputes, a commercial real estate litigation lawyer can help you understand your options.
What Is a Partition Action
A partition action is a lawsuit that forces the division or sale of jointly owned property when co-owners cannot reach an agreement. While these cases are common in residential real estate, they also apply to commercial properties like office buildings, retail spaces, warehouses, and mixed-use developments. Any co-owner has the right to file a partition action. The court will then determine the most appropriate way to divide the property or its proceeds.
Types of Partition
Courts typically order one of two types of partition:
- Partition in kind: The property is physically divided into separate parcels, with each co-owner receiving their proportionate share.
- Partition by sale: The property is sold, and the proceeds are distributed according to each owner’s interest.
For commercial properties, partition by sale is far more common. Physically dividing a shopping center, office complex, or industrial building often isn’t practical. The property loses value when split, and zoning regulations may prohibit subdivision.
When Co-Owners Seek Partition
Disputes leading to partition actions often involve:
- Disagreement over selling versus holding the property
- Conflicts about management decisions or improvement costs
- One owner wants to exit the investment, while others want to continue
- Family businesses where heirs inherit property but have different goals
- Partnership dissolutions where property division is contested
Unlike other business disputes, partition actions have a low bar. You don’t need to prove wrongdoing or breach of contract. As a co-owner, you generally have an absolute right to seek partition unless you’ve signed an agreement waiving that right.
The Partition Process
Filing a partition action begins with a complaint in the appropriate court. The plaintiff must identify all co-owners and their ownership percentages. The court will appoint a commissioner or referee to evaluate the property and recommend whether partition in kind or partition by sale is appropriate. If the court orders a sale, the property typically goes to public auction or is sold through a real estate broker. The proceeds are then distributed based on each owner’s percentage of ownership, minus costs associated with the sale and any outstanding liens or mortgages.
Defenses and Complications
While partition rights are strong, some defenses exist. Co-owners may argue:
- A valid agreement prohibits partition for a specified period
- The timing of the partition would cause undue financial harm
- One party has made disproportionate improvements or contributions
Courts will also consider whether one co-owner has been excluded from property use or if someone has paid more than their share of expenses. These factors can affect how proceeds are divided, even if they don’t stop the partition entirely.
Alternatives to Litigation
Before filing a partition action, co-owners should explore alternatives. One owner might buy out the others at an agreed price. Mediation can help parties settle without court intervention. If the property generates income, restructuring the ownership or management agreement might resolve the dispute. These alternatives save time and money compared to litigation. However, when negotiations fail, partition actions provide a clear legal path forward.
Understanding Your Rights
Commercial property co-ownership disputes can threaten your investment and business relationships. Whether you’re considering a partition action or responding to one, understanding the legal process helps you make informed decisions.
If you’re facing a co-ownership dispute involving commercial real estate, Volpe Law LLC can help you evaluate your options and protect your interests. Contact the firm to discuss your situation and determine the best strategy for resolving your property conflict.
