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Division of the Proceeds in a Partition Action in New York

divide-300x225Our firm often handles partition matters where two or more people co-own a property.  Under New York law, no one is forced to co-own property if they do not want to.  As a result, a partition action may be brought to have the property sold by the Court and the proceeds fairly divided between the co-owners.

Most, if not all, of partition actions are settled without actually having a Court-ordered sale of the property.  Usually the parties reach an agreement to either sell the property to a third party or arrange to have one of the parties buy the other’s interest in the property.

However, the question usually arises regarding what may be a fair division of the proceeds in the resolution of a partition case.  This post will explore the various factors which may arise in such a situation.

The general law in New York is that the parties first receive credit for amounts that they “put into” the property.  The first thing our attorneys will consider is who paid for the property in question.  Of course, some co-owners may have inherited the property, so, in those situations, neither party will receive any credit for this component.  However, in other situations, one individual may have contributed most, if not all of the purchase price.  For example, a same-sex couple purchases a single-family house.  One of the partners pays the entire downpayment, which is ordinarily ten percent of the purchase price, as well as all of the closing costs.  Then the couple splits up, and a partition action is brought. The individual who paid the downpayment and closing costs would be entitled to a credit when the property is sold, above and beyond their one-half share in the property.

Next, we would examine the contributions made by the various owners towards maintaining the property in question.  Once the property is purchased, there may be a mortgage loan.  Unless the owners split the mortgage payments equally, the party making the mortgage payments is entitled to a credit for the payments he has made.  The same principle would apply to items such as property taxes, homeowner’s insurance, and repairs and maintenance to the property.

Standard practice in a partition action is that a Referee be appointed by the Court to sell the property and determine the fair and equitable division of the proceeds.  In such a Court proceeding, the parties may be required to submit evidence, in the form of written receipts, to show their contributions to the purchase of the property and payment of post-purchase expenses.

Of course, this procedure may be done outside of the Court process.  If the parties and their attorneys are amicable, they can decide each party’s fair share without the need for a Referee, which may be expensive and time consuming.  This is done by first, having a professional appraiser determine the approximate value of the property.  Next, the parties and their attorneys should share the information regarding the various monetary contributions by each of the co-owners.  When this process is complete, the attorneys can arrive at a monetary amount for one party to buy out the other, using the data provided by their clients.  The alternative is for the parties to then agree to jointly sell the property, with a written agreement in place that delineates how the proceeds from the sale will be divided.  Such an agreement would factor in the financial information provided by the parties.

Our firm handles many partition matters, and welcomes all inquiries regarding the issues discussed in this post as they may apply to your situation.

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