Partition Actions: Pennsylvania’s Inadequate Solution for Property Co-Ownership Disputes

Think about it: you and a friend, significant other, a family member, or even a business partner, decide to purchase a piece of property together (or maybe you inherit it). Maybe it’s your first home as a couple, a hunting cabin, a vacation home, or even a business venture. Everyone's excited, dreaming of the possibilities. But what happens when those dreams diverge? What happens when someone wants out, or disagreements arise? This is where the law of partition comes into play, and it can be a bumpy ride.

What is Partition, Anyway?

In Pennsylvania, the law of partition essentially allows any co-owner of real estate to force a sale of the property, even if the other co-owner(s) object. It’s a legal remedy available under the Partition of Real Estate Act (231 Pa. Code Chapter 1560). The idea is that if co-owners can't agree on how to manage or dispose of the property, the court can step in to ensure everyone gets their fair share of the value. 

Think of it this way:  co-owners have the right to dictate the terms governing their co-ownership of real estate in Pennsylvania.  When you waive those important rights, the government has a solution for you (partition) and it’s not a good one.  Do you think you should waive your rights?  Why accept a solution that is awful when you can have your own solution?

The partition process typically involves filing a lawsuit, providing notice to all co-owners, and potentially undergoing a court-ordered valuation of the property. If a partition in kind (dividing the property physically) is impractical or impossible, which is often the case, the court will order the property to be sold. The proceeds, after paying off any liens and costs associated with the sale, are then divided among the co-owners based on their respective ownership percentages.

Sounds Fair, Right? Not Always. Here's Why You Need a Co-Ownership Agreement BEFORE Things Go Sour:

While the law of partition offers a solution in a pinch, relying solely on it without a pre-existing agreement can be a recipe for heartache and financial loss. Here are three compelling reasons why you should have a robust co-ownership agreement in place:

1. Deadlock is Deadly:

• When co-owners are deadlocked in a dispute, bad things happen with the property. Deadlock means uncertainty.  Nobody wants to invest money when there is no certainty those expenses will be paid back.  Needed maintenance does not happen, insurance lapses, utilities are shut off, damages go without repair, etc. The property value takes a nosedive.

• Deadlock means losing potential renters or even buyers for the property.  No income means co-owners have to go out of pocket to pay carrying costs for the property.

2. Court Proceedings are Expensive:

• Filing a lawsuit to resolve co-ownership problems is very expensive – think tens of thousands of dollars (or more).  Every dollar spent on litigation is one less dollar that all co-owners will recovery in the end.  Often the equity in the property is not adequate to pay for all litigation costs AND fully compensate co-owners for their investment in the property.

• Litigation takes a long time. It’s not a quick fix.  While the suit drags on, the problems leading to the litigation continue.  The property may fall into disrepair, taxes go unpaid and no rental income is generated.   The problems with the property often get worse during litigation, not better. 

3. Control Over the Sale Process (and the Price!):

• Partition's Problem: Under partition law, the court oversees the sale. While the court strives for fairness, you lose a significant degree of control over the timing, marketing, and ultimate sale price of the property. The sale may be conducted through a public auction, which often results in a lower price than you might achieve through a traditional real estate listing with a qualified agent. You could be forced to sell at a price significantly below market value, leaving you feeling like you’ve been shortchanged.

• Co-Ownership Agreement's Solution: A well-drafted co-ownership agreement allows you to dictate the terms of a sale. You can specify a minimum acceptable price, outline the marketing strategy, and even designate a specific real estate agent to handle the transaction. It allows for a more orderly and potentially more profitable exit strategy. Think of it as having a pre-nuptial agreement for your property!

4. Defining Responsibilities and Preventing Disputes:

• Partition's Problem: The law of partition focuses primarily on dividing the assets after a dispute has already arisen. It doesn't address the day-to-day issues of property management, maintenance, or the allocation of expenses. Who pays the property taxes? Who's responsible for repairs? What happens if one co-owner wants to make improvements? Without a clear agreement, these questions can lead to constant friction and ultimately contribute to the need for a partition action in the first place.

• Co-Ownership Agreement's Solution: A comprehensive agreement clearly outlines each co-owner's responsibilities, including financial contributions, maintenance obligations, and decision-making authority. This can significantly reduce the likelihood of disputes and create a more harmonious co-ownership experience. It's about proactive problem-solving, not reactive damage control.

5. Protection Against Unexpected Circumstances and Heirs:

• Partition's Problem: Life throws curveballs. What happens if one co-owner becomes incapacitated, gets divorced (and their share of the property is a marital asset), files for bankruptcy, or passes away? The law of partition might force the sale of the property at a particularly vulnerable time. Furthermore, if a co-owner dies, their share passes to their heirs, who may have entirely different priorities or be unfamiliar with the property.  Do you want to all of a sudden be a co-owner with your dead co-owner’s three kids?  Uh, no – that’s a disaster.

• Co-Ownership Agreement's Solution: A co-ownership agreement can address these contingencies. It can include buy-sell provisions that allow remaining co-owners to purchase the departing co-owner's share, set terms for dealing with bankruptcy, and even address the disposition of the property in the event of death. You can also create a right of first refusal, giving the other co-owners the chance to purchase the property before it is offered to outside parties. This provides crucial protection and ensures continuity in the co-ownership arrangement.

The Bottom Line:

While the law of partition provides a legal safety net, it's far from ideal. Its there for co-owners who waive their right to have an agreement of their own.  A well-crafted co-ownership agreement offers a much more proactive and controlled approach to managing shared property. It can save you money, reduce conflict, and provide peace of mind.

Don't wait until disagreements arise. Contact one of Fiffik Law Group’s real estate attorneys to discuss your specific needs and create a co-ownership agreement that protects your interests. It's an investment that can pay off handsomely in the long run.