Divorced couples may be familiar with how the courts divide a house or other real estate. In North Carolina, an “equitable distribution” proceeding can determine how the real estate will be divided, if spouses can’t agree. But what can non-married co-owners do when they are no longer happy owning property together and can’t resolve the situation by agreement? The law provides an answer: partition.
North Carolina, like other jurisdictions, allows a co-owner of real estate to ask the court for a partition of the land. In a partition proceeding, the court can divide the land in one of two ways – either by actually dividing the land itself (a partition “in kind”) or by selling the land and dividing the proceeds. A partition in kind may be appropriate where, for example, several children inherit a large family farm from their parent, and each child wants to solely own a piece of the farm. In such a case, the court can appoint impartial “commissioners” to fairly divide the property, accounting for the fact that some portions of the property may be more valuable than others. On the other hand, where an unmarried couple buys a typical suburban house together, it is probably infeasible to literally split the house if the couple decides to end their cohabitation. In that case, a partition sale would be appropriate.
While partition has been available in North Carolina for many years, the General Assembly recently passed Senate Bill 729, an act to update the partition laws. The new laws take effect on October 1, 2020. While many of the changes in the law (including the creation of a new Chapter 46A in the General Statutes) are technical in nature and will be of greatest interest to attorneys who handle real estate disputes, some changes are important. For instance:
- The new law changes how attorney fees can be awarded in partition cases. Whereas courts currently have general discretion on whether to order the payment of some or all of a party’s attorney fees in a partition case, the new law provides additional guidance. It states that, generally, a court must allocate among co-owners, according to their interest in the property, any attorney fees expended “for the common benefit of all” co-owners. Accordingly, if multiple co-owners are benefitted by the partition but only one of the owners spent money to hire an attorney to pursue the case, the “free riders” should have to pay their share of the legal expenses. The new law also provides some more detailed rules about disputes relating only to “the method of partition or the division of the proceeds.”
- The new law also creates a right for a co-owner to seek “contribution” (financial compensation) from other owners for paying “carrying costs” for the property – specifically, property taxes, homeowners’ insurance, repair costs, loan payments or other “actual costs of preserving the value of” the land.
While Senate Bill 729 does not dramatically change the law of partitioning property, it contains some notable tweaks. Co-owners of property who may need a partition should consult a lawyer familiar with the current state of the law – and should evaluate whether it is best to file a partition case before or after the new law takes effect on October 1. Dissatisfied co-owners should also consider hiring an attorney to assist with negotiations before heading to court. While partition proceedings are sometimes necessary to resolve disputes, substantial expense can often be saved by negotiating a reasonable buy-out of a co-owner’s interests in the property. Likewise, in situations where non-married parties (like business partners or unmarried couples) voluntarily take co-ownership of property together, they should consider consulting with an attorney about a “co-tenancy agreement” or other contract that will provide an agreed-upon buy-out mechanism in the event of a future dispute.
Elliot A. Fus
Elliot has practiced law for over 20 years and is a member of the Federal, North Carolina and Forsyth County bar associations. He is an experienced litigator with major case experience in state and federal courts and in private arbitrations. Elliot has a broad range of experience with real estate disputes.
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