Sale in Lieu of Partition

If you share ownership of property with one or more parties, there may come a time when someone wants to sell the property or wants out of the partnership. Unless all parties can reach an agreement that allows everyone their “fair share” of the proceeds from the sale or transfer of the property, an owner may file a partition action with the court.

Through a partition action, an owner asks the court to divide the property among the owners. Of course, a building can’t be divided, and Maryland property code says that if “the property cannot be divided without loss or injury to the parties,” the court shall order the sale of the property. This is known as sale in lieu of partition.

In some situations, a sale in lieu of partition may be the only way for owners to be compensated for their share of the property. But, for many reasons, owners may want to work out an agreement outside the courtroom.

Costs of Assessment

When a party files a partition action, and the court orders a sale of the Property. The Court may appoint three to five commissioners to assess the value of the property (unless all parties waive the appointment of commissioners). It’s the property owners who must pay the commissioners, and their payment comes from the sale proceeds. The Court can may also appoint a trustee to sell the Property and any sale is ratified by the Court. The Trustee is also paid from the proceeds of the sale.

Depending on whether the Court appoints commissioners or a Trustee, will determine how the property will be sold. If Commissioners are appointed, the property in question may be sold at judicial auction, so the proceeds from the sale tend to be much lower than if the owners sold the property on the open market. That lower sale price, in conjunction with legal fees and commissioner payments, can consume a large portion of sale proceeds. A Trustee will generally attempt to sell the Property on the open market, but there will still be costs owed to the Trustee and the real estate agent, plus any other costs for incurred in the sale of the property.

Creating Rifts

Occasionally, family members who jointly own property have different opinions about what to do with it. This may be more likely to occur when family members jointly inherit land or a home. While family members do have a legal right to partition, filing an action against another family member can cause resentment and ruin relationships.

Reaching an Agreement

It’s not always easy to reach a consensus about what to do with jointly owned property, but owners who can get to that point will be better off in the long run. Hiring an attorney to serve as a mediator may be helpful, as having a neutral party facilitate negotiations defuses tension.

The cost of mediation is almost always a more affordable alternative than a court-ordered appraisal and sale of property. In mediation, parties might ultimately decide on a compromise that doesn’t involve selling the property. And if they do agree on selling the property, they’ll get a better price on the open market than through a judicial sale.

When parties can come to an agreement, they may be able to preserve their interpersonal relationships, or at least part ways without feeling any simmering hostility.

Lusk Law, LLC, specializes in helping people avoid litigation when possible, and we’re ready to actively represent our clients in court when litigation is necessary, including representing clients in Sale in Lieu of Partition cases. Our experienced attorneys have provided legal counsel and representation to residents of Frederick County, Howard County, Montgomery County, Baltimore County, Baltimore City, Carroll County, Washington County, Anne Arundel County, and other counties in Maryland. Please call us at 443-535-9715 or fill out our contact form if you have any questions about this topic.

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