Commercial Real Estate Industry

Partition is a statutory procedure whereby co-tenants (for example joint tenancy, tenancy-in-common, community property) can file a court action to physically divide or sell the property.  See A.R.S. § 12-1211 et seq.  Unless the co-tenants have a private partition agreement, any co-tenant can compel sale or physical division of the property through the statutory partition process.  Under the statutory partition process, the court appoints commissioners to study whether a physical division of the property is appropriate.  If so, the property will be physically divided among the co-owners.  If not, the property will be sold by the commissioners and the net proceeds divided among the co-owners.  As a practical matter, the partition process gives one co-owner leverage to compel the other co-owners to voluntarily sell the property or be faced with a forced sale under a process outside their control.  There is one exception to the right of a co-owner to compel partition – if the parties have a separate partition agreement.  In many partition actions, the “private partition agreement” defense is often raised.  At that point, the debate is whether the parties actually have such an enforceable agreement, and even if the parties do have some form of agreement, whether that agreement is truly a “partition” agreement.  See McCready v. McCready, 168 Ariz. 1, 810 P.2d 624 (Ariz. App. 1991).  A “true” partition agreement would be an agreement between the parties whereby the parties agree that upon some trigger event the property will be physically divided among the co-owners (for example, Owner A gets parcel 1; Owner B gets parcel 2, etc.).  The more serious debate ensues when the parties have a separate agreement addressing development of the property, leasing of the property, future sale of the property, or something of that nature.  The question then becomes whether that is really a “partition” agreement.  If it is a partition agreement, then that agreement will be enforced and the statutory partition process will not apply.  If it is not a partition agreement, then any co-owner may still pursue partition under the statutory procedure, and the remedies of the other co-owners aggrieved thereby may be limited to a damages action for breach of contract.  A related question is whether a contract between the parties to simply waive rights under the partition statute (without providing for a partition plan) would be an enforceable partition agreement that would prevent use of the statutory procedure.  That is an open question under Arizona law.  The debate there pits the traditional legal principle (1) that parties are free to contract, against (2) the public policy behind the partition statute.  Therefore, the question is whether an agreement attempting to nullify the partition statute (but with no alternative partition plan agreed upon) would be against public policy.  On a related note, Arizona law is clear that there is no statute of limitations setting a time limit on a statutory partition action.  Occhino v. Occhino, 164 Ariz. 482, 793 P.2d 1149 (Ariz. App. 1990).