Partition Actions in Commercial Investments: Best Practices to Safeguard Your Interest

Partition Actions
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Commercial investments epitomize the notable financial undertakings that bring about the best returns. However, these investments come with inherent risks, specifically whenever partnership and co-ownership arrangements are involved. Disputes over the use of property, management, or even distribution of profits lead to intricate legal battles.

A lawyer can help mitigate these risks, and using best practices designed to protect commercial investments. Today we’re exploring the key best practices for commercial investing, and offering insights into how attorneys can help safeguard investors’ interests during the partition process.



Overview of Partition Actions

Put simply, a partition action is a legal process used to divide property among its co-owners whenever they disagree on its management, usage and disposition. It is often related to commercial investments where several investors get involved. There are two main types of partition: partition in kind and partition by sale.

  • Partition in Kind: This method involves the physical division of the property into distinctive parts that are further allocated to its co-owners. It is simple and involves land or already developed properties.
  • Partition by Sale: When physical division of the property is an impractical choice; the property can be sold, and the proceeds divided amongst the co-owners based on their ownership interest.

Best Practices for Safeguarding Investments

Transparent & Thorough Agreements

Always draft a clear and complete ownership agreement from the beginning to safeguard your investments from possible partition disputes. Such agreements should mention the rights and roles of each party, the decision-making process, and dispute-resolution actions. Thoroughly placing these terms can prevent any scope for misunderstanding and offer the right approach to resolving conflicts.

Regular Communication & Documentation

Communication plays a significant role, especially among the co-owners. Try arranging periodic meetings to discuss the property’s management, financial status, and issues. Draft or document the meetings to outline the decisions. Maintain a complete record to ensure clarity and serve as the key evidence if any disputes escalate to real estate litigation.


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Engage in Early Mediation

It is critical to consider mediation before turning to a partition action lawsuit during a disagreement. Mediation involves a third party playing a neutral role in discussions, and helping the co-owners reach a mutual agreement. Mediation can be a cost-effective option for resolving property disputes and can be effective for preserving personal relationships.

Comprehend the Financial Implications

Understand the financial implications of partition actions. For instance, partition by sale could result in a sale under not-so-good market conditions, leading to a low selling price. Court costs, legal fees, and other expenses tend to pile up. Knowing about the costs beforehand will impact your decision-making strategy.

Maintain Property Value

Proper maintenance and enhancements can help maintain or increase the property’s value. This makes the property attractive in cases where partition by sale becomes necessary. Overlooking the property leads to depreciation, which has an adverse effect on the co-owner’s ROI.

Evaluate All Possible Outcomes

Before choosing the partition action route, assess the outcomes and their effects. Consider the possible market conditions, the chances of proper division, and the long-term impacts across the investment profile. Consult with an expert partition lawyer who can offer key insights to help you make the best decision.


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Be Prepared for Litigation

Litigation is often unavoidable in a couple of instances. Having an experienced lawyer is essential when partition action leads to court. Your lawyer can present your case in the best way, advocating for a fair sale or a division to help handle the intricacies of the legal processes.

Consider Buyout Options

Buyout is an alternative to partition, where one of the co-owners buys the property share of the other. It is a practical solution if a single party is keener on maintaining ownership and can afford to buy the others. Try ensuring that the buyout terms are fair and reflect the current market value of the property.

Get Professional Advice

Last but not least, always seek professional advice when handling co-owned commercial properties. Lawyers, along with financial advisors, real estate consultants, and other professionals, offer the right guidance to handle the challenges involving co-ownership and protect your investment.

Elijah Underwood

Elijah Underwood is the founder of Underwood Law Firm, P.C., focusing on partition actions, partnership disputes, and real estate law. Eli is a licensed real estate broker, investor, and lawyer with a knack for winning cases and influencing state law. Eli is an active member of the Executive Committee for the California Lawyer’s Association Real Property Section and the instructor on Partitions and Co-Ownership Relationships for the California Association of Realtors.

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