Timeout: Real Estate Disputes Through a Special Commissioner

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While real estate special commissioner appointments are most common in the context of divorce cases, they can be a useful dispute resolution tool in a wide range of family law, probate and partition matters. As an alternative to litigation, a special commissioner can be a cost-effective, expedient and result-oriented solution to litigation matters involving real estate.

By definition, a special commissioner is a licensed real estate agent and/or broker who is appointed by the court or stipulated by the parties to initiate and complete the sale of real property – including residential, commercial, land or special-use assets. Compensation is on a success-fee basis, as a market rate commission, based on the gross sales price of the property.

Jaburg Wilk

From a practical perspective, a special commissioner may help parties achieve the successful sale of real property, without the need for the stress, money and time often associated with litigation. With that in mind, let’s take a look at the specifics of the different types of disputes that may often benefit from a special commissioner appointment.

Family Law

Such cases are governed by Rule 95G of the Arizona Rules of Family Law Procedure, implemented Jan. 1, 2006. This allows for the appointment of a real estate special commissioner to assist the parties with disposition of community real property when the parties are otherwise unable to agree on such issues. One example of a case in this realm would include a situation in which the parties don’t know or can’t agree on a real estate agent, perhaps because there is a lack of trust or a conflict of interest for one of the parties. In divorce cases, one spouse may cause issues in the sales process, most commonly by limiting access to the marital residence or failing to keep the property maintained as needed for viewings by prospective buyers.

Probate/Contested Estates

This method of sale – governed by the authority of A.R.S. §14- 3911, Partition for the Purpose of Distribution – is used in contested estates where beneficiaries cannot agree on the disposition/distribution of assets. One or more parties, or their representatives, may petition the court prior to the formal or informal closing of the estate, to make partition. After notice to the interested heirs or devisees, the court may enlist the assistance of a special commissioner to sell any property that cannot be partitioned without prejudice to the owners and that cannot conveniently be allotted to any one party.

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Partition

Finally, when a property held by cotenants (e.g., joint tenants, tenants-in-common or community property) is incapable of fair division, sale or distribution of proceeds the governing authority is A.R.S. §12-1218.B. In some cases, dividing and selling the property might depreciate the value (or be physically impossible, such as a single-family home), or the parties disagree on whether it should be sold or managed. In such cases, the court-appointed special commissioner will be directed to sell the property and return the proceeds into court to be divided between the parties according to their respective interests – and after payment of any mortgages, liens, commissions and escrow fees. Generally speaking, one or more of the owners cannot block the sale, unless willing to buy out the other parties.

In the event that the real estate involves an operating business, such as a hotel, apartment complex, retail center or complex income producing property, a special commissioner is likely not the best appointment, but a receiver may be a good alternative for the parties to gain control of the property, operate, build comprehensive financial statements and sell.

Regardless of the reason for the appointment of a special commissioner (or a receiver, for properties with operating businesses), the big-picture goal is to maximize the value of the real estate asset(s) by accurate valuation, strategic marketing and open and inclusive communications, to achieve highest/best pricing, within the established timeline.

While parties may be at loggerheads on a variety of interpersonal levels, clearly those objectives are in everyone’s financial best interest.

When seeking a special commissioner appointment, seasoned brokers with broad experience in working with different types of properties and submarkets are essential. Additionally, brokers should be comfortable working in an adversarial/ litigious environment. Finally, the special commissioner should be comfortable drafting motions and appearing and testifying in court to resolve matters related to the valuation, marketing, access and sale of real estate assets. Beth Jo Zeitzer

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