This article dissects the remedy of partition with reference to New York’s scheme.
Whether a property owned by two or more tenants-in-common can be partitioned “in kind,” i.e., by physically dividing the real estate or other property interest, or by subjecting it to a judicial sale, or even whether the property may be subject to partition at all, are issues that courts must decide when the property’s majority and minority owners are strongly divided on whether the property should be divided or sold.
Although the law clearly provides a means for parties to partition their commonly-owned property, see RPAPL §901, oftentimes parties enter into agreements that restrict their right to sever their interest in the property without the unanimous consent of all the owners. Such agreements are enforceable, but courts have nevertheless identified several ways in which an agreement restricting the right to partition can be nullified.
Whether or not particular agreements restricting the right to partition will be enforceable are subject to how courts determine to apply the law to the circumstances of each individual case. Therefore, it is important that parties entering into common ownership agreements be certain that the terms of the agreement conform to their respective future desires for either restricting the right of all the owners to partition or for being freely able to partition their separate interests in the property without unanimous consent.
RPAPL § 901(1)
The Real Property Actions and Proceedings Law (RPAPL), Section 901(1) thereof, provides that:
A person holding and in possession of real property, as joint tenant or tenant in common, in which he has an estate of inheritance, or for life, or for years, may maintain an action for the partition of the property, and for a sale if it appears that a partition cannot be made without great prejudice to the owners.(Emphasis added).
As explained in Ching v. Chang, 137 AD2d 371, 373, 529 NYS2d 294, 295 (1st Dept. 1988), citing the seminal Court of Appeals decision, in Chew v. Sheldon, 214 NY 344 (1915),
It is also a generally held view that absent an express agreement to the contrary, a testamentary restriction against partition, or extreme prejudice to a co-owner, a partition is a matter of right of a co-owner who no longer desires to hold or use the property in common. (Emphasis added).
ESTABLISHING THE BASIS FOR A PARTITION
(1) The party seeking partition must show an ownership interest in the property.
“RPAPL 901 limits the persons who may maintain an action for partition to those specifically enumerated in the statute. Korn v. Korn, 153 AD3d 1023, 22 NYS3d 671 (3d Dept. 2016), and “[t]o establish his or her prima facie entitlement to summary judgment in a partition action, the plaintiff bears the burden of demonstrating his or her ownership and right to possession of the real property.” Korn v. Korn, 190 AD3d 1043, 139 NYS3d 701, 704 (3d Dept. 2021).
(2) PHYSICAL POSSESSION IS NOT NECESSARY.
The party bringing the partition action must have legal title, but it is not necessary that the party be in actual physical possession of the property, what courts once referred to as “Pedis possessio.” See Tomkins v. Jackson [a/k/a “50-Cent”], 20 Misc.3d 1108(A), 866 NYS2d 96 (Sup. Ct., N.Y. Co. 2008) (citing Garland v. Raunheim, 29 AD2d 393, 288 NYS2d 417 (1 st Dept. 1968) and Brown v. Crossman, 206 NY 471 (1912). “[C]onstructive possession, such as the law draws to the title, is sufficient for the purposes of maintaining an action in partition.” Garland v. Raunheim, 29 AD2d 383, 389, 288 NYS2d 417, 423 also (1 st Dept. 1968); see also Deegan v. Deegan, 247 AD2d 340, 287 NYS2d 230 (2d Dept. 1936).
(3) PARTITION ACTIONS INVOLVING LLC’S AND PARTNERSHIPS.
Limited liability company (LLC) or partnership ownership of a property precludes any of the LLC members or partners from commencing a partition action in his or her individual capacity. The property is owned by the LLC or by the partnership entity, but not by the individual LLC members or individual partners, because they are not tenants in common. In such cases, the party seeking to “partition” the property must first seek to dissolve the LLC or wind up the affairs of the partnership. See Sealy v. Clifton, LLC, 68 AD3d 846, 847-848, 890 NYS2d 598 (2d Dept. 2009)
Nevertheless, where properties are owned by two or more LLC’s as tenants in common, one or more of the LLC’s may sue to partition the jointly owned property of all the LLC’s in accordance with the express provisions of RPAPL 901(1), supra.
(4) CIRCUMSTANCES THAT RESTRICT OR SUPPORT THE RIGHT TO PARTITION.
Although partition is generally viewed as a matter of right of a co- owner who no longer desires to hold or use the property in common, see Ching v. Chang and Chew v. Sheldon. supra, “the remedy [of partition] has always been subject to the equities between the parties.” Hitech Homes, supra, 159 Ad3d, at 489, 72 NYS2d, at 65, citing Ripp v. Ripp, 38 AD2d 65, 327 NYS2d 465 (2d Dept. 1971), affirmed, 32 NY2d 755 (1973).
(A) TESTAMENTARY RESTRICTIONS WILL PREVAIL.
Partition will not be compelled in violation of a restriction imposed on an estate In Chew v. Shelton, supra, the Court of Appeals held that children not named in the Will were nevertheless entitled, as tenants in common, to partition or sale of a farm, but that a sale would be subject to the personal lien and claim of another daughter, for whom the right to possession of the farm was given for her home and support, where the proceeds of any sale would have been inadequate to fulfill the wishes of the father. The Court also noted that “it is an equally well-settled rule that ‘equity will not award partition at the suit of one [who is seeking partition] in violation of a condition or restriction imposed upon the estate by one through whom he claims.” 214 NY, at 348-349.
(B) MARITAL AGREEMENTS
In Ripp, supra, 38 AD2d, at 70, 327 NYS2d, at 470-471, the Second Department noted that due concern “for the proper and judicious enforcement of the direction in the judgment of divorce [in a matrimonial action] . . . are better evaluated by the court which determined the matrimonial litigation between the parties.” The Court held, therefore, that a husband’s action for partition of the former marital home, to which the wife had been awarded sole and exclusive possession, was premature where the judgment of divorce had not been modified to grant the husband the right of partition. Clearly, therefore, where a judgment of divorce so provides, the right of to partition will be enforced in accordance with the terms of the judgment.
(C) THE RIGHT TO PARTITION MAY BE WAIVED.
The Court, in Leonardo v. Leonardo, 297 AD2d 416, 417, 746 NYS2d 90, 92 (3d Dept. 2002) (citing Chew v. Sheldon, supra), held that “[t]he equitable right to partition can be waived by an agreement not to partition.”
In Leonardo, three brothers in a law partnership, which owned three parcels of real estate, agreed that “should a partner elect to withdraw from the partnership, the remaining partners must purchase his interest at a fixed price, payable over 20 years.” Plaintiff sought partition of the real property contending that the agreement, which restricted the transfer of an interest in the partnership to a third party during the lifetime of the other partners without their consent, was unenforceable because it failed to provide a reasonable limitation on the restriction of plaintiff ’s right to seek partition.
The Court, implicitly noting the contradiction inherent in plaintiff ’s argument, held that “[p]laintiff has failed to support his argument that an agreement which restricts alienation of a partnership interest during the lifetimes of the partners is unenforceable.” (Emphasis added).
(D) ORAL WAIVERS OF PARTITION RIGHTS ARE UNENFORCEABLE.
While parties may agree to limit their right to individually seek to partition their commonly-owned property, they may do so by written agreement only. As explained in Casolo v. Nardella, 275 AD 502, 90 NYS2d 420 (3d Dept. 1949), and cited with approval by the Court of Appeals, in Kaplan v. Lippman, 75 NY2d 320 (1990),
The right to partition is an incident to the ownership of the undivided interest of a tenant in common of real property. It is a valuable part of such interest in that it affords the owner a means of disposing of his interest which cannot be defeated by his co-owners. This right of partition is recognized and enforced both under the common law and by statute. This right, like that of other interests in real property, may be limited or surrendered entirely by one tenant in common to the other tenants in common, and when this has been done by agreement it operates as a defense to a partition action brought in violation of such agreement. However, when one tenant in common by agreement relinquishes his right to bring partition, he surrenders to the other tenants a valuable vested interest in his ownership of the property. The surrender of an interest in real property is required to be in writing under the Statute of Frauds. (Emphasis added).
(E) RIGHTS OF FIRST REFUSAL CAN BAR PARTITION.
Partition can also be denied where a written agreement, between tenants in common, gives each owner an option to exercise a right of first refusal to purchase the interest of an owner who receives a bona fide third-party offer to buy that owner’s interest. See Smith v. Smith, 116 AD2d 810, 497 NYS2d 192 (3d Dept. 1986).
Nevertheless, although the inclusion of a right of first refusal is not an unreasonable restraint on alienation, it was also held, in Smith v. Smith, supra, 116 AD2d, at 811, 497 NYS2d, at 193, that, where an agreement bound the option “upon ‘distributes, legal representatives and assigns of the parties’,” the “inclusion of such words is significant and shows the parties’ understanding that the option is to ‘extend in duration for an indefinite period of time,’” thereby rendering the agreement “in violation of the rule against perpetuities (EPTL 9-1.1),” and thus invalid, and, therefore, defendant’s motion to dismiss the complaint to partition the property was denied.
(F ) AGREEMENTS MAY BAR PARTITION UNTIL ALL THE OWNERS AGREE UPON A SALE PRICE.
In Buschman v. McDermott, 154 AD 515, 517,139 NYS 314 (1 st Dept. 1913), the Court held that it was not an unlawful restraint on alienation for the several owners to have agreed with each other not seek to partition the commonly-owned property, without unanimous consent upon a sale at an agreed price. The Court said “[i]f there is a present right to dispose of the entire interest, even if its exercise depends upon the consent of many persons, there is no unlawful suspension of the power of alienation.” The Court further noted that the three owners can sell at any time they see fit. All they have to do is to agree upon a price. Not only this, but the death of any one of the parties would terminate the agreement, when a sale or partition could be had. (Emphasis added).
(5) WHEN PHYSICAL PARTITION CAUSES “GREAT PREJUDICE TO THE OWNERS.”
RPAPL §915, in pertinent part, provides that:
Where the property or any part thereof is so circumstanced that a partition thereof cannot be made without great prejudice to the owners, the interlocutory judgment, except as otherwise expressly prescribed in this article, shall direct that the property or part so circumstanced be sold at public auction. Otherwise, an interlocutory judgment in favor of the plaintiff shall direct that partition be made between the parties according to their respective rights. (Emphasis added).
In Michelangelo GIIK Flatiron LLC, et al, v. NRS Flatiron LLC, Index No. 654176/2021, majority owners of the iconic Flatiron Building, located at the Manhattan intersection of Fifth Avenue and 23 rd Street, sought a partition and judicial sale of the building. The plaintiffs alleged, and it was undisputed, that “certain disagreements have arisen between Plaintiffs and Defendants with respect to the rehabilitation of, development and future uses of the Property,” and they further alleged that “[t]he Property is so circumstanced that it cannot be divided physically between Plaintiffs and Defendants without great prejudice to them as its owners, within the meaning of RPAPL Sections 901 and 915.”
The Court granted summary judgment to the Plaintiffs, finding that there was “a very clear record of some dysfunction [between the parties], enough to create the kind of tension that leads to these kinds of cases,” that the parties’ ownership agreement “contains no provision restricting or limiting plaintiffs or the defendant, for that matter, from seeking a partition and sale of the property,” and the “defendant [did] not put forward any evidentiary support suggesting that physical partition of the property is feasible.” Accordingly, the Court concluded that “the plaintiffs have made a compelling case that trying to chop up the Flatiron Building into multiple separate tracts, each individually owned, just seems entirely impractical.”
A similar decision was made in Hitech Homes v. Burke, 159 AD3d 489, 72 NYS3d 64 (1 st Dept. 2018)(held: physical partition of a one-family, four story, 50 feet by 17 feet dwelling, with one basement and one source of water and sewer service, could not be made without great prejudice to the co-owner tenants in common).
However, even where the physical partition of a building may be feasible, courts may still look to other factors for finding a judicial sale less prejudicial to the parties’ interests. In Snyder v. Fulton Street, LLC, 57 AD3d 511, 868 NYS2d 715 (2d Dept. 2008), the Second Department noted that “we cannot conclude that the resulting $1.2 million loss of value to the property, if physically divided, does not constitute great prejudice,” and held, therefore, that “Supreme Court improperly concluded that the physical partition of the property would not significantly reduce its value.”
In Ching v. Chang, supra, the First Department also noted, with respect to the partition of owner interests in the shares of a cooperative apartment, that:
common sense tells us that the differences arising between co-owners that would compel one owner to seek to alienate his property interest . . . will, in all likelihood involve conflicts concerning such issues as use and occupancy of the apartment, disagreements as to each owner’s respective financial obligations regarding the apartment, or disagreements as to entitlement to income tax deductions for payment of real property taxes or mortgage interest. Simply put, judicial intervention is sought because there has been a breakdown in the relationship between the co-owners impinging on their ability to enjoy peacefully their occupancy rights to the apartment, making the focus of the action for partition, quite naturally, the apartment, not the stock. There is absolutely no reason, then, not to have this action governed by RPAPL article 9. (Emphasis added).
Likewise, in Damas v. Biggs, 157 AD3d 454, 66 NYS3d 130 (1 st Dept. 2018), the Court ruled that:
Given that the parties could not reach a settlement agreement, and physical partition would cause great prejudice to both the owners, the motion court correctly decided that the cooperative unit be sold and the proceeds divided.
The considerations elaborated in Ching v. Chang and Damas, for cooperative apartments, apply equally to condominiums. See Manganiello v. Lipman, 74 AD3d 667, 905 NYS2d 153 (1 st Dept. 2010).
As this article shows, the right of parties to partition property they own, as tenants in common with other parties, is a valuable right that allows parties to either physically divide their interest in the property from the interests of the other owners or to entirely divest themselves of their ownership share of the property — to allow them either (a) to remove themselves from disputatious and irreconcilable relationships, or (b) to exploit the value of their interest to pursue or invest in other financial opportunities. The right to partition (either by partition in kind or by judicial sale) may generally be exploited for these reasons, but exercising that right may in appropriate cases be subject to equitable considerations if circumstances show that partition cannot be made without great prejudice to the owners. Parties may agree to surrender their right to partition, but the agreement will be unenforceable if the restriction extends beyond the lifetime of any of the parties to the agreement, or if the agreement is made orally and not by written agreement.