Detailed Answer
When two or more people co-own real property and one owner wants money instead of part (or all) of the physical property, Delaware law offers several routes to convert the ownership interest into a monetary award. The two main paths are: (1) negotiate a voluntary buyout with the co-owner(s) or (2) pursue a court-ordered partition (usually a partition by sale) that converts the property into cash and divides the proceeds.
How a voluntary buyout works
An out-of-court buyout often saves time and expense. Steps typically include:
- Obtain a current, professional appraisal to establish fair market value.
- Agree on each co-owner’s percentage share (often based on deed language: tenants in common, joint tenants, etc.).
- Calculate the buyout price (co-owner’s share of fair market value, adjusted for mortgages, liens, unpaid contributions to taxes or improvements, and any agreed credits or debits).
- Complete the transaction with a written purchase agreement and a closing handled by a title company or attorney.
Voluntary buyouts allow the parties to control timing, tax treatment, and allocation of closing costs. If parties disagree on price or credits, a neutral appraiser or mediator can help resolve the dispute.
How court-ordered partition (and partition by sale) works in Delaware
If negotiation fails, a co-owner can ask a court to divide the property’s value. In a partition action the court can:
- Order partition in kind — physically divide the property when the land can be fairly split; or
- Order partition by sale — sell the property and divide the proceeds among the co-owners.
Most frequently, when physical division is impractical, the court orders a sale and distributes the net proceeds. The court will also account for mortgages, liens, property taxes, and contribution claims (for example, one owner paid more mortgage or made improvements). Delaware’s courts apply equitable principles when deciding how to allocate proceeds and credits.
Typical partition-by-sale procedure (what to expect)
- The co-owner filing the case files a partition complaint in the appropriate Delaware court. (Delaware courts handle civil and equitable remedies; check the correct venue in your county or ask counsel.)
- The court issues process and notifies all owners and lienholders.
- The court may order an appraisal, set conditions for a sale, or appoint an officer (such as a commissioner or master) to oversee sale steps.
- After sale, the court or officer pays liens and expenses, then divides the net proceeds among owners based on ownership shares and any adjustments the court orders (credits for improvements, mortgage payments, etc.).
How the court calculates monetary compensation
The court starts with the property’s fair market value. From that amount it subtracts payoff of mortgages and liens, reasonable sale costs, and any liens or encumbrances. Then it divides the net proceeds according to ownership shares and any equitable credits or debits the parties establish (for example, if one co-owner paid more toward the mortgage or made valuable improvements, the court may give that co-owner a credit).
Common legal claims and adjustments you may see
- Contribution claims — one co-owner seeks reimbursement for mortgage, taxes, utilities, or repair payments.
- Accounting — the court may order an accounting of receipts and expenditures related to the property before distributing proceeds.
- Liens and priority — secured creditors are paid first from sale proceeds.
- Attorney’s fees — in some situations (contract, statute, or where equity requires), courts may award reasonable fees.
Practical tips and strategy
Choosing between negotiation and litigation depends on facts, relationship with co-owners, timeline, and willingness to bear litigation costs. Many owners attempt a negotiated buyout first because it is faster, cheaper, and gives control over tax timing and sale method. If a buyout is impossible, seek a partition action.
Relevant Delaware resources
Delaware law and court guidance are available online. For statute research see the Delaware Code (start at Title pages for property and civil procedure): https://delcode.delaware.gov/title25/. For information about Delaware courts and filing civil/equitable actions, see the Delaware Courts website: https://courts.delaware.gov/. These pages provide starting points for locating the statutory and procedural law that applies to partition and related remedies.
Short hypothetical to illustrate
Imagine two friends own a beach house as tenants in common (50/50). One owner wants out and requests a buyout. The owners get an appraisal showing market value $400,000. After paying off a $100,000 mortgage and $20,000 in closing and sale costs, the net sale proceeds would be $280,000. If they sell, each owner’s gross share would be $140,000, adjusted for any credits (for example, if one owner paid $10,000 of unreimbursed repairs, the court or the parties might credit that amount).
Helpful Hints
- Get a current, licensed appraisal early — it frames valuation and negotiations.
- Collect documents: deed, mortgage statements, tax bills, receipts for repairs and improvements, and any written agreements about contributions or buyouts.
- Try negotiation or mediation first. It’s usually faster and cheaper than court.
- Be prepared for court costs and potential delay if you end up litigating. Courts may also order additional appraisals or reports.
- Ask about tax consequences. Converting property to cash can create capital gains or other tax impacts; consult a tax advisor.
- If one co-owner is a creditor or has a lien, the lien typically must be paid from sale proceeds before distribution.
- Consider a temporary agreement (e.g., buyout paid over time with security) to avoid sale costs while protecting the selling owner’s interest.
- Speak with a Delaware property attorney to map the fastest, least expensive path for your facts — an attorney can draft buyout agreements and, if needed, handle a partition action.
Disclaimer: This article explains general Delaware law and is for educational purposes only. It is not legal advice and does not create an attorney-client relationship. For advice about your specific situation, consult a licensed Delaware attorney.