Detailed Answer — Can you negotiate a buyout instead of court-ordered partition in Hawaii?
Short answer: Yes. In Hawaii, co-owners can generally negotiate a private buyout of one owner’s share instead of filing (or continuing) a partition action. Courts recognize and encourage private settlements, and a properly documented buyout and transfer will usually prevent or resolve a partition lawsuit. This page explains how a buyout works under Hawaii law, what to watch for, and when you might still need the court.
What Hawaii law says about partition
Hawaii’s statutory scheme for partition actions is found in the Hawaii Revised Statutes, chapter 667. The statute gives any co-owner the right to seek partition by sale or in kind when owners cannot agree on possession or title division. The statute does not prevent owners from making private agreements to divide or transfer interests. For the partition statute, see: HRS Chapter 667 — Partition.
Why a negotiated buyout is often preferable
- Faster: avoids the months (or years) of court delay.
- Cheaper: reduces attorney fees, court costs, and sale expenses.
- Control: owners decide the price, timing, and method of transfer.
- Privacy: terms stay private rather than becoming court record.
How a typical buyout works — step by step
- Confirm ownership and shares. Determine how title is held (tenants in common, joint tenants, trust, etc.) and each owner’s fractional interest.
- Value the property. Obtain a professional appraisal or at least comparable market analysis. Agreeing on a valuation reduces later disputes.
- Calculate buyout amount. Multiply agreed fair market value by the selling owner’s share. Adjust for unpaid expenses, contributions, necessary repairs, liens, or mortgage obligations if the parties agree.
- Agree on terms. Decide payment timing (lump sum, promissory note, seller financing), contingencies, responsibility for closing costs, and who pays off mortgages or liens.
- Document the deal. Draft a written buy-sell agreement and a deed (quitclaim or warranty, as appropriate). Include a full release of claims by the seller and an acknowledgement of receipt of consideration.
- Title and closing. Use a title company or attorney to handle closing, clear liens, obtain title insurance if desired, and record the deed in the Bureau of Conveyances (or Land Court) so the transfer is effective.
- Record keeping and tax considerations. Keep copies for taxes. The seller may have capital gains consequences; the buyer should confirm mortgage and property tax impacts.
Key legal and practical issues to watch
- Written agreement: Oral agreements are risky. Put everything in writing and have all owners sign.
- Clear title: Any mortgages or liens must be handled. A title search at the start avoids surprises.
- Appropriate deed: Use the correct deed form and record it promptly.
- Mortgage consent: If the property has an existing mortgage, the lender’s consent or payoff may be required.
- Valuation disputes: If you cannot agree on value, consider mediation or hire a neutral appraiser whose number parties accept.
- Tax consequences: Sellers should consider capital gains and other tax impacts. Buyers should consider basis and potential future tax planning.
- Co-owner protections: If a seller is getting a promissory note from the buyer, secure it with a mortgage or note and include default remedies.
When a buyout may not be feasible
A negotiated buyout may not work if:
- A co-owner refuses to sell or won’t accept a reasonable offer.
- One owner cannot finance the buyout and no acceptable financing exists.
- Title or lien problems make a clean transfer impossible without court involvement.
- There are complex rights (beneficiaries, trust interests, or disputed title claims) that require judicial resolution.
If negotiation fails: the court option
If negotiations fail, any co-owner may file a partition action under HRS Chapter 667. A court may order partition in kind (divide the land) if practical, or order the property sold and the proceeds divided. Courts also handle equitable adjustments for contributions and liens. See: HRS Chapter 667 — Partition.
Practical drafting tips for the buyout agreement
- Identify parties, property by legal description, and the specific interest being transferred.
- State the agreed sales price and how it was determined. Describe any offsets or credits.
- Include representations and warranties (authority to sell, no undisclosed liens).
- Provide for escrow instructions, closing date, and who pays which closing costs.
- Include a full release and covenant not to sue after closing.
- Specify dispute resolution (mediation, arbitration) for post-closing issues.
When to hire a lawyer
Consider hiring an attorney if any of the following apply: complex title issues, disputes over valuation or contributions, planned seller financing or security instruments, significant tax concerns, or if one owner is uncooperative. An attorney can draft or review the agreement, review title, and ensure the transaction is properly closed and recorded.
Useful resources
- Hawaii Revised Statutes, Chapter 667 — Partition: https://www.capitol.hawaii.gov/hrscurrent/Vol14_Ch0231-0258/HRS0667/
- Hawaii State Judiciary: general civil procedure information — https://www.courts.state.hi.us/
Disclaimer
This information is educational only and is not legal advice. It does not create an attorney-client relationship. For legal advice about your specific situation, consult a licensed Hawaii attorney.