Partition of Real Estate; or, Breaking Up is (Not) Hard to Do
Posted: 7 Sep 2000
Under the common law, joint owners of real estate have the right to seek partition, or physical division, of the land. However, modern statutes also allow courts to order a sale of the land, with proportionate division of the proceeds, if the loss from division is substantial. Although forced sale can be beneficial by preventing inefficient fragmentation of the land, it entails a cost by depriving nonconsenting owners of any value of their share of the land in excess of its market value. This paper develops an economic standard for choosing between partition and forced sale based on the objective of maximizing the aggregate value of the land. The basic trade-off is between the benefits of forced sale when scale economies are present and protection of subjective value under partition. A review of the case law suggests that courts have developed a standard that reflects this trade-off.
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