In a noteworthy decision by the Supreme Court, New York County, Judge Cohen ruled in favor of the minority owners who sought a judicial partition and sale of the Flatiron Building, a Manhattan landmark. And, on March 22, 2023, this historical building sold for $190 million at a live auction after a competitive bidding process.
The owners of the Flatiron Building held title as “Tenants in Common” which is the default form of common ownership that gives each owner the right to use, occupy, and enjoy the property; each owner is also entitled to an equal say in its operation despite ownership interest disparities.
This iconic building was subject to disagreements among co-owners for years that resulted in it being dormant since 2019. The majority owner disagreed with minority owners over management, renovations, and the use of the building. As a result, the minority interest holders commenced a customary partition action just over a year ago requesting a forced sale of the building. The judge ruled for the minority interest holders, and the Flatiron Building headed to auction. The public auction was held just outside State Supreme Court in Lower Manhattan, and the new owner purchased this property for final bid of $190 million.
While this is a landmark building, the decision is far from unique. Disputes like this are common occurrences, and many of our clients have been involved in similar situations. Whether it concerns the use, renovation, or management, of a property, owners can have differing opinions. And like this example, some co-ownerships wind up falling out. In that case, any one of the owners may commence a partition action by sale, like this, or in kind where the property is literally divided.
Partition is a legal action, which is synonymous with division of real property. Partition in kind, which is favored by courts, means that the property is physically divided into pieces and equitably given to each co-owner as separate property.
Partition by sale is a forced sale of the property by a court and occurs when a court determines that equitable or physical division of the property is impossible without causing substantial injury to all or any of the co-owners. Proceeds from this sale will be divided according to the ownership shares of each owner. This is what the judge ultimately determined in the Flatiron Building lawsuit.
If you are having disagreements with your partners over operation and/or management of a commercial property, you have options to address those issues. Struggling to agree on a concrete vision for a misused or underused commercial property is common among co-owners. The Wagoner Firm has successfully led partition actions in the past and continues to counsel clients on the issues arising out of these types of disputes. We have helped clients mitigate risk and streamline a resolution to real property ownership disputes, and the Firm is available to help you find solutions today. Please do not hesitate to reach out if you find yourself trapped in ownership of real property with other owners – we can help!