Partition and Revelation
Although property ownership is prototypically associated with a single owner, land is very often co-owned. When things go wrong among co-owners, the law has a built-in escape hatch: partition. Co-tenants can partition the co-owned properties through voluntary agreement, or any co-tenant may petition a court for partitioning. All jurisdictions we know require unanimity for the former but design the latter petition right to be unilateral. Partition may be either in kind (the land is physically divided up), by sale, or through some combination of these methods. Regardless of the method chosen, the judicial partition process operates coercively as to at least some of the co-tenants. It thus implicates problems of value revelation akin to those raised by other coercive land transfers, such as eminent domain. Indeed, despite receiving relatively little scholarly attention, revelation in the co-ownership context raises a set of questions that are in some ways richer and more interesting than those presented by government condemnation.
Existing economic analyses of partition have primarily examined whether partition by sale or partition in kind is more efficient, with a strong emphasis on balancing economies of scale against subjective attachments to the land. In this Article, we focus on two aspects of the problem that have been neglected in earlier treatments. First, we consider the implications of different judicial partition procedures on the bargaining dynamics that precede resorting to judicial partition. Second, we consider the potential impacts on efficiency of intermediate and partial forms of partition, which are prevalent in practice. Considered together, these two branches of our analysis show how more accurate revelation mechanisms might play a role in advancing the efficiency of co-ownership.
One interesting and counterintuitive result of our analysis is that the goal of incentivizing efficient pre-partition behavior may be in some tension with the goal of seeking efficiency in the partition process itself. Perfect auction mechanisms that force parties to reveal subjective valuations in the judicial partition context could alter the negotiation dynamic in ways that make voluntary partition less likely. As a result, better revelation mechanisms may not always yield better outcomes. The challenge is to design partition approaches that allow subjective values to be taken into account in deciding how to partition property without encouraging socially wasteful struggles over surplus in earlier periods. A useful partition approach must also deal reasonably well with the liquidity and coordination shortfalls that can hamper revelation of value in the co-ownership context.
Because partition design features that advance some efficiency goals impede others, we cannot determine the best approach without additional research—both empirical studies and formal theoretical modeling.7 We can say with some confidence that no first-best partition solution is achievable under realworld conditions. At the same time, we see significant room for improvement over the status quo. Our goal in this Article is to lay out the considerations relevant to the choice of a new partition mechanism.