Legal Question in Real Estate Law in California

First, I should point out that the trust tenant's proposal may or may not be fair, depending upon what other assets (and liabilities) the trust may have. A 25% interest in a trust may or may not be worth more than a 50% interest in a house. There are other considerations as well, such as whether the 75% holder of the trust would be sole trustee, and whether he/she is a good manager.

The foregoing is probably academic, however, since the question clearly indicates that the individual-capacity owner isn't interested in becoming a co-beneficiary of the trust.

I'd say the individual tenant cannot be forced to negotiate or accommodate unless there is an enforceable agreement between the two co-owners requiring this, or requiring mediation of disputes. We do occasionally see this, but not often.

That brings us to how to co-ownership may be terminated. You mention a petition to the Court for termination of the co-tenancy by sale. Actually, it's probably not a petition, but rather a full-blown lawsuit called a partition suit, action for partition, or the like, and the process is set forth in the Code of Civil Procedure sections 872.010 through 874.240, about 21 pages of fine print, including footnotes.

Generally speaking, a partition action proceeds in three phases. In the first, the Court determines the plaintiff's right to partition. Then, the property is sold by Court order, although this can be done through ordinary real-estate channels rather than a courthouse-steps auction. Finally, the Court determines the allocation of the net proceeds between the former owners.

Law and judicial custom have established a set of fairly firm rules for allocating the proceeds of a partition sale. First, of course, the costs of sale (pay-off of liens, agent commissions, etc.) are deducted. Then, the former owners' "fair" shares are computed, generally on the basis of contribution to the purchase price, adjusted for the actual subsequent contributions of one or the other for expenses such as taxes, insurance, mortgage payments, and offset by any profits one has made from renting to third persons. Expenditures made for improvements may or may not be considered, depending upon whether the improvements were for the primary benefit of the tenant-in-possession, or were agreed upon beforehand, etc. In the end, each former co-owner should end up with cash proceeds fairly representative of his or her stake in the property. The law also contains some provisions for re-allocating certain attorney's fees incurred by the parties.

Obviously, the net cash available to distribute will depend upon there being some significant equity in the property, since the expenses of suit and sale will eat into the net profits (if any).

Due to the time, cost and anxiety created by carrying out a full-blown partition action, a rather high percentage of such suits are settled out-of-court soon after being filed. Often, a formerly-reluctant co-owner/defendant will agree to be bought out by the plaintiff, or to a private sale to a third party. If there are issues such as adjustments to a straight 50-50 split of the net proceeds, often the parties agree to submit the questions to binding arbitration.

I hope this is helpful, and I'd be happy to provide a further free consultation if you want.