Business of Farming

BY ROBERT TUFTS AND KEN KELLEY

You, your brother and sister inherited the farm from your parents. That makes you tenants in common. You have an undivided interest in the property, meaning you each own a one-third interest in the entire farm. As such, you each have the right to use the entire farm and you can’t point to any portion of the farm as being yours. That also means you jointly manage the farm. What happens when the three of you can no longer agree?

Joint owners can separate their interest in property through the process of partition. Partition can be either voluntary (the three of you agree to a physical division and prepare deeds to transfer your one-third interest in two parcels to the other two) or involuntary through a court proceeding. An owner, no matter how small their interest, has the right to force the partition of the property. Maybe your brother died without a will and was survived by his spouse and three children from that marriage and two children from a previous marriage. A child that owns a 1/15th interest has the right to force the partition even if all the other owners vote against partition.

There are two forms of partition, the traditional partition covered by Chapter 6 of

Title 35 of the Code of Alabama (1975), and partition under the Uniform Partition of Heirs Property Act (UPHPA) covered in Chapter 6A.

Under traditional partition the court has to physically divide the property if it is subject to division. If there are three heirs and the land is a flat 300 acres, the physical division is fairly easy. But what if there are three owners in one generation and five in the next generation? In the example above, you and your sister each own a one-third interest, your brother’s wife owns a one-sixth interest and the five children each own a one-fifteenth interest. If the topography is not uniform, for example on the 300 acres there is some pasture, some trees, a pond and a wetland around a creek, then physical division becomes almost impossible. In that case the property has to be sold and the proceeds divided. A current owner has the right to purchase the property for the appraised price before the case goes to trial. If the case goes to trial, the judge will order the sale of the property. The end result of the traditional partition is the physical division or sale of the property.

Under UPHPA the result could be different from the traditional partition. The first requirement is that twenty percent of the interest in the property must be owned by heirs of the prior owner. If one or more owners petition for partition under UPHPA, the other owners have the option to buy the offering owners’ interest at the value set by the court. If the other owners do not purchase all of the offered interest, then one of the owners that requested the sale of his interest may purchase the interest of the other offering owners. If all of the offered interests are not purchased, then the judge will attempt to physically divide the property. If the property cannot be physically divided “without great prejudice to the cotenants” based on the ownership shares, the property will be offered for sale.

“If the court orders a sale of heirs property, the court shall order that the sale be conducted by one or more of the following methods of sale: open market sale with or without a broker or brokers; by sealed bids; public auction; or private sale. The court shall choose a method which shall be more economically advantageous and in the best interest of the cotenants as a group.” §35-6A-10, Code of Alabama (1975)

The USDA recently funded the Heirs Property Relending Program to help owners of heirs’ property purchase the fractional interest of other owners. “Heirs’ property means a farm that is jointly held by multiple heirs as tenants in common as a result of inheriting title from a relative.” We typically think of heirs’ property as property that passes to heirs because no will was probated or estate administered. This definition seems to allow loans to our example siblings even though they inherited the land from their parents through a will. The maximum loan amount available under the program is $600,000. If you are considering a partition action, you should contact the Farm Service Agency to discuss this program.

If you own an undivided interest in land and are not happy with the way the other owners want to manage the land, you have the right to have the property partitioned. Based on the facts of the case, you will get either a portion of the land or a portion of the sale proceeds.