Our subject today is the Uniform Partition of Heirs Property Act. There, I said it.
This blog exists for a few different reasons, but this is the biggest one: We want to explain how laws that you otherwise would not know or care about can make your life better. Laws are—after all—yours. You should be able to use them. We make money by helping you use them. Simple.
So here’s an example of a law's usefulness from the Uniform Partition of Heirs Property Act. Nothing sexy about that name, for sure, but then again sexiness is only skin deep. This law can be a big help when you need it and was created to help people who inherit property so that they can keep their property. Keeping property = good.
Other interesting blawgs on topic:
Here’s the scenario: Mom leaves the house and land to her two children, Andrew and Bonnie. Andrew makes $40,000 a year (must be a lawyer) and has 3 kids, while Bonnie makes $175,000 and has one kid. They were born 10 years apart so they did not grow up together and never were close. After mom dies they fight over everything, which is normal because they’ve never really liked each other. When mom was alive she stopped the fighting, but now she’s no longer around to referee.
Bonnie gets mad and goes to her lawyer. He advises her to partition the property and buy it at auction. (Partition simply means to split it up.) This is good advice because she can afford another mortgage and her brother can’t (Remember, he’s a broke lawyer.). Bonnie sues to partition, there is an auction, and she buys a $150,000 piece of property for $90,000, and writes her brother a check for $45,000 (half of the selling price, of course). Now she owns the land, and her brother lost (and she gained) $30,000 of value.
Here’s where the non-sexy-but-otherwise-cool law called The Uniform Partition of Heirs Property Act (UPOHA) comes into play. It provides Andrew with several remedies.
1) It allows co-tenants the right to buy out the other tenants,
2) It gives preference to “partition in kind” as opposed to “partition by sale,” and
3) it reforms the sale process to improve the chance of maximizing the heirs’ share of the proceeds. Yay for more $$$!
So you file a lawsuit and serve everyone as usual. What is different from a normal petition for partition?
First, before the Uniform Partition of Heirs Property Act applies, it must be determined that the property is an “heirs property.” “Heirs property” means real property held in tenancy in common that satisfies all of the following requirements as of the filing of a partition action:
(A) there is no agreement in a record binding all the cotenants which governs the partition of the property;
(B) one or more of the cotenants acquired title from a relative, whether living or deceased; and
(C) any of the following applies:
(i) 20 percent or more of the interests are held by cotenants who are relatives;
(ii) 20 percent or more of the interests are held by an individual who acquired title from a relative, whether living or deceased; or
(iii) 20 percent or more of the cotenants are relatives.
This law is found at Arkansas Code Ann. 18-60-1002(5) if you're interested. Once you can determine that the property is "heirs property," the Uniform Partition of Heirs Property Act applies.
Second, the court appoints commissioners that must be disinterested (This does not mean they’re bored. That’s a given.) and impartial and they cannot be parties to the lawsuit.
Third, the court determines fair market value (not an auction). This can be done by an appraisal, an agreement between the cotenants, or by the court after an evidentiary hearing. Parties will receive notice of the fair market value and can object if they want.
After fair-market value is determined, all cotenants will be notified of the fair-market value given the option to buy out other cotenants. The cotenants have 45 days after the notice of fair-market value to notify the court that they wish to buy the property. They can pay the court for the portion they wish to buy and the court will reallocate the interest in the property.
If not all the interests are purchased or if a cotenant requests a partition in kind (splitting the property into different parcels), the court will order a partition in kind unless it will result in great prejudice. An example of “great prejudice” might be a single-family home on a single lot. One-half of a home is not worth half the price of the home; it’s worth nothing. You can't split up a home like you can split up a farm or commercial property.
If cotenants don’t want to buy the property and partition in kind is not practical, then the court will order a sale. The sale must be open market, unless sealed bids or an auction would be in the best interests of the cotenants.
This new law (enacted in 2015) protects heirs and gives co-tenants a lot more freedom and protection. If you find yourself in such a situation, contact us and we can explain how the Uniform Partition of Heirs Property Act might allow you to keep more of your inheritance.