Thursday, 23 November 2017

Partition May Be The Only Remedy

Written by Posted On Tuesday, 03 May 2016 17:44

Mama lived a good life and raised two wonderful children. Jack moved to Oregon and his sister Carol lived in the family home in Washington with her mother. Mama just died, and had the good sense to have a Last Will and Testament, giving the home to both children equally as tenants in common.

Jack wants to buy a condo and wants to sell the house and get half of the sales proceeds. Carol wants to stay in the house but cannot afford to buy Jack out. The house has appreciated nicely over the years.

How do they resolve this dilemma if they cannot reach a friendly - brother and sister –agreement?

There is in the law a concept known as "partition". Judges throughout the nation have made it clear they will not force two or more people to continue owning real property where one of the owners wants out.

Jack can file a partition lawsuit in a local court where the property is located. Alternatively, he can find a speculator who will give Jack immediate cash, in return of getting a deed to Jack's half interest in the house. A tenant in common can sell her interest -- or even give it to someone by gift -- without the consent of her fellow co-tenant. And the speculator can then file the partition lawsuit, and ultimately kick Carol out of the family home.

If Jack and Carol owned two properties, the court can order that each would end up owning one of the properties. In our case, the court will force the sale, with the proceeds being divided equally. The sale can be handled by an independent real estate agent or the Judge -- after advertising the sale in the Washington Post for several weeks– can hold an auction right in the courthouse. From my experience, however, having represented brothers or sisters in similar situations, the only winners in a partition action are the lawyers and the speculators who often get a good bargain.

Carol will get half of the proceeds. She may be able to be reimbursed for any real estate taxes or mortgage payments which she made over the past three years. But unless she can arrange to be a tenant with the new owner, she will have to move out of the family home.

A recent report by the National Conference of Commissioners on Uniform State Laws found that partition lawsuits have resulted in the displacement of many low-to-moderate income families across the country. For example, the report stated that "African-Americans have experienced tremendous land loss over the course of the past century, ... and partition sales have been one of the leading causes of involuntary land loss." The report made it clear, however, that "forced partition sales have negatively impacted other communities as well", pointing out that Mexican-Americans lost hundreds of thousands of acres of land in New Mexico and other states."

Such displacement is not limited to rural areas. Cities -- including Washington -- face similar concerns. All too often, property is handed down from generation to generation. For example, great-grandfather had two brothers and a sister. The three inherited the property when he died. Each brother had a wife and two children. When one of the brother's died, his wife inherited the property but she remarried and had another child. It gets complicated especially when there is no Last Will and Testament. I once had to track down 32 distant relatives in order to clear title.

There is a bill presently pending before the D.C. Council, entitled "Uniform Partition of Heirs Property Act". The purpose of the proposed law is to remove -- to the extent possible -- the adverse consequences of a partition action while at the same time recognizing the rights of a co-tenant to sell the property. Clearly, it is a difficult balance.

If enacted into law, before John -- or the speculator who bought his interest -- can file the court action, Carol will have to get advance notice. Once the lawsuit is filed, the Judge is authorized to obtain an appraisal so as to assure the property will not be sold at a "fire sale". Furthermore, Carol will have the right to buy the property. She can bring in a friend or a relative to assist her if possible, so she can remain in the family home.

Higher income families typically retain estate-planning specialists to ensure a smooth transition of wealth to the next generation. Mama -- to her credit -- gave the property by Will to her two children, but did not consider the consequences. All too often, however, there is no Will and a contested probate case drags on for months or years.

The proposed act is presently pending before the D.C. Committee on the Judiciary, whose chairperson is Kenyan McDuffie. It has been enacted in a number of states, such as Montana, Nevada, and Connecticut, but for readers in other state, talk with your state legislator about this important law.

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Benny L. Kass

Author of the weekly Housing Counsel column with The Washington Post for nearly 30 years, Benny Kass is the senior partner with the Washington, DC law firm of Kass, Mitek & Kass, PLLC and a specialist in such real estate legal areas as commercial and residential financing, closings, foreclosures and workouts.

Mr. Kass is a Charter Member of the College of Community Association Attorneys, and has written extensively about community association issues. In addition, he is a life member of the National Conference of Commissioners on Uniform State Laws. In this capacity, he has been involved in the development of almost all of the Commission’s real estate laws, including the Uniform Common Interest Ownership Act which has been adopted in many states.

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