Do you intend to leave a piece of property to your children or family members after you pass? Or, maybe you are an heir who has inherited a piece of property. In either case, that’s great news! Who wouldn’t want to receive a beloved childhood home, a vacation house or an investment property? After all, they can keep it or sell it.
But what happens if there is more than one heir and you want those individuals to share the property? Or perhaps you’ve inherited a piece of property along with some family members.
Does everyone get along now? Will everyone get along in the future when taxes and insurance are due? What about when a major repair is needed?
Will everyone be able to play nice and decide how the property will be utilized? Will old (or new) family rivalries become an issue with the property being the most tangible focal point of the dispute? What happens then? If everyone cannot agree on what to do, then the only option left is a partition action.
Chapter 64 of the Florida Statutes contains the general provisions associated with the partition of real property. Partition refers to the division of real property currently held jointly or in common by two or more persons into individually owned interests. In other words, the court, in a partition action, can divide the subject real property between the joint owners in an equitable fashion.
This is most often accomplished through a partition by sale, where the real property is sold through a court ordered sale whereby third parties can bid on the property and the proceeds are distributed equally, subject to certain offsets.
What happens if one or more persons wants to keep the property? Normally, they would be left to bid, and often be outbid, by third party buyers. However, if the property came from a family member, such as through an inheritance, this procedure is different due to a recently enacted statute known as the Uniform Partition of Heirs Property Act (UPHPA).
The UPHPA provides a new mechanism enabling heirs who wish to keep real property to effectively “buy out” other heirs who wish to simply sell the real property. This statutory update is significant in that it allows one heir to buy out the interest of the other heirs if a partition action is filed. The UPHPA applies only to “heirs property” which Section 64.202(6) of the Florida Statutes defines as real property held in tenancy in common that satisfies certain requirements.
Those requirements include the following:
No agreement exists between the cotenants which governs the partition of the property;
One or more cotenants acquired title from a relative; and
20 percent or more of the interests are held by cotenants who are relatives, 20 percent or more of the interests are held by someone who acquired title from a relative or 20 percent or more of the cotenants are relatives.
Once it is determined that the subject property is in fact “heirs property”, the property will be valued pursuant to Section 64.206 of the Florida Statutes. Thereafter, the process for the forced cotenant buyout is delineated in Section 64.207 of the Florida Statutes. This process can be fairly complex and, without proper counsel, could lead to an individual receiving only a fraction of what their interest in the property is actually worth. Similarly, without proper counsel, an individual who wants to prevent a family member from buying out their interest in the property may be able to set the buyout price so high that it does not make financial sense for the purchase of that interest.
Create Your Estate Plan Carefully. The best way to prevent a dispute among heirs over partitioning property is by having a sound estate plan that prevents these types of events from occurring in the first place. If you are considering devising real property to numerous recipients, it is important to be aware of the statutory provisions contained in the UPHPA to ensure your estate plan reflects your intended goals.
Agreement in Advance. If you find yourself as the owner of property along with family members with whom you are getting along, a practical next step would be to establish a partnership agreement that includes provisions for splitting or “buying out” other interests in the property without the need for filing a partition action.
Spot the Issue. If you are expecting to inherit certain real property that may also be devised to additional heirs, it is important to know your rights pursuant to the UPHPA. For example, depending on whether you wish to reside at the inherited property or sell it while splitting the proceeds, the UPHPA can be used to accomplish your goals.
Speak with Counsel. To best allow yourself to understand what rights you may have pursuant to the UPHPA, it is always prudent to speak with an attorney experienced in the area.