Driver, roll up the partition, please.
Last month, Maryland put legislation into effect pertinent to farm owners and relevant to anyone who owns property.
In May, Maryland joined twenty-one states in enacting a version of the “Uniform Partition of Heirs Property Act.” Maryland’s new “Partition of Property Act” aims to help families preserve wealth and legacies held in real property by protecting them from predatory sales, tangled titles and pressured decisions on property and ownership division.
The legislation serves to provide a pathway encouraging collaboration and equity. Previously, when all heirs had equal ownership (and were known by law as tenants-in-common) any one heir could force the sale of the property and have resulting funds divided amongst heirs, known as partition by-sale. In this process, the property is often sold at below the fair market value and strips heirs of an opportunity to acquire wealth – in the form of land or fair compensation. This partitioning was a common approach for settling disputes among heirs and a speculatively desired proceeding for real-estate to acquire property at below-market prices.
The “Partition of Property Act” seeks to change the Maryland partition law to protect owners of tenancy-in-common property by requiring notification of property stakeholders and a fair market-based valuation of the land and by creating a road map for buyouts and partition.
- It creates a notice requirement.
- Alert all property owners at the same time;
- Put forth effort to identify and alert heirs known and unknown;
- Mark the property conspicuously to bring the community’s attention to the property’s status.
- It demands property valuation by
- An appraisal OR
- Evidence OR
- Court determination based on appraisal plus evidence OR
- Owners come to an agreement.
- Offers buy-out options by
- Giving co-owners the right to buy-out those who don’t want the property at all.
- Encourages partitioning aside from the common by-sale.
- Dividing the land into parts, known as partition by-kind, is a required consideration for the courts.
If there is no buy-out or partitioning of the land in-kind, partitioning must be done in-sale, meaning the property must be valued on an open market to receive a fair market price.
When deciding the value of the property, with this legislation the courts must consider various inputs to the lands use and consequences of partitioning such as:
- Practicality of dividing the property;
- If partitioning will cause the property to be materially diminished;
- Impact of co-tenants on the land (eg how their actions have improved the value of the property);
- Sentimental value.
Supporters of this legislation expect it will create a pathway to clear titling and encourage collaboration among stakeholders. It is in-line with allowing farmers to go through the re-lending process to access funds available in the Inflation Protection Act through re-titling.
The full impact of the legislation will be seen as it enters the “real world” and is employed by courts and property heirs and landowners, who now have a better footing to protect and manage their property.