This column first appeared in the San Antonio Express News and other Hearst Newspapers on November 9, 2018.
Dear Mr. Premack: My parents had four children, they paid for a house, and they both died with Wills leaving their house to the four children. We all agreed among ourselves to keep their house and split the net rental income it produces. We have all gotten along well until recently, when property values have started to go up. My sister transferred her share of the house to her son, and he has been agitating to sell the house, so he can get a larger sum of money. He says he talked to a lawyer about suing us to force the sale of the house, so we might as well save the legal fees and go along with the sale. Isn’t there any way, short of defending ourselves in court, that we can stop our nephew? – H.W.
Historically, your nephew and his attorney would have been on solid legal ground. When people jointly inherit a house or other real estate, they each own an undivided share. Each owner could file suit to force partition of the property, which sometimes can only be achieved by selling the property.
In order to protect families from such a difficult legal situation, the Texas Legislature passed a version of the Uniform Partition of Heirs Property Act in 2017. The new law provides each co-owner some protective rights, including the right to notice, right to an appraisal, right of first refusal, and if all else fails a court-supervised sale to be sure each owner gets their share of the net proceeds.
The new Uniform Law applies only: 1) when the heirs own the real property as tenants-in-common, not as joint tenants with rights of survivorship; 2) when the heirs have not already signed an agreement specifying how they will retain or partition the property; 3) when at least one co-owner inherited the property from a relative; and 4) when at least 20% of the co-owners are related to each other.
If those conditions are all met, yet one of the co-owners files for partition of the property, then all co-owners must be notified of the court action. If notice is by publication in a newspaper, then a sign must also be posted at the property informing any visitor of the court action. The court must then determine the fair market value of the property and must appoint an impartial and disinterested person to do the appraisal (unless the co-tenants all agree on another way to value the property, which could save money by eliminating the need for an appraisal). If there is an independent appraisal, any co-owner can then object to the appraisal and seek a redetermination of the property’s value.
Once the court finally decides on the property’s value, the new Uniform Law allows any one of or a group of the co-tenants (except for a co-tenant who petitions the court for partition by sale) to buy-out all the other co-tenants for that court-determined value. (A co-tenant who petitions the court for partition in kind is not subject to being bought out.) In this manner, if they so desire, the other owners can group together and buy-out the share of the co-owner who asked the court to enforce sale of the property. This may short-circuit that person’s future plan to profit from the partition (for instance, in hope of selling out to a commercial buyer) and thus may discourage a co-owner filing bringing a partition suit at all.
If none of the other co-owners want to buy-out the property, then the court can divide the property into parcels (in the case of raw land) or can require the property’s sale (in the case of a house). When sold on the open market, or by sealed bid, or by auction the net proceeds are then divided among the former co-owners. (The court must use an open market sale unless it determines that a sealed bid or auction sale is likely to yield a higher sales price.)
Consequently, under the new law, your nephew may decide that he is better off trying to sell his share to the rest of you. If you can negotiate an agreed value and can join forces to buy his interest, then you can avoid court and all of the associated expenses of litigation.
* Thanks go to Professor Thomas W. Mitchell, Texas A&M School of Law for his input into this column. Professor Mitchell was principal drafter of the Uniform Partition of Heirs’ Property Act (UPHPA).
Paul Premack is a Certified Elder Law Attorney with offices in San Antonio and Seattle, handling Wills and Trusts, Probate, and Business Entity issues. View past legal columns or submit free questions on legal issues via www.TexasEstateandProbate.com or www.Premack.com.