The committee on Energy took up a bill that would establish the Uniform Partition of Heirs Property Act.
House Bill 2802 would preserve family wealth in the form of real property. Some families engage in sophisticated estate planning to ensure the passage of generational wealth but those with smaller estates are more likely to use a simple will or to die intestate. For lower-income families, most of an estate consists of real property.
If the landowner dies intestate, the real estate passes to the landowner’s heirs as tenants-in-common. In a tenancy-in-common, any co-tenant has the legal right file an action with a court to partition the property.
Tenants-in-common are vulnerable because any individual cotenant can force a partition. Real estate investors may acquire a small undivided share of heirs’ property and file a partition action and force a sale. Using a partition by sale, an outside investor can acquire an entire parcel, sometimes at a price below its fair market value. This may deplete a family’s inherited wealth.
This bill provides to the heirs a series of due process protections; notice, appraisal, right of first refusal, right to a private auction, and if the other co-tenants choose not to exercise their right to buy the property, a commercial sale supervised by a court to ensure all parties receive a fair price and their share of the proceeds.
The act only applies to heirs’ property where one or more co-tenants must have received his or her property interest from a relative and only when there is no written agreement governing partition among the owners. If a property is not an heir’s property, the current partition statute will apply.
The bill would preserve the right of a co-tenant to sell his or her interest in inherited real estate while ensuring that the other co-tenants will have the necessary due process to prevent a forced sale to an outside investor.
The bill was reported to the House and will be referred to the Judiciary Committee.
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