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Partition sales erode generational wealth and create housing and financial instability.
This article was originally published by Stateline, an initiative of The Pew Charitable Trusts.
When Karama Neal’s mother passed away in 2010, Neal became one of more than 150 heirs to 160 acres of family land in Arkansas first purchased in 1888 by her great-great-grandfather, Griffin Henry Belk, a former slave.
No one had lived on the property since the 1980s, when Neal’s great-uncle died. Neal was excited about being a co-property owner among many. She began looking for family members, until her father, who’s an attorney, warned that any one could force a partition sale, often leading to the loss of ownership.
“I stopped that work and looked for a solution,” Neal said.
Neal’s story is a common one among African American families, especially in the South. Informal successions of property ownership can create diminished claims to inheritance and situations that are ripe for corruption.
Provisions in the 2018 farm bill and new laws passed in 13 states since 2011 will help heirs' property owners like Neal and her family, but the changes came after roughly 85% of black-owned land with active farm operations already had been lost, in part because of laws negatively affecting owners of heirs property. (The census data represents active, black-owned agricultural land. It does not include leased or inactive black-owned agricultural land, or black rural landowners generally, which would yield higher figures.)
“Anything could have happened since 1888 to have us lose the land,” Neal said, “and for so many families, that’s exactly what happened.”
When property owners die without a will, their descendants, or heirs, share a claim to the estate — a situation known as heirs' property. But it takes only one heir who wants out of the arrangement to sell their share. They may need the money or no longer want to share in the responsibility of property ownership. Sometimes, there are so many heirs, dividing up the property into separate tracts isn’t feasible.
An heir may force a partition sale, which means the entire property is sold. Oftentimes, a predatory developer scoops it up at a deep discount.
Poor and disadvantaged communities have been the primary victims of partition sales, which experts consider to be the “most unstable form of common, real property ownership.” While many of those affected have been African American, heirs' property issues affect a range of people and communities, from whites in Appalachia, to Native Hawaiians in Hawaii, to Latinos along the New Mexico-Texas border, to middle-income white families with poor estate planning, according to Thomas Mitchell, a law professor at Texas A&M University in College Station.
Ultimately, the laws erode generational wealth and create housing and financial instability. Leading researchers estimate that between 12% and 30% of all rural properties lack clear title, according to Nick Bourke, who directs the consumer finance project at the Pew Charitable Trusts. (Pew also funds Stateline.)
But people in urban areas, particularly legacy cities, also are affected. Philadelphia, for example, had 14,000 properties in 2007 owned by deceased people whose heirs lack current titles, according to a study by Philadelphia VIP, which provides pro bono legal services.
“This is an economic mobility issue,” Neal said.
Farm Bill Recognition
In 1999, a federal judge ruled in a class-action lawsuit that the U.S. Department of Agriculture had wrongfully excluded black farmers from loans — often by using the lack of clear title as an excuse. Between the case, and a second settlement in 2010, farmers were awarded $2.35 billion.
Provisions in the 2018 farm bill, introduced by U.S. Sens. Tim Scott, a South Carolina Republican, and Alabama Democrat Doug Jones prevent similar discrimination. President Donald Trump signed the bill into law in December.
The law includes provisions for heirs to qualify for a USDA Farm Service Agency (FSA) farm number — akin to a driver’s license for agriculture — which unlocks key programs and enables participation in local FSA elections. The farm bill instructs Agriculture Secretary Sonny Perdue to come up with other forms of documentation when heirs lack a clear title.
But to fully make use of the farm bill protections, states must have enacted a Uniform Partition of Heirs Property Act.
Despite attempts to update the partition law, swift changes didn’t begin until the Uniform Law Commission, which crafts legislation to help stabilize statutory law across states, promulgated the heirs' property legislation in 2010.
The law covers three major partition law reforms: First, it gives co-owners the opportunity to buy out heirs who want to sell their share. Second, if a buyout doesn’t resolve the issue, a court may consider dividing the property between the owners or selling the property and dividing the proceeds equitably between the owners.
Its decision should be informed by economic and non-economic factors, such as the land’s sentimental, cultural or historic value or whether one or more co-tenants would be homeless without the property. Third, open market sales, rather than auctions, are preferred to ensure a higher sale price.
Nevada was the first state to pass the law in 2011. Ten more states followed through 2018.
Congress passes a farm bill about every five years, and it took time for heirs' property provisions to be included. Advocates say the 2018 farm bill’s historic inclusion of heirs' property provisions has focused attention on heirs' property issues. This year, 10 state legislatures and the District of Columbia considered protections for heirs' property owners.
Indiana was among the states where legislation didn’t pass. When a uniform act is introduced in the state legislature, the Indiana State Bar Association asks for a year to review it before taking a position, said Jeff Kolb, who chairs the association’s probate review committee.
State Rep. Mark Baker, a Republican, said Mississippi’s bill didn’t improve state law.
“You’d always bring yourself back full circle to, what is the state of title? And, in whom are we going to confirm ownership so that we can begin the process in making a partition determination in kind or by sale?" said Baker, chairman of the House Judiciary Committee.
And while Mississippians are free to convey their interest in property, and property owners can sell their interests as well, most buyers don’t want to buy an undivided piece of a property unless they’re related to the other owners, Baker said.
“I don’t have a whole lot of clients who are interested in coming in and buying a 25% interest in a 40-acre tract with people they don’t know,” said Baker, who runs a private law practice and is a candidate for state attorney general.
Reaching New Audiences
In 2013, Neal, the Arkansas co-heir, started a grassroots organization to advocate for her state to pass the uniform act. Lawmakers passed it unanimously in 2015, and it became law Jan. 1, 2016.
Neal, president of Southern Bancorp Community Partners in Little Rock, and her co-heirs are still working out clear title to the property, but the law at least allows them to begin the process, Neal said.
“There was no real way to get clear title without significantly risking the property,” Neal said.
Much of the scholarship around heirs' property has focused on African Americans in the South, so Mitchell, the law professor, sought to develop broader interest by universalizing the law’s effects.
“With a slight change in framing, we described a problem that impacts low-income, disadvantaged families, who are disproportionately people of color, but not exclusively,” Mitchell said.
In South Carolina, where African Americans have been disproportionately affected by partition laws, the law is named after Clementa C. Pinckney, a former Democratic state senator and an advocate for changes in partition law who was killed in the 2015 mass shooting at the Emanuel African Methodist Episcopal Church in Charleston.
The law passed despite facing opposition from a single senator, then-Republican state Sen. Paul Thurmond, son of Republican U.S. Sen. Strom Thurmond, a leading segregationist during the 1950s and ’60s who died in 2003.
Success in Southern states such as South Carolina made such laws seem easier for other states to enact, Mitchell said. Focusing on protecting property rights and family real estate wealth has resonated with audiences in Texas and Missouri, which named its law the “Save the Family Farm Act.”
But some states have surprised even Mitchell.
Montana enacted the law in a matter of weeks in 2013 when a family risked losing the ranch it held over several generations because a relative threatened a partition suit, Mitchell said.
Iowa had one of the country’s worst partition laws because these laws made a partition sale the preferred remedy even when the court could have ordered property physically divided, Mitchell said. But a dispute between two siblings who had inherited a nearly 500-acre family farm prompted a public outcry. The case went to the state Supreme Court, which affirmed a lower court decision that upheld the law by forcing a partition sale.
There haven’t been any broad studies on the impact of the heirs' property law, though advocates claim that anecdotal evidence suggests it has been effective. For example, in Texas, land in a partition case sold for $3 million instead of $1 million, which shows that open market sales yield better prices than the auctions typically used for partition sales, Mitchell said.
In some states, families who were under attack have breathing room to practice effective estate planning, according to advocates.
Neal said failed efforts in 2017 and again this year to repeal the law in Arkansas were noteworthy because “it seems unlikely there would be repeal efforts if the law weren’t being effective.”
But no one knows how prevalent heirs' property is. A 2017 study published by the USDA Forest Service, Southern Research Station, identified 38,120 acres as possible heirs' property in 10 mostly small, rural Georgia counties. The land represented between 11% and 25% of the total acres within the counties, and a total tax appraised value of more than $2 billion.
Arkansas and other states would benefit from similar data, Neal said.
“There is significant room for research on the prevalence of heirs' property,” Neal said. “There’s often a misunderstanding about where it is. People think it’s only a rural issue, and it’s not.”
April Simpson is a staff writer for Stateline.