Fractional Interests in Land and Houses: The Heirs Property Problem
Did you know that somewhere between 11% and 25% of the real property in Georgia, with an estimated value of over $34 billion, is locked up in fractional interests that can prevent it from being used, sold or developed?* Known as heirs property, the problem stems from the many ways in which title to land and houses gets divided, usually unintentionally, among two or more people when the first owner dies. The successor owners become tenants in common, a state of ownership where each co-tenant has certain rights and obligations defined by law, but no one co-tenant can control the use, sale, or development of the property without the cooperation of the other co-tenants. Problems multiply when a co-tenant transfers her interest, or if she dies intestate, thereby further dividing the fractional interests. Many co-tenants of heirs property are unaware of their ownership, and it can be difficult in some cases to determine who all the owners are.
The Family Farm
At Watson Bonander, we frequently represent clients in disputes or litigation over their rights in heirs property. We have had several cases involving disputes over the family farm or what used to be a working farm. For example, some of the owners may want to keep the land for sentimental reasons or may want to keep it to use in ways that produce no income such as for weekend retreats from the city. Others may want to sell it either because it has become more valuable due to encroaching development or because they do not want to be burdened by paying a share of the taxes, insurance and other expenses associated with the property. The traditional legal remedy is what is called a partition action, where the court supervises physically dividing the land among the owners, or if that is impractical, orders the property to be sold to the highest bidder in a judicial sale. Partition actions are often economic disasters because the physical division of the land destroys the value, or because judicial sales rarely produce fair market value prices. Georgia has tried to address the problem of partition actions for heirs property by enacting the Uniform Partition of Heirs Property Act, O.C.G.A. § 44-6-180 et seq. The statute defines heirs property and provides some protections to prevent owners of heirs property from losing the value of the property in judicial sales.
Urban Properties
Heirs property, however, is not just a rural problem and it affects everyone directly or indirectly. There are houses throughout Atlanta, in both urban and suburban areas, that have become heirs property. An heirs property house may sit empty for years because none of the owners want to live there or because none can afford to buy out the fractional interests of the other owners. The house may also be acquired by speculators at a fraction of its value at a tax sale. In other cases, the people living in the heirs property house may not know that they do not have marketable title, and are surprised when they are unable to sell it, or in some cases, when they receive an eviction notice. We have represented clients in many of these unfortunate situations.
There is no one solution to the heirs property problem, but the first step is to recognize the danger the problem presents. Getting good legal advice about how to keep and transfer family land and houses may be the best investment you can make.
*Georgia Heirs Property Law Center, "Myths and Facts: Heirs Property in Georgia" (https://www.gaheirsproperty.org); David Pendered, "Georgia's Estimated $34-plus billion in heirs property could ease wealth, housing gap," (https://saportareport.com/columns December 2, 2019); see also, Caitlin Henderson, Heirs Property in Georgia, Common Issues, Current State of the Law, and Further Solutions, 55 Georgia Law Review 875 (2021).