A Look at the Newly Enacted Uniform Partition of Heirs Property Act (“UPHPA”)
Property being transferred from one generation to another by intestate succession is considered “heirs’ property.” According to Virginia law, when someone who owns real property dies without an estate plan, i.e., intestate, their heirs-at-law inherit ownership interests in the real property. If two or more heirs are entitled to receive an interest in the real property, the heirs will own the property as tenants in common.
Owning property as tenants in common is one of the most common ways that property is held. However, it is also one of the least stable forms of common ownership of real property as any of the owners can initiate a partition suit or sale of their interest. This often results in the forced sale of these properties and, ultimately, the loss of generational wealth which unfortunately disproportionately affects disadvantaged populations. For example, the rate of intestacy among African Americans is more than double the rate of intestacy among white Americans and only about twenty percent of African Americans have wills. Heir property therefore continues to be the leading cause of involuntary land loss among African Americans.
This prompted the American Bar Association’s Real Property Section and Trust & Estates Law Section to advocate for the passage of the Uniform Partition of Heirs Property Act (“UPHPA”). The UPHPA requires certain safety measures designed to protect heirs, including the following:
- A requirement for an independent appraisal of the property;
- The right to first refusal to purchase the share of the petitioner;
- In-kind division, if it can be done equitably;
- Factors to consider including sentimental attachment and ancestral value;
- Listing for sale at appraised value before an auction.
The UPHPA was first introduced by the Uniform Laws Commission in 2010 and is designed to remedy the problems those who own family real property face in keeping their property and their wealth within the family. The Act specifically targeted a few key elements of partition suits that have been historically unfavorable to heirs’ property. Virginia recently adopted provisions of the UPHPA for all partition actions filed after July 1, 2020.
Traditionally, courts have favored partition by sale over partition in kind, as many have developed and applied an economic test. A sale of real property will be ordered if this test shows that the hypothetical fair market value of the entire property is more than the aggregated fair market value of the sub-parcels that would result from a physical division of the property. This approach, however, overlooks the emotional and ancestral ties to the land.
Prior to the implementation of the UPHPA, partition sales often resulted in an involuntary loss of property rights and a loss of wealth proceeds from the sale of the property. The UPHPA has addressed a need for notice to all parties, the proper procedure for determination of value, suggests allowing co-tenants to buy out the rights of those filing for partition by sale, suggests partition alternatives, and lists elements that must be considered by the courts when making a final decision.
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