Uniform Partition of Heirs Property Act
Imagine a scenario in which you, your sister, and your brother inherit a valuable piece of commercial property in Miami which you own together. The property has been in your family for generations, and upon your parents’ passing, you receive a 33.3% interest in the property together with your siblings. In essence, you all own it together – since your parents assumed you would remain one big happy family, owning and maintaining the property while staying in business together for the next generation.
But what if you have been estranged from your siblings for years, and you do not want to stay in business together? What if you no longer like or trust your sister and brother and have reason to question their judgment? Can you get out of the problem in which your parents put you and your siblings?
In August of 2020, several months after Covid hits, you hire an attorney to explore your options and consider filing a partition action to force the sale of the commercial property. However, you worry that the Court may auction off the property at a heavily discounted price below market value. Your lawyer advises you that you are in luck because, as of one month ago, in July 2020, the Florida legislature passed a bill known as the Uniform Partition of Heirs Property Act (“Heirs Property Act”). See §§ 64.201 —64.214, et seq. You learn that your family’s property qualifies as “heirs property” because (1) there is no contractual agreement binding all the cotenants which governs the partition of the property; (2) at least one of the cotenants acquired title from a relative, and (3) more than twenty percent (20%) of the interest in the property is held by cotenants who are relatives. See Fla. Stat. § 64.202.
Your lawyer explains that the biggest difference between a “standard” partition action and partition under the Heirs Property Act is that, under the Act, the Court is required to make an adjudication as to the value of the property and provide co owners with the right to buy out the party or parties requesting partition by sale. See Fla. Stat. §§ 64.206, 64.207.
A year has passed, and suddenly, the Miami real estate market is booming, and property values have sky-rocketed. Prices have increased by up to forty percent (40%) since the beginning of Covid! So, in August 2021, you decide it is time to sell the property while the market is hot. You retain the attorney to file the partition action pursuant to the Heirs Property Act. However, your brother and sister refuse to sell, decide to exercise their right of first refusal, and instead, elect to buy you out.
Unfortunately, your siblings’ buyout offer is far below what you would make if you sold the property on the open market, and you do not want them interfering with the sale. Because you cannot agree with them on a method to value the property, pursuant to the Heirs Property Act, the Court holds an evidentiary hearing to determine the fair market value of the property. See Fla. Stat. § 64.206(6). The Court considers and weighs the evidence introduced by all parties, including an independent appraisal you submitted and the testimony of a qualified commercial appraiser and broker you retained to testify regarding the steep increase in property values and market shift since Covid began. The Court finds your evidence compelling and ultimately determines that the fair market value of the property is ten million dollars ($10,000,000.00). Therefore, in order to prevent a partition by sale, your siblings must come up with over three million dollars ($3,000,000.00) to buy out your interest in the property. Since they do not have the funds to buy you out, the property is put up for sale on the open market as dictated by the Heirs Property Act. See Fla. Stat. § 64.210.
Under the Heirs Property Act, the “determination of value” by the Court sets the floor for a potential sale – i.e. the property must be sold for no less than ten million dollars. Id. at § 64.210(3). The property ultimately sells for $10,850,000.00. You receive not only the proceeds from the sale for your interest in the property, but you also receive an additional significant sum since the law requires that the final division of sale proceeds must be adjusted to fairly compensate you for your financial contributions towards the property, including all the improvements you previously made to the commercial property years ago to increase its value. See Fla. Stat. § 64.206(7). All in all, you walk away with a large sum of money and the benefit of “no longer being in business” with your estranged family members.
The Uniform Partition of Heirs Property Act is a new piece of legislation that many are unfamiliar with. If you find yourself in a situation in which you are battling with family members over a piece of co-owned property, Haber Law can help you navigate the partition process and ensure your rights are protected under the law.