Undivided Interest In Farmland And Iowa Farmland Partitions

Selling Farmland With Undivided Interests

In my career as a farmland auctioneer in Iowa, I’ve been witness to some very difficult ownership situations among siblings that have inherited farms as co-owners.  In at least a small percentage of the properties, I handle there is an absolute unwillingness on the part of 1 or more siblings to sell the farm.  By law, outside of some family farms owned in corporation tax structures, it is necessary for each and every heir with ownership to consent to the sale of the inherited farm real estate.  In a voluntary sale situation if there are 12 heirs and 11 consent to sale and 1 does not then the 1 will be able to stop the sale absent a partition proceeding by Iowa’s old laws.  We have watched with interest this year’s legislative session as Iowa Senate File SF2175 made its way through the process.  Iowa has typically remedied partitions by sale which has presented some difficult decisions for those wishing to keep the farmland.  They would be forced to bid at the auction or other agreeable means to buy back the property at market price ensuring that those divesting of the inheritance would be paid fair value.  This system had its issues and as an auction professional sometimes presented a difficult situation in providing a fair buying opportunity for the public and maintaining the integrity of the auction process.

Change has been afoot in the wake of the Newhall v. Roll lawsuit which commenced in 2016.  Court rulings coming from this case set the stage for a change to Iowa’s partition laws and modernizing how we deal with farmland real estate partitions.  On July 1, 2018, Iowa’s new partition law will take effect and persons inheriting Iowa farmland will finally have the ability to use owelty payments in the partition of farmland.  An owelty is an equalization charge or amount a co-owner must pay to another after a lawsuit or filing request to partition real estate so that each co-owner receives an equal “value.  The math possibilities can be endless in terms of what a situation may look like.  You could have 5 siblings inherit 3 farms and 1 does not want to sell.  You could have 7 siblings inherit 1 farm and 4 don’t want to sell and 3 do.  Any and every possible scenario is possible and owelty gives us a new way to deal with that versus just a sale although Iowa’s new owelty law will require the payment be made prior to the partition.

This will be new for Iowa, we have never had this option before while most other states have and I think it will be a welcome change, even for those of us in the business of selling farmland.  It allows those situations to be remedied outside of the public auction arena which I believe is a positive development for both auctioneers and family farms.

If you want to learn more about Iowa farmland partitions here are a couple links that provide in-depth details.

A Completely New Partition Law is Coming to Iowa

Iowa Supreme Court Nixes Partition in Kind

If you are in a situation where your family doesn’t agree it is always best to seek legal advice from a qualified professional that specializes in partition matters.  If you have questions about selling a farm we always available to visit with you and your family to help you understand the options that are available outside of the court system.  You can call me directly at 515-537-6633 anytime or if its more convenient you can schedule a consultation with me right here, just choose an available time on my calendar.

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