With a name like Grandison Grandberry, how could a man fail?

Grandison was born a slave near Memphis, freed after the Civil War and by hard work, luck and who knows what else, put together almost 150 acres of farmland outside of Fayette County, Tennessee. Here, he escaped the sharecropping and tenant farming horrors of the post-Civil War South. The old line that “you ain’t a man what ain’t got land” held no shame for him.

Grandison farmed it with his wife, Fannie, his nine children and his extended family, watching things grow and wither until he passed in 1910. He left no will. His wife maintained the land until she died in 1919 also without a will. Then some of the children and grandchildren lived in the homeplace for generations.

Finally, in the 1970s, one of the descendants went to a lawyer to figure out who owned the land. The attorney went to work seeking to determine the bloodline of Grandison and Fannie Grandberry.

Many, many descendants owned the property. Some of them did not know it and looked for an easy windfall. Others wanted to clean up the title so the property could be borrowed against, partitioned and all the other things an owner can do with clear title. All of them had different motivations, different things going on in their lives, but not many of them really wanted to be farmers like Grandison and Fannie.

With so many owners, the legal solution was a partition action. The law does not require people to own land together if they don’t want to. Tennessee gives a co-tenant or joint property owner the right to partition the jointly owned property. The partition can be in kind, where the property is physically divided among the owners, or partition by sale, where the property is sold by the court and the proceeds divided by the owners.¹

Even when there are only two co-tenants, each has equal rights, even to the same bed and bathroom.² This sometimes creates an impossible mess and partition statutes exist to help families resolve these entanglements.

In the case of property owned by dozens of heirs like the Grandberry property, it would be nearly impossible to ever get a loan on the property. Likewise, giving an easement or license or dividing off a portion of the property would be fraught with risk. To truly transfer an interest in the property, every single part-owner would have to sign the transferring instrument.

Speculators caught wind of the possible Grandberry partition action. The record shows two fraudulent deeds, a $100,000 loan secured by a usurious $350,000 promissory note, a party’s attorney taking an interest in the property and years and years of litigation.

A partition action can be very expensive and emotionally draining for a family. It can also be an overly blunt tool. This is especially true concerning heir property.

In the Grandberry matter, as in other heir property cases, an outsider can find any heir willing to sell her share. The outsider can then file a partition action forcing a sale of the property. In many cases, the outsider, who may be a sophisticated investor, can wear out the other interest-owners until they also agree to sell their interests. When the court orders a sale, they are in prime position to buy out the other interests, often at forced-sale prices.

Historically, this approach has been particularly hard on Black farmers. A 2022 study showed that Black farmers lost $326 billion worth of land in the 20th century. Black farmers owned over 16 million acres of land in 1910 compared to 4.7 million acres in 2017. The loss was largely “due to discriminatory USDA lending policies and forced sales of co-owned land called heirs’ property.”³

The Uniform Partition of Heirs Property Act was developed to address this problem and has been recently adopted in Tennessee, codified in Tenn. Code Ann. 29-27-301 et. seq (the “Act”).

The Act protects the rights of the heirs by basically providing notice, establishing a fair market value, a right of first refusal and a strengthened preference partition in kind.

The federal Agriculture Improvement Act of 2018 made passage of the Uniform Act a requirement for certain priorities in federal loans. That federal act also provides loans for legal fees “[t]o assist heirs with undivided ownership interests to resolve ownership and succession on farmland that has multiple owners.” By passage of the Act, Tennessee made its citizens eligible for these loans.⁴

Provisions of the Act

The Act deals with many of the issues that arose in the Grandberry case and is mandatory in heirs property cases.

In Section 302, “heirs property” is defined as real property held as a tenancy in common where at least one of the co-tenants acquired the property from a relative and “20% or more of the interests are held by co-tenants who are relatives.”⁵

It also applies where at least 20% of the interests are held by an individual who acquired title from a relative (e.g. an investor), or where 20% of the co-tenants are relatives. In the most common situation, a parent dies without a will and his or her property is descended to children and grandchildren. If an investor buys out the interest of an heir or heirs, the Act still applies unless the investor manages to buy over 80% of the interests.⁶

When this definition of heirs property is met, Section 303(b) requires the use of the Act. “In an action under this chapter [being Chapter 27—Partition], the court shall determine whether the property is heir property.” If so, “the property shall be partitioned under this part.” It is the court’s responsibility to apply the Act even if the parties have not sought it. This has caused issues in other states and is likely to do so in Tennessee.⁷

Under Section 304, upon application of the Act, a petitioner who notices a party by publication must post “a conspicuous sign on the property” with the case information. The court may require posting the name of plaintiff and known defendants, and it may be the best practice to post such a sign preemptively.⁸

A fundamental part of the Act comes next: establishing the value of the property.

Determining the Value of the Subject Property

As in the Grandberry matter, a distant heir might feel that her interest is close to nil since she can do little to nothing with it. This results in heirs giving their property away or selling it for small sums. After a partition under the Act, the heirs should receive payment more closely aligned with the fair market value of the property.

Under Section 306(a), the Tennessee Act makes its most substantial deviation from the Uniform Act as to valuing the property. Paragraph (a) of Tenn. Code Ann. 29-27-306 provides that “if the court determines that the property that is the subject of a partition action is heirs property, then the court may consider the county’s tax appraised value.” This effectively sets the “county’s tax appraised value” as the default value. One of the parties must file an objection to the tax appraisal in order to force an appraisal of the property.⁹

While tax assessments are easy to apply, tax appraisals are not normally competent evidence of fair market value.¹⁰ As the real estate market of the last few years has shown, even appraised values can be much less than selling prices. Thus, it is very important for the practitioner to require an appraisal.

The court has discretion to make an independent assessment of the property value if an appraisal too costly. The court can also consider “other evidence of value” besides the appraisal. Also, if all the parties agree to a value, then that value shall be adopted by the court.¹¹

The Buyout Provisions

Once the fair market value is determined, the buyout provisions of the Act come into play. Any co-tenant may request partition by sale by providing notice to all parties. However, under Section 307(a), that co-tenant is subject to being bought out by any other co-tenant who wants to buy her share.

A co-tenant seeking to buy out the co-tenant requesting partition has 45 days in which to file an election with the court to do so. Thus, in the common Investor-Forcing-a-Sale circumstance, the Act prohibits the investor from acquiring the property if any other party is willing and able to buy her share. The investor can still get a great return on her investment if she bought heir interests at a discount and can now sell them for fair market value, but it may keep the property in the family.¹²

The price of this sale is the fair market value times the fractional ownership of the co-tenant requesting the partition. So if the fair market value is $100,000 and there are four heirs, then each share should sell for $25,000. A buying co-tenant would then have a half interest while two others would have one-quarter interests, and the co-tenant requesting partition would be out of the picture. More than one co-tenant can buy, and the bought share is split up among the buying co-tenants. In the same example, two co-tenants could each purchase a one-eighth share from the co-tenant requesting partition.¹³

After this 45-day election period, a party may move the court to determine the allocation of interests. If only one co-tenant steps up to buy the seller’s share, then that co-tenant adds the seller’s share to her own. If more than one co-tenant seeks to buy the seller’s share, then the court divides up the seller’s share. If no co-tenants step up to buy the seller’s share, then the court shall resolve the partition in another way.

Section 307(e)&(f) detail what happens if the buying co-tenant or co-tenants do not pay the price for the interest. The court basically conducts a 20-day “savings round” wherein any interest purchaser that came through with her payment, can also purchase the interest for the co-tenant who failed to make her payment.¹⁴

Paragraph (g) allows a co-tenant who is purchasing an interest to ask the court to authorize a sale of the interests of all co-tenants named as defendants that were served with the petition but did not appear in the action. This allows the court to clear up possible interest holders that are distant, or uninterested. The comments to the Uniform Act mention that it is also possible that these co-tenants “do not believe the court really has the power to take away their interests” or that resisting is futile. Other co-tenants may “not have the money to hire counsel or the persistence or capacity to read and respond to pleadings.”¹⁵ Besides being concerns that the court should weigh in making the determination to sell, these considerations are also useful to an active co-tenant and her attorney who want to preserve the family land.

Partition In Kind

At this point in the process, a partition in kind is still available if a co-tenant has requested it. Of course, the fewer interest holders, the more likely that a partition in kind is feasible. Section 308 provides that the court may, upon motion and hearing, order a partition in kind to the remaining co-tenants so long as a partition in kind will not result “in great prejudice to the co-tenants as a group.”

Partition in kind is preferred and the court has discretion to require one party “to pay one (1) or more other co-tenants amounts so that the payments, taken together with the value of the in-kind distributions to the co-tenants, will make the partition in kind just and proportionate in value to the fractional interests held. This “owelty” or “boot” payment shows the preference the Act has for partition in kind over a sale of the property.¹⁶

Section 309, as titled, provides the court the considerations for partition in kind. The comments to the Uniform Act stresses that in heir property cases, the court must consider “the totality of the circumstances,” not just the economic utility of the property division.¹⁷ As such, the section lists seven considerations including the catch-all “any other factor.” A trial court must weigh “[a] co-tenant’s sentimental attachment to the property” and “[e]vidence of the collection duration of ownership” compared to more measurable items such as “[w]hether the heirs property practicably can be divided.”¹⁸

Paragraph (b) requires that if partition in kind was not requested or is not feasible, then the court shall order a partition by sale of the property.

Partition By Sale

As mentioned pertaining to Section 308, if the court does not order partition in kind, and a co-tenant has requested it, the court must order a sale of the property. Section 310 provides the instructions for this sale. The court must assess “the method of sale that is most economically advantageous and in the best interest of the co-tenants as a group.” The section lists the only three options as “an open-market sale, a sale by sealed bids, or an auction.” In some jurisdictions, Tennessee courts have held family-only auctions where only interest holders can offer bids. Presumably this would still be possible as a form of auction.

Paragraph (b) of Section 310 provides for the appointment of a real estate broker to offer the property for sale. In another deviation from the Uniform Act, a “special commissioner” may also be appointed to offer the property for sale.¹⁹ The broker or commissioner must offer the property for sale for a price “no lower than the determination of value” established by the court.

The remaining paragraphs of Section 310 provide for situations where there are no acceptable offers to purchase. The court can simply accept a lower offer, or have the property sold at auction. If the purchaser is one of the selling co-tenants, she “is entitled to a credit against the price in an amount equal to the purchaser’s share of the proceeds.”

Applying the Act in Tennessee

The Uniform Act has been widely praised as a push back for those who are “land rich but cash poor.” However, there are criticisms. In many situations, the heirs property is sitting idle and unused. Not every situation is tragic and an investor will at least put the property “back in circulation” for housing or farming.

The Act is mandatory and a multi-step process. Often in litigation, parties get tired of the fight and want to resolve the issue. However, since the Act is mandatory, early resolution of the litigation difficult. In neighboring Georgia, the Act has been interpreted on appeal three times, and in all three cases, the Court of Appeals has vacated the trial court’s judgment. In every case, provisions of the Georgia Partition of Heirs Property Act were not properly followed by the trial court.­²⁰

Also, there are still opportunities to take advantage of unsophisticated heirs. Land with title issues is worth less than land without title issues and investors know this. For instance, an heir may see her share of heirs property as useless and worthless and sell to an investor for a very low price. If the investor pushes for a partition, the other heirs will have to buy her share at the fair market price, which assumes that title issues have been resolved. This still leads to a windfall.

As a legal advocate, the reader should realize how much he or she brings to the table. Besides just the ability to represent a client in court, the advocate has connections, knowledge and relationships that the client may not have. The knowledge of hard money or bridge lenders, the ability to seek loans from the federal government specifically for this purpose, access to realtors, surveyors and soil testing may all be foreign concepts to a property owner who rarely deals in land sales and title issues. Most real estate attorneys will have a basic knowledge of these people and processes just from working in the industry.

The property once belonging to Grandison Grandberry was fought over for about 25 years, from the time a descendant first inquired about who owned the property, until the court of appeals issued its holding. The Act would have provided a slightly cumbersome but sure way of resolving the property title issues, and would have given ambitious family members a real chance at keeping the family farm. Instead, what once had meant so much to Grandison was sold off with much of the value going to attorneys’ fees and transaction costs. It was a tragedy that should not have been. |||

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SAM GOWIN practices in Chattanooga and Ringgold, Ga. and is a graduate of the University of Georgia School of Law. Gowin previously worked as an electrical engineer in the nuclear power and custom machinery fields after graduating from the Georgia Tech in 1999. Gowin handles real estate litigation and transactional matters in Southeast Tennessee and Northwest Georgia.

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NOTES

1. Tenn. Code Ann. 29-27-101 et. seq.
2. See McCants v. McGavock, No. E2017-01712-COA-R3-CV, at *7 (Tenn. Ct. App. May 1, 2019).
3. Dania V. Francis & Darrick Hamilton & Thomas W. Mitchell & Nathan A. Rosenberg & Bryce Wilson Stucki, 2022. “Black Land Loss: 1920−1997,” AEA Papers and Proceedings, American Economic Association, Vol. 112, at 38-42, May; Douglas, Leah, U.S. Black farmers lost $326 bln worth of land in 20th century-study, May 2, 2022, Reuters, www.reuters.com/world/us/us-black-farmers-lost-326-bln-worth-land-20th-century-study-2022-05-02 (last visited Sept. 30, 2022).
4. Pub. L. No. 115-334.
5. Tenn. Code Ann.. 29-27-302(5)(A).
6. Tenn. Code Ann. 29-27-302(5)(C)(i).
7. E.g. Faison v. Faison, 811 S.E.2d 431 (Ga. Ct. App. 2018) (finding the Act was not followed even where the appealing party was in default).
8. Tenn. Code Ann. 29-27-304(b).
9. The Uniform Act makes the appraisal mandatory. This tax appraisal provision was made by amendment.
10. “[I]n Tennessee and elsewhere ‘[i]t is the overwhelming weight of authority that assessed value is not competent direct evidence of value for purposes other than taxation.’” Carpenter v. Sims, No. E2007-0622-COA-R3-CV, at *6 (Tenn. Ct. App. Nov. 7, 2007) citing C.C. Marvel, Annotation, Valuation For Taxation Purposes to Show Value for Other Purposes, 39 A.L.R.2d 209 (1955).
11. Tenn. Code Ann. 29-27-306 (b),(c)&(f).
12. Tenn. Code Ann. 29-27-307(b).
13. Tenn. Code Ann. 29-27-307(c).
14. Partition of Heirs Property Act, Uniform Law Comm., https://bit.ly/3eHnOJy (last visited Sept. 30, 2022).
15. Id.
16. Tenn. Code Ann. 29-27-308(c); see Fraker v. Fraker, 603 S.W.2d 135 (Tenn. 1980) for a rare reference to the old equitable remedy of owelty in Tennessee law.
17. Partition of Heirs Property Act, Uniform Law Comm., Comment 1, p. 26, https://bit.ly/3eHnOJy (last visited Sept. 30, 2022).
18. Tenn. Code Ann. 29-27-309.
19. Tenn. Code Ann. 29-27-310(b).
20. Faison v. Faison, 811 S.E.2d 431 (Ga. Ct. App. 2018) (finding that even with agreement among all non-defaulting parties, the act had to be applied and followed); Matabane v. Whatley, No. A22A0152 (Ga. Ct. App. May 27, 2022) (requiring a hearing on in kind distribution among the two only heirs); Morton v. Pitts, 357 Ga. App. 513 (Ga. Ct. App. 2020) (vacating for not ordering an appraisal).