USING LAND TRUSTS TO PREVENT SMALL FARMER LAND LOSS

Transcription

1 USING LAND TRUSTS TO PREVENT SMALL FARMER LAND LOSS Julius J. Zschau, Ulysses Clayborn, Andrew M. O Malley Editors Synopsis: In the century since African-Americans began to acquire real property in the American southeast, generations of intestacy inheritance have led to such drastic fragmentation of ownership this land that the law has had a difficult time equitably protecting the owners interests. In this Article, the authors present a brief overview of these fragmented real property interests Heirs Property and propose land trusts as a method by which all parties involved can avoid some of the significant problems that result. I. AFRICAN-AMERICANS RURAL RETENTION HEIRS PROPERTY A. Early Land Acquisition by African-Americans B. Tenancies in Common C. Impact of Tenancy in Common on Heirs Property D. Impact of the Partitioning of Heirs Property II. USING LAND TRUSTS AS A MEANS OF ALLEVIATING THE RURAL LAND-LOSS PROBLEM A. Introduction and Alternative Solutions B. Advantages of the Land Trust for Heirs Property Owners C. Introduction to the Land Trust D. Historical Julius J. Zschau is a shareholder of Pennington, Moore, Wilkinson, Bell & Dunbar, Tampa, Florida. He received his B.S. & J.D. degrees from the Univ. Illinois, and LL.M. from The John Marshall Law School. Mr. Zschau is a member of the American College of Real Estate Lawyers, past chair of the Real Property, Probate and Trust Law Section of the Florida Bar, past chair of the American Bar Association Land Trust Committee and of the Florida Bar Land Trust Committee. He is Co-Chair of the ABA s Task Force on Property Preservation, and is Group Chair of the Hospitality, Community Recreation and Common Interest Developments Group. Ulysses Deke Clayborn is the Managing Member of Clayborn & Associates, LLC, a real estate law firm in Kansas City, Missouri, specializing in housing development. Prior to establishing the firm he served as the General Counsel to the Missouri Housing Development Commission, an agency which finances developers of affordable housing. He received his B.A. from DePauw University in 1981, his J.D. from the University of Missouri-Kansas City and a LL.M. in taxation from Washington University. Andrew M. O Malley is a member of the American College of Real Estate Lawyers and real estate and finance partner with Carey, O Malley, Whitaker & Mueller, P.A., Tampa, Florida.

2 REAL PROPERTY, TRUST AND ESTATE LAW JOURNAL E. General Features of the Land Trust F. Effect of the Statute of Uses G. Creative Form of Land Ownership H. Florida s Law I. Multiple Ownership Advantages J. Tax and Related Considerations K. Special Concerns of Beneficiaries L. Drafting Considerations M. The Trust Agreement and Collateral Documents III. CONCLUSION APPENDIX A - State Land Trust Survey APPENDIX B - Model Land Trust Act APPENDIX C-1 - Beneficiary Agreement APPENDIX C-2 - Beneficiary Agreement I. AFRICAN-AMERICANS RURAL RETENTION HEIRS PROPERTY 1 A. Early Land Acquisition by African-Americans Upon arrival in this country, African-Americans began the quest for freedom and the fruits of liberty, including the acquisition of land. 2 Until the end of the Civil War, African-Americans had found it difficult to acquire land, due in large respect to most African-Americans status as slaves. 3 While some evidence exists of landownership by freedmen prior to the end 1 As used in this Article, the term Heirs Property refers to property interests that members of a family have inherited when land, typically rural land, has been passed from generation to generation through intestate succession, most often with no record of these transfers in any probate court records, or otherwise. As is noted in this Article, Heirs Property is particularly prevalent in African-American families in the Southeast, although similar situations may as frequently occur within Native-American families in the West, and incidents of such situations probably have occurred throughout the country. One of the most comprehensive reviews of the nature of, and problems associated with Heirs Property in the Carolinas and in other southern states, is Faith Rivers, Inequity in Equity: The Tragedy of Tenancy in Common for Heirs Property Owners Facing Partition in Equity, 17 TEMP. POL. & CIV. RTS. L. REV. 1 (2007) [hereinafter Rivers, Inequity]. 2 See generally, Thomas W. Mitchell, From Reconstruction to Deconstruction: Undermining Black Landownership, Political Independence and Community Through Partition Sales of Tenancies in Common, 95 NW. U. L. REV. 505, 523 (2001) [hereinafter Mitchell, Reconstruction to Deconstruction]. 3 See id. at 524.

3 FALL 2009 Land Trusts to Prevent Land Loss 523 of the Civil War, the greatest period of land acquisition occurred between the late 1800s and Initially, government initiatives assisted with the goal of land acquisition by African-Americans including: (1) General Sherman s Field Order No. 15, issued in January 16, 1865 (Sherman s Order); (2) the Bureau of Refugees, Freedmen, and Abandoned Land, established in March 1865 (Freedmen s Bureau); and (3) the Reconstruction Acts passed in March 1867 (Reconstruction Acts). 5 Sherman s Order declared that the Sea Islands, stretching from Savannah, Georgia to Charleston, South Carolina, and totaling 485,000 acres, to be abandoned property. 6 Sherman ordered that the Sea Islands be segmented into forty-acre plots and redistributed to African-Americans. 7 This act amounted to the greatest land-redistribution program benefitting African-Americans in this country s history. 8 The Freedmen s Bureau was established to provide medical, educational, and relocation services to African-Americans. 9 A major purpose of the Freedmen s Bureau was to oversee the redistribution of the land confiscated from members of the Confederacy to the newly freed slaves. 10 Despite its grand purpose, the Freedmen s Bureau accomplished very little in the area of land redistribution. 11 President Andrew Johnson opposed the practice of confiscation and the other penalties imposed upon former Confederates. 12 Instead, he issued pardons to many former Confederates and ordered the Freedmen s Bureau to restore the confiscated land. 13 The Reconstruction Acts were another governmental initiative directed to address the issues of the newly-freed slaves. 14 The Reconstruction Acts divided the ten Confederate states into five districts, each governed by a 4 See id. at See id. 6 See id. at See id. 8 See id. (citing RICHARD A. COUTO, AIN T GONNA LET NOBODY TURN ME ROUND: THE PURSUIT OF RACIAL JUSTICE IN THE RURAL SOUTH (1991)). 9 See Kristol Bradley Ginapp, Jim USDA Crow: Symptomatic Discrimination in Agriculture, 8 DRAKE J. AGRIC. L. 237, 239 (2003). 10 See id. 11 See id. 12 See id. at See id.; see also Mitchell, Reconstruction to Deconstruction, supra note 2, at See Act of Mar. 2, 1867, ch. 153, 14 Stat. 428, amended by Act of Mar. 23, 1867, ch. 6, 15 Stat. 2, amended by Act of July 19, 1867, ch. 30, 15 Stat. 14, amended by Act of Mar. 11, 1868, ch. 25, 15 Stat. 41.

4 REAL PROPERTY, TRUST AND ESTATE LAW JOURNAL federal military leader. 15 The federal presence created an atmosphere in which African-Americans were able to utilize their newly-acquired rights. 16 During Reconstruction, African-Americans were able to vote, protect their interests, and acquire land. 17 However, this period of federal protection was short lived because President Rutherford B. Hayes withdrew the federal troops from the South in Although some support for the distribution of land to ex-slaves existed, the government s policy ultimately failed to provide the support the ex-slaves needed. 19 Eventually, any land former slaves had gained was lost. 20 Despite the aforementioned setbacks, African-Americans continued to work to acquire greater landholdings. 21 Through hard work and guile, African-American landholdings increased dramatically after the Civil War. For example, by 1890, African-Americans owned 120,738 farms. 22 The coming decade would mark further increases, and by 1900, African-Americans owned 187,799 farms. 23 By 1910, African-American farm ownership had increased to 218,972 farms, 24 approximating fifteen million acres. 25 This would mark the peak of African-American landownership due to such factors as discrimination, 26 intimidation, 27 and migration to the North, See ENCARTA, African American History, Chapter XI, encyclopedia_ _5/african_american_history.html. 16 See id. 17 See id. 18 But see Rivers, Inequity, supra note 1, at See Ginapp, supra note 9, at See LOREN SCHWENINGER, BLACK PROPERTY OWNERS IN THE SOUTH (1990). 21 See Faith R. Rivers, The Public Trust Debate: Implications for Heirs Property Along the Gullah Coast, 15 S.E. ENVTL. L. J. 147, 152 (2006) [hereinafter Rivers, Public Trust Debate] (noting that 16,000 African-American families were able to acquire over 50,000 acres in the low country of South Carolina during the Reconstruction era). 22 See W. E. BURGHARDT DUBOIS, THE NEGRO 137 (Oxford Univ. Press 1970) (1915). 23 See Phyllis Craig-Taylor, African-American Farmers and the Fight for Survival, 26 N.C. CENT. L.J. 21, 29 (2003). 24 See DuBois, supra note 22, at See id. 26 See Mitchell, Reconstruction to Deconstruction, supra note 2, at 528 (discussing the impact of discrimination by USDA). 27 See Todd Lewam & Dolores Barclay, Torn from the Land, pts. 1 & 2, ASSOCIATED PRESS, Dec. 2 3, 2001, available at 03.htm, 28 See Mitchell, Reconstruction to Deconstruction, supra note 2, at 530.

5 FALL 2009 Land Trusts to Prevent Land Loss 525 African-American landownership experienced a steep and continuous decline thereafter. 29 This decline is evidenced by the 1997 Agriculture Census, which lists African-American farm ownership at approximately 1.1 million acres (for fully-owned farms). 30 Although factors such as discrimination, 31 intimidation, and migration have contributed to African-American land loss, a study conducted by the Emergency Land Fund now known as the Federation of Southern Cooperatives Land Assistance Fund (the Federation) concluded that land transfers by intestate succession 32 and partition sales were the chief causes of African-American land loss. 33 Historically, the majority of real property owned by African-Americans at death has not been transferred by will See id. at 509 (discussing the stabilization of African-American ownership by 1910, followed by a steep decline after 1920). 30 See U.S. DEP T OF AGRIC., 1997 CENSUS OF AGRICULTURE 25, available at Data/us-51/us1_17.pdf (Table 17). However, the 2007 census shows for full ownership, Black ownership increased to over 1.6 million acres. See U.S. DEP T OF AGRIC., 2007 CENSUS OF AGRICULTURE 58, available at Full_Report/Volume_1,_Chapter_1_us/st99_1_ pdf (Table 54). Moreover, another survey done in 1999, which included lands not actively being farmed by the owners, showed that black agricultural landowners owned 7,629,000 acres of farmland. See Thomas W. Mitchell, Destabilizing the Normalization of Rural Black Land Loss: A Critical Role of Legal Empiricism, 2005 WIS. L. REV. 557, 578 (2005) [hereinafter Mitchell, Destabilizing]. 31 See Mitchell, Destabilizing, supra note 30, at 567 (discussing Associated Press investigative reports of land loss through discrimination); see also Mitchell, Reconstruction to Deconstruction, supra note 2, at 506 (discussing the landmark case Pigford v. Glickman, 185 F.R.D. 82 (D.D.C. 1999), in which the USDA settled discrimination claims, but the settlement failed to restore lands to the class members). 32 See Phyllis Craig-Taylor, Through a Colored Looking Glass: A View of Judicial Partition, Family Land Loss, and Rule Setting, 78 WASH. U. L.Q. 737, (2000) (describing the unfortunate consequences of allowing property to be distributed through intestacy). 33 See generally Mitchell, Reconstruction to Deconstruction, supra note 2, at 511 (citing, among others, THE EMERGENCY LAND FUND, THE IMPACT OF HEIR PROPERTY ON BLACK RURAL LAND TENURE IN THE SOUTHEASTERN REGION OF THE UNITED STATES (1984), published by the Government Printing Office, but unfortunately no longer generally available). Cf. Mitchell, Destabilizing, supra note 30, at 598 ( [M]y research project in rural North Carolina has led me to question the degree to which partition sales have been a source of black land loss, at least with respect to involuntary black land loss in the past thirty to forty years. ). But cf. Rivers, Inequity, supra note 1, at 33 (questioning the applicability of this study to land loss along the coast). 34 See Craig-Taylor, supra note 32, at 748; see also J. Banding Holman, Time to Move Forward on Heir s Property, S.C. LAW., July-Aug. 2006, at 21; cf. Mitchell, Reconstruction

6 REAL PROPERTY, TRUST AND ESTATE LAW JOURNAL This is due to many factors, including the lack of access to attorneys. 35 Unfortunately, many owners of Heirs Property mistakenly believe that it cannot be sold or lost and thus there is no need for wills. 36 As a result, the property has been passed to future generations by intestate succession. 37 Under intestate succession, when an individual dies without leaving a valid will, the property is distributed to the decedent s heirs as provided by state law. 38 Modern intestacy statutes provide that where there is more than one qualifying heir, the heirs hold the property by tenancy in common. 39 B. Tenancies in Common Tenancies in common are the most common form of co-ownership in land. 40 It is a form of co-ownership in which two or more cotenants possess an undivided interest in the whole property. 41 That interest, although undivided, is held severally. 42 Thus, while each tenant in common has his or her own distinct and several title to the land, none of the co-owners possess a separate deed that specifies their specific shares or portions of the parcel of land. 43 In addition, tenancies in common grant a unity of possession, by which all owners have the right to enjoy and utilize the entire property. 44 As a result, each cotenant has a separate interest in the rents, income, and profto Deconstruction, supra note 2, at (questioning whether this pattern is unique to rural black families, and the causes). 35 See, e.g., Malcolm A. Meyer, Louisiana Heir Property, Solutions for Establishing Record Title, 55, LA. B.J. 328, 329 (suggesting that those heirs in possession may not want to alert other family members of their rights, may not want to incur a property reassessment which they believe can be avoided by intestacy, and may believe that they are better protected against creditors if they avoid not formally documenting title changes at death); see also Rivers, Inequity, supra note 1, at 28 (describing Heirs Property owners fear of the legal system). 36 See Rivers, Inequity, supra note 1, at 5, 52 (discussing the many misconceptions Heirs Property owners have regarding their rights and responsibilities regarding their ownership of Heirs Property). 37 See id. at 9, See Rivers, Public Trust Debate, supra note 21, at See 4 DAVID A. THOMAS, THOMPSON ON REAL PROPERTY 32.06(a) (2d ed. 2004); 7 RICHARD R. POWELL & MICHAEL ALLAN WOLF, POWELL ON REAL PROPERTY 50.02[6] (2007). 40 See 4 THOMAS, supra note 39, See id. 42 See id See Mitchell, Reconstruction to Deconstruction, supra note 2, at See 4 THOMAS, supra note 39, 32.07(d); 7 POWELL & MICHAEL, supra note 39, 50.01,

7 FALL 2009 Land Trusts to Prevent Land Loss 527 its generated from the utilization of the property. 45 Accordingly, if any cotenant obtains an economic benefit from third parties through the exploitation of property, that cotenant must account to the other cotenants for any rents or profits received. 46 The joint tenancy is the second-most-common form of co-ownership of real property. 47 In order to better understand the relationship between intestate succession and African-American land loss, we must obtain a greater understanding of tenancy in common and, to a lesser extent, joint tenancy. 48 The greatest difference between these two forms of joint ownership is that the joint tenancy provides for the right of survivorship and the tenancy in common does not. 49 This feature dictates that the entire interest of each joint tenant terminates at death, and the remaining joint tenants now are entitled to larger shares. 50 For this reason, joint tenancies tend to consolidate the 45 See 7 POWELL & MICHAEL, supra note 39, See 4 THOMAS, supra note 39, See Craig-Taylor, supra note 32, at 744 (discussing the differences between a cotenancy and a joint tenancy). 48 See Mitchell, Reconstruction to Deconstruction, supra note 2, at ; Rivers, Inequity, supra note 1, at 2 4. Ownership by joint tenancy differs from ownership by tenancy in common in several ways. One such difference is evidenced in formation. To establish a joint tenancy, the unity of time, interest, possession, and title must be present. Accordingly, joint tenants have one-and-the-same interest, accruing by one-and-the-same conveyance, commencing at one-and-the-same time, and held by one-and-the-same undivided possession. To preserve a joint tenancy, the joint tenants must maintain the unity of time, interest, possession, and title. As all joint tenants possess one-and-the-same interest, a transfer by any cotenant will affect that interest. For instance, where there are only two joint tenants, a transfer by one joint tenant will terminate the joint tenancy and convert it into a tenancy in common. However, if there are three or more joint tenants, a conveyance by one to a third party will sever the joint tenancy only as to the conveying joint tenant s interest. The incoming cotenant will hold his interest as a tenant in common, while the non-conveying cotenants will continue as joint tenants. Therefore, property held in joint tenancy may not be transferred by a joint tenant without affecting the status of the interest. However, because tenancy in common does not require the unities of time, interest, possession, or title, the cotenants may acquire their interests at different times by different conveyances and hold in different percentages. As stated above, the interest, although undivided, may be several in nature. See generally 4 THOMAS, supra note 39, 31.08(b); 20 AM. JUR. 2D Cotenancy and Joint Ownership 22 (2009). 49 See 4 THOMAS, supra note 39, See id Although many often say that the surviving joint tenant received his former joint tenant s share by survivorship, technically, the deceased s interest merely terminates with her death, leaving the other joint tenant as the only owner. Nothing passes ; rather, the decedent s interest simply ends. See id.

8 REAL PROPERTY, TRUST AND ESTATE LAW JOURNAL number of ownership interests by vesting title in the surviving joint tenant at the death of a joint interest holder. 51 Tenancies in common do not contain a survivorship feature because each cotenant possesses the right to transfer his or her interest during life and at death. 52 A cotenant does not have to obtain the consent of the other cotenants prior to exercising this right 53 as it is enjoyed by all cotenants regardless of the size of their undivided interest. 54 Each cotenant possesses the right to dispose of the cotenant s interest at death. 55 Where no valid will exists, the cotenant s interest passes by intestate succession to the cotenant s heirs. 56 Therefore, when property passes by intestate succession, the heirs take a proportionate share and hold as cotenants. With the death of each cotenant, the number of owners increases because the cotenant s descendants take that interest by representation. 57 Over multiple generations, this practice can result in hundreds, or even thousands, of cotenants holding the land. The highly-fragmented land passed in this manner is referred to as Heirs Property. 58 C. Impact of Tenancy in Common on Heirs Property The Federation provided an illustrative example of how splintered an interest can become in its study, Impact of Heirs Property. 59 The example involved a Mr. John Brown from Rankin County, Mississippi, who purchased a farm in Mr. Brown died intestate in 1935, and the land passed by intestate succession to his heirs. The land passed in this manner for several generations. By 1978, sixty-seven individuals held an interest in the property, the smallest of which was a 1/19,440th share See John W. Fisher, II, Creditors of a Joint Tenant: Is There a Lien After Death, 99 W. VA. L. REV. 637, 640 (1997). 52 See 4 THOMAS, supra note 39, See id. 54 See id. 55 See id. 56 See 7 POWELL & MICHAEL, supra note 39, 50.02[6]. 57 See UNIF. PROBATE CODE 2-106(b) (amended 1997), 8 pt. 1 U.L.A. 85 (1998). 58 See generally Hanoch Dagan & Michael A. Heller, The Liberal Commons, 110 YALE L.J. 549, 606 (2001). 59 See Mitchell, Reconstruction to Deconstruction, supra note 2, at See id. (citing THE EMERGENCY LAND FUND, THE IMPACT OF HEIR PROPERTY ON BLACK RURAL LAND TENURE IN THE SOUTHEASTERN REGION OF THE UNITED STATES, (1984), no longer generally available).

9 FALL 2009 Land Trusts to Prevent Land Loss 529 As a result of several characteristics of the tenancy in common form of co-ownership, properties passed to heirs over generations by intestate succession are more susceptible to land loss than those held by joint tenancy. 61 One such characteristic is the ability of a cotenant to transfer their interest, because it permits the fragmentation of ownership interests. This ability, as illustrated, increases the number of cotenants and makes the property more susceptible to land loss. 62 The fragmentation of ownership interests negatively also affects the owners ability to reach consensus on the management of the property. 63 The greater the number of cotenants, the more difficult it is to manage the property effectively. 64 Further, while the original owners of the property were natives of the community, a portion of the second- and third-generations of heirs, due to the mobility of the modern population, likely are not. 65 Consequently, as the number of cotenants increases, through fragmentation, the number of nonresident cotenants also increases. Therefore, the fragmentation of ownership interests and dispersal of owners can create a situation in which a substantial portion of cotenants are strangers to one another. 66 This creates a phenomenon in which the cotenants are constituted into two groups resident cotenants and nonresident cotenants. There appears to be a corresponding relationship between the proximity of the cotenant to the property and the cotenant s material participation. That is, resident cotenants are more likely to materially participate in the management of the property than nonresident cotenants. 67 Thus, the fragmentation of ownership interest and dispersal of the cotenants to disparate parts of the country become obstacles to the effective management of the property. 68 These obstacles, left unchecked, can frustrate the cotenants to the point that one exercises the right to sell an ownership interest. If this occurs, the property could be sold either to a member of the family or to an 61 See generally Rivers, Inequity, supra note 1, at See id. at See Mitchell, Reconstruction to Deconstruction, supra note 2, at 518 (discussing examples of this problem). 64 See Dagan & Heller, supra note 58, at 606 (noting that without unanimous consent cotenants may neither manage, mortgage, nor sell any fraction of the Heirs Property tract). 65 See Mitchell, Reconstruction to Deconstruction, supra note 2, at See id. at See id. at See id.

10 REAL PROPERTY, TRUST AND ESTATE LAW JOURNAL outsider. 69 This choice could be the first step toward a potential land-loss situation. Another characteristic of the tenancy in common is the lack of defined obligations which cotenants owe to one another. While the law generally articulates the rights enjoyed by cotenants, 70 it does not as clearly describe their corresponding obligations. 71 This absence can create a situation which makes the land more susceptible to loss. For example, no formal rules exist regarding the obligation of cotenants to contribute to the operational expenses of co-owned land. 72 This absence of defined obligations permits a cotenant to obtain the benefits of ownership without performing any corresponding duties. Consequently, there are instances in which certain cotenants incur a disproportionate share of the property s operational expenses. The decision of these cotenants to pay more than their proportionate share of these expenses may be motivated by a desire to keep the land in the family and not economically based. 73 Examples of these disproportionate expenses include the payment of ad valorem taxes, mortgage payments, and operational expenses. In these cases, the occupying cotenant may recoup the disproportionate share of the operational expenses by offsetting them against the gross proceeds generated by operation. 74 However, if the property does not generate a profit, the other cotenants are not required to reimburse that cotenant for the excess operational expenditures. 75 Moreover, a cotenant s failure to pay a proportional share of operational expenses is almost without consequence because it does not reduce their percentage interest in the property. 76 The inability to force a cotenant to bear a proportional share of operational expenses creates the freerider problem. 77 If the freerider problem becomes too great, contributing cotenants may become so frustrated that one will decide to sell an interest in the property. 78 If this sale is to an 69 See id. at See 4 THOMAS, supra note 39, See id. ( [T]he law governing the relations between cotenants is marked by a degree of vagueness; rules are applied under all the circumstances. ). 72 See Mitchell, Reconstruction to Deconstruction, supra note 2, at See generally Rivers, Inequity, supra note 1, at 70 (explaining the importance of continued family ownership). 74 See 7 POWELL & MICHAEL, supra note 39, 50.04[1]. 75 See id [2]. 76 See id. But, payment of more than a cotenant s share may entitle that cotenant to an adjustment at partition. See id. 77 See Mitchell, Reconstruction to Deconstruction, supra note 2, at See id. at

11 FALL 2009 Land Trusts to Prevent Land Loss 531 outsider, it could cause a land-loss situation. Disagreement by the heirs on the payment of real estate taxes creates the same problem. If the taxes are not paid, the county auctions off the property, and the family likely loses their property. 79 D. Impact of the Partitioning of Heirs Property As illustrated earlier, each cotenant possesses the right to sell that cotenant s undivided interest in the property. 80 However, the value of an undivided interest in property may not be worth very much. Further, the market for such an interest may consist mainly of cotenants who desire only to expand their ownership interests. There is typically a greater market for the entire parcel of land. While any cotenant may utilize the entire property, that cotenant cannot dispose of it without the consent of the other cotenants. 81 In order to sell the entire parcel, a cotenant either must acquire all the interests held by the other cotenants or file a partition action. 82 The acquisition of all the other ownership interests would require a lot of time and effort, and the inadvertent omission of a single parcel may render the transaction ineffective. 83 However, a cotenant interested in selling the entire parcel of land may enlist the assistance of the courts by filing a partition action. 84 Upon filing a partition action, the court will order either physical or in-kind partition, or a forced-sale partition. 85 An in-kind partition consists of a physical division of the property into its many ownership interests. 86 This division dissolves the unity of ownership interest that once joined all interests, and the petitioning cotenant then can sell that cotenant s interest without endanger- 79 See Rivers, Public Trust Debate, supra note 21, at 153 (describing the common failure to set up a plan for tax payments, which often results in the property loss by tax sale); see also Holman, supra note 34, at 23 (noting the common misconception among co-owners that paying a larger share of the taxes gives that individual a greater ownership interest in the property). 80 See supra Part I.B. 81 See 4 THOMAS, supra note 39, See id. 83 But cf. Meyer, supra note 35, at 330 (noting that Mississippi now permits the use of an heirship affidavit to establish ownership and merchantable title, bypassing the need for formal, and expensive, probate proceedings). 84 See 4 THOMAS, supra note 39, See id.; see also Rivers, Inequity, supra note 1, at (noting that the current rules for partitioning land evolved out of the rules that were developed for partitioning slaves). 86 See 4 THOMAS, supra note 39, 38.04(a).

12 REAL PROPERTY, TRUST AND ESTATE LAW JOURNAL ing the interests of the other cotenants. 87 On the other hand, in a forced-sale partition, the court orders the sale of the entire property and the division of the proceeds among the cotenants based upon their proportionate ownership interest. 88 Most state statutes provide that in-kind partition is the preferred remedy and a forced-sale partition should only be ordered if it would be inequitable to order an in-kind partition. 89 Some states have statutes that seem almost to mandate physical partition. 90 However, Professor Craig-Taylor points out that no matter how well-intentioned this type of statutory mandate is, it has not been very successful. 91 An in-kind partition is favored because an actual division preserves the succession of real property through familial lines and bars... [the forced sale of] real property against the will of the owners. 92 While in-kind partition is the preferred remedy, most state statutes permit forced-sale partition if the petitioning cotenant can demonstrate that an actual division would cause injury to some or all of the owners. 93 One might believe that the injury requirement would make a forced-sale partition rare. However, the injury requirement has proven so easy to meet that the forced-sale partition is the rule rather than the exception. 94 Therefore, a tenant seeking forced-sale partition may obtain the requisite court order by demonstrating that: (1) he [or she] has a right to partition as a matter of 87 See id. 88 See Craig-Taylor, supra note 32, at 752 (noting that partition by sale was unknown at common law and is a uniquely American procedure). 89 See 4 THOMAS, supra note 39, (stating in-kind partition is at least nominally favored). 90 See Holman, supra note 34, at 24 (identifying North Carolina and Tennessee as states whose statutes purport to restrict the use of partition by sale). Georgia might be added to this list. See generally GA. CODE ANN (1991) (allowing petitioners money payments for their interests only if the court is convinced that physical partition would be inequitable). 91 See Craig-Taylor, supra note 32, at Id. at See id. at See id. at (noting that all one has to do to show injury and thus be entitled to have the property sold is to demonstrate that the sale price of the tract as a whole will exceed the total sales prices if the property is broken into parts and each part is then individually sold). In most situations, this likely will always be the case that the value of the property divided will not equal the value if left intact. See id.

13 FALL 2009 Land Trusts to Prevent Land Loss 533 general right, and (2) a physical partition would be infeasible. 95 The petitioning cotenant may use a number of arguments to establish the second prong of infeasibility. 96 One of the most frequent arguments made to demonstrate infeasibility is that too many ownership interests exist in the commonly owned property. 97 Because Heirs Property tends to be held by an ever-increasing number of owners, it is extremely susceptible to forced-sale partition. 98 Equally common, if the party seeking sale can show that the value of the separate parcels into which the property would be divided will be worth less than the property as an entire whole tract, the court will mandate sale. 99 More often than not, this is fairly easy to show. The sale of the land transforms the real property interest once held by the cotenants into a personal property interest and potential land loss. 100 Through routine orders of forced-sale partition, the courts enable an individual cotenant to force a sale of the entire property. 101 Once the court orders a forced-sale partition, it will require the entire property to be sold for fair market value. 102 Partition actions brought by a family member can provide an opportunity for a cotenant to consolidate the myriad interests held by other cotenants. 103 A cotenant that has routinely paid more than that cotenant s proportionate share of operational expenses may finally be able to resolve this situation. 104 In doing so, this cotenant is able to dismiss freerider problems and get rid of disgruntled cotenants. 105 As a result of a forced-sale partition, one cotenant or a group of cotenants acting together, may be able to obtain the entire parcel of property and thereby more effectively utilize it. 106 However, to acquire the property, the interested cotenant must outbid all others 95 Id. at 755 (describing infeasibility and identifying the factors that a proponent of the sale must show). 96 Id. 97 See Craig-Taylor, supra note 32, at See generally id. at See generally id. at See id. at See generally Rivers, Inequity, supra note 1, at (discussing the partition process, and particularly, the likelihood of a court-ordered sale of the property). 102 See id. at (describing the different methods by which states use market value... in assessing the feasibility and efficacy of partition remedies. ) (citation omitted). 103 See id. at See id. at See Mitchell, Reconstruction to Deconstruction, supra note 2, at See id. at 514.

14 REAL PROPERTY, TRUST AND ESTATE LAW JOURNAL interested in the property. 107 This could create a problem for co-tenants that lack the resources to acquire the property. In the event the family members are unable to outbid a non-family member, property held by the family for generations could be lost. 108 The mere sale of a cotenant s interest to an outsider can also trigger land loss. 109 While all cotenants possess the right to sell their interests, the sale to someone outside of the family increases the exposure to a forcedsale partition. 110 As explained earlier, the market for an undivided interest in real estate is less than that for the entire tract of land. 111 Therefore, a nonfamily-member s motivation for the acquisition of such an interest should raise suspicions. The motivation may be for the precise purpose of instituting a partition action to acquire the entire property. 112 There are instances where opportunistic land speculators, armed with knowledge of future development within an area, obtain a cotenant s interest for just this purpose. 113 At the subsequent partition sale, the uncoordinated efforts of family members generally are no match for an organized and well-financed speculator. Opportunistic lawyers and land speculators have taken advantage of these legal rules in order to force sales of black-owned land. 114 Some argue that while the partition sale does permit one cotenant to force the sale of jointly-owned property despite the wishes of the majority, this is balanced by the property being sold for its fair market value. 115 However, whether the cotenants of property sold in this manner actually obtain fair market value is an open question. 116 Because these sales are judicial in 107 See id. 108 See Rivers, Inequity, supra note 1, at See Mitchell, Reconstruction to Deconstruction, supra note 2, at Id. at See supra Part I.D. 112 See Mitchell, Reconstruction to Deconstruction, supra note 2, at 508 (noting that a family member often may sell out to an outsider who is purchasing the share solely to force the sale of the entire tract). 113 See Rivers, Public Trust Debate, supra note 21, at 155 n.61 (describing a partition sale where the property was sold for $900,000, and then immediately listed for sale by a developer for $3 million); Holman, supra note 34, at 22 (describing that an African- American family had owned a tract since 1873; a speculator acquired a small interest, caused the property to sold at a partition sale for $161,223, then subdivided the property and sold it for $2 million). 114 Mitchell, Reconstruction to Deconstruction, supra note 2, at See id. at See Dagan & Heller, supra note 58, at 607 (noting various reasons why partition sales rarely produce a fair value).

15 FALL 2009 Land Trusts to Prevent Land Loss 535 nature, 117 they are not publicized in the same manner as commercial real estate sales. And unlike condemnation actions, the courts do not appoint commissioners to determine the fair market value of the property. Partition sales are like any other judicial sales conducted on the courthouse steps in auction fashion. 118 The property thereafter is conveyed to the author of the highest bid. 119 Therefore, no clear evidence exists that the highest bid bears any relationship to the true market value of like-kind property located within that area. As a result, African-American owners of Heirs Property have lost, and continue to lose, property acquired by an ancestor s prodigious efforts. To focus attention on the loss of small farms, particularly those owned by minorities, the American Bar Association s Section of Real Property, Trust and Estate Law (RPTE) instituted The Property Preservation Task Force (Task Force), consisting of members from the Real Property Division as well as the Trust and Estate Division. 120 This Task Force has developed a draft of a Uniform Partition of Inherited Property Act, which the Task Force has submitted to the National Conference of Commissioners on Uniform State Laws. 121 That Act currently is working its way through the process of becoming a Uniform Act. 122 In addition, the Task Force working with the Land Trust Committee of the RPTE has developed a model Land Trust Act (attached as Appendix B), which may at some time be moved to the process of becoming a Uniform Act See 4 THOMAS, supra note 39, 38.05(a). Section of the proposed Uniform Partition of Inherited Property Act prefers a commercial sale of the property instead of an auction sale. See UNIFORM PARTITION OF INHERITED PROPERTY ACT (Proposed Draft 2009), available at See 4 THOMAS, supra note 39, 38.05(a). 119 See id. 120 For more information about the Task Force, see generally Section of Real Property, Trust and Estate Law: Property Preservation Task Force, committee.cfm?com=rp See UNIFORM PARTITION OF INHERITED PROPERTY ACT (Proposed Draft 2009), available at see generally Anna Stolley Persky, In the Cross-Heirs, A.B.A. J. May 2009, at 44, (describing the proposed statute including criticism of the proposal). 122 See Report of the Property Preservation Task Force (Apr. 6, 2009) (on file with authors). 123 Cf. PRELIMINARY REPORT OF THE PROPERTY PRESERVATION TASK FORCE (2004), ReportFinal pdf. Author Julius J. Zschau is co-chair of the Task Force, and as a result, much of the description of the Task Force and its purpose and projects are from

16 REAL PROPERTY, TRUST AND ESTATE LAW JOURNAL The major undertaking of the Task Force has been working with a North Carolina Resource Center (NCRC) to establish a pilot project that would offer assistance to farmers who are facing partition actions against tenancy in common property. 124 The RPTE has committed to provide some of the funding for this project. 125 The principle role of the RPTE, the Task Force, and the funds which the RPTE has or will provide will be: (1) The RPTE will work with various organizations to recruit pro bono attorneys and law firms to serve as co-counsel with local organizations in the representation of land owners. (2) When a case is placed with NCRC, the local organization will forward the names and addresses of the client group and any adverse parties to the Lawyer s Committee for Civil Rights under Law (Lawyer s Committee). The Lawyer s Committee will work with the RPTE and others to recruit a team of pro bono lawyers with appropriate expertise to co-counsel with the referring local organization and make sure that the case clears conflicts. The Lawyer s Committee and the other groups will make the initial calls, introducing local organizations to the pro bono attorneys recruited for NCRC, and will mediate any discussions regarding minor alterations to the standard co-counsel agreement prior to execution. (3) The Lawyer s Committee will receive funding from the RPTE. These funds are intended to compensate these organizations for both out-of-pocket expenses and staff time related to education and outreach activities. 126 The RPTE continues to monitor the activities of the groups, moving forward with the pilot project with the goal of eventually seeing these kinds of programs spread into other areas where the need is greatest. 127 personal knowledge not online. The Task Force website, supra note 120, provides links to contact the ABA and the Task Force to request further information. 124 See Memorandum of Understanding Among Alabama Appleseed Center for Law & Justice, Inc. et al. (Apr. 3, 2009) (on file with authors) (agreeing to the operating terms of the NCRC). 125 See id. 126 See id. 127 See id.

17 FALL 2009 Land Trusts to Prevent Land Loss 537 II. USING LAND TRUSTS AS A MEANS OF ALLEVIATING THE RURAL LAND-LOSS PROBLEM A. Introduction and Alternative Solutions There have been numerous legislative improvements and suggestions for methods to alleviate the problems associated with Heirs Property and partition sales. 128 Some have suggested that statutes should permit a majority of the owners to convert cotenancy property into an LLC or similar form, which would continue to be managed by majority vote. 129 Some states already provide for the purchase of only the petitioning owner s individual share when a partition action has been brought, thereby avoiding the sale of the entire tract. 130 Special tax relief and land-use regulation statutes also have been proposed. 131 Other proposals would make it easier for the inpossession tenant to acquire title by relaxing adverse possession principles. 132 Others also have suggested mandatory mediation. 133 The Uniform Commissioners are considering a statute that would give more weight to longstanding ownership, sentimental attachment, and similar considerations, in determining if a court should order a sale. 134 They also would allow for 128 See Rivers, Inequity, supra note 1, at (describing legislative improvements that have already been enacted). 129 See Mitchell, Reconstruction to Deconstruction, supra note 2, at (suggesting majority vote similar to Norwegian models); see also Dagan & Heller, supra note 58, at 615 (discussing Germanic majority vote procedures). 130 See 4 THOMAS, supra note 39, (listing Alabama, Georgia, Kansas, Maine, Ohio, Oklahoma, South Carolina, Virginia, and Wyoming as having such provisions); see also Dagan & Heller, supra note 58, at 617 (discussing concept and fact that a similar Alabama statute had been held unconstitutional); Mitchell, Reconstruction to Deconstruction, supra note 2, at 564 n.356 (citing articles discussing this concept). 131 See Holman, supra note 34, (recommending statutes that would require sale of only necessary portion of property to pay taxes rather than sale of entire tract); Rivers, Public Trust Debate, supra note 21, at , 167 (discussing the need to exempt Heirs Property from zoning and land-use regulations, and recommending a Gullah Culture Preservation Exemption to limit property taxes). 132 Contra Mitchell, Reconstruction to Deconstruction, supra note 2, at (rejecting as unfair and not a long-term solution to Heirs Property problems); Fender v. Heirs of Smashum, 581 S.E.2d 853, 857 (S.C. Ct. App. 2003) (behavior was not sufficient to find cotenants had been ousted). 133 See Rivers, Inequity, supra note 1, at 77 (explaining the benefits of mediation in this area). 134 See UNIFORM PARTITION OF INHERITED PROPERTY ACT (Proposed Draft 2009), available at see also Rivers,

18 REAL PROPERTY, TRUST AND ESTATE LAW JOURNAL only a sale of a portion of the property and utilize commercial sales procedures rather than auction sales to set the price. 135 These options may be helpful. However, the use of the so-called Illinois Land Trust may provide another excellent method to assist Heirs Property owners. The balance of this Article describes the nuances of the land trust, and specifically shows how those who are assisting Heirs Property owners can use it to protect their property and their rights to the property. B. Advantages of the Land Trust for Heirs Property Owners Many of the suggestions for reform are based on the notion that efficient and effective Heirs Property use and management cannot be subject to the veto power of any one heir owning a share of the land which is, unfortunately, the hallmark of the existing cotenancy model. The current model simply prevents productive use of the land and, as noted, leads to many other problems. The land trust can be an alternative method of controlling Heirs Property land. The trust will make it easier to manage the land while protecting each heir s interest. The land trust might serve as the lone management device or in conjunction with an LLC that would assist in the management functions. 136 Both the LLC and the land trust present opportunities to convert the Heirs Property management structure from one requiring unanimous consent of the owners to one providing for majority rule; with the land trust, certain powers can be centralized in one or a few of the owners, or the person, or entity selected to serve as the trustee. 137 These features will make it easier to manage the family land, to borrow monies when improvements are needed, and to account for the payment of taxes and fees, all while properly protecting those who are responsible for management of the family property, and, equally important, protecting the property rights of those family members who elect not to involve themselves in the day-to-day use and management of the Heirs Property land. By adopting a land trust to hold and manage the land, partition sales should be a thing of the past. With a properly-structured land trust, those Inequity, supra note 1, at (suggesting that recognizing personhood interests in Heirs Property may lead to more equitable decisions, even in partition actions). 135 See UNIFORM PARTITION OF INHERITED PROPERTY ACT (Proposed Draft 2009), available at See Mitchell, Reconstruction to Destruction, supra note 2, at 568 (discussing how the LLC may be a desirable alternative form of land management). 137 See id. at 571.

19 FALL 2009 Land Trusts to Prevent Land Loss 539 members who desire to transfer their interests can do so without the requirement of causing the dirt to be divided up or sold. C. Introduction to the Land Trust The land trust has its origins in the State of Illinois and is very often referred to as the Illinois Land Trust. 138 In Illinois, it is still largely a creature of judicial action, despite the fact that it has from time to time received attention from the Illinois legislature. 139 In states such as Florida, the land trust is a creature of statute. 140 The Illinois Land Trust was first used in the 1860s and received judicial approval in the early 1900s. Because the land trust in Illinois was judicially created, it carried with it some of the standard trust principles. As a result, many Illinois lawyers will not create a land trust with a deed directly from the seller to the trustee; rather, they will convey title to a straw person acting as a nominee for the buyer, the beneficiary. This procedure is a result of the theory that the only way to create a trust is for the settlor to establish the trust because only the settlor can create the powers in the trustee. 141 This procedure is unnecessary under Florida law because section of the Florida Statutes expressly provides that every deed to a trustee containing the requisite language will create a land trust. 142 Section also permits land trusts to be created by corporations, partnerships, and even other land trusts themselves. It is not necessary that the creator of the trust be an individual. 143 In that regard, the Florida statute regarding land trusts has become a guide to other jurisdictions with respect to the establishment of this most useful and important vehicle. 144 Before discussing the practical value of land trusts and their acceptability across the country, some review of the general historical background of trust law and the evolution of land trust law will be helpful to place land trusts into their proper perspective. D. Historical In medieval times, the features of feudal tenure, primogeniture, and forfeiture for treason very often caused owners of real property to transfer their 138 See 765 ILL. COMP. STAT. ANN. 405/1 (West 2001). 139 See, e.g., id. 140 See FLA. STAT. ANN (West 1995 & Supp. 2009). 141 See 765 ILL. COMP. STAT. ANN. 405/2 (West 2001). 142 See FLA. STAT. ANN (West Supp. 2009). 143 See id. 144 See, e.g., 765 ILL. COMP. STAT. ANN. 405/2 (West 2001).