Uniform Laws Update

Uniform Laws Update provides information on uniform and model state laws in development as they apply to property, trust, and estate matters. The editors of Probate & Property welcome information and suggestions from readers.

Uniform Laws Update Editor: Benjamin Orzeske, Chief Counsel, Uniform Law Commission, 111 N. Wabash Avenue, Suite 1010, Chicago, IL 60602.

Rethinking the Law of Tenancy in Common

A tenancy in common is an arrangement in which multiple persons own undivided shares of the same property. Under the common law, each cotenant has an equal right to use and enjoy the property but may not exclude any other cotenant from any part of the property. Unlike a joint tenancy, cotenants under a tenancy in common have no right of survivorship. Their interest in the property passes to their heirs or devisees at death.

Tenancies in common can be created intentionally or unintentionally. Whenever someone dies intestate with multiple heirs, a tenancy in common is created by default. If the property passes through multiple generations in this manner, the number of cotenants can multiply quickly. The presence of many cotenants makes management of the property more difficult as disagreements over the use and upkeep of the property become more likely.

A few years ago, the Uniform Law Commission (ULC) approved an act to address one major issue involving a subset of tenancies in common: abusive partition actions. A speculator seeking to acquire property at a bargain price can buy one cotenant’s interest and then file a partition action, potentially forcing a sale of the property at auction. The Uniform Partition of Heirs Property Act (UPHPA) helps the owners of inherited property defend against such actions with a series of due process reforms: enhanced notice; independent appraisal to determine the value of the property; an option for the cotenants who did not request a partition sale to purchase the interest of the plaintiff cotenant; a strengthened preference for partition in kind (physical division) of the property; and, if the property must be sold, a requirement to market the property openly to all potential buyers, including those who intend to finance the purchase. To date, the UPHPA has been enacted in 20 states and the US Virgin Islands and is under consideration in several more.

Building on this successful foundation, last year the ULC formed a drafting committee to consider further reforms to the common law of tenancies in common. The committee has met several times and read a draft act for comment and critique at the recent ULC Annual meeting in July 2022. The proposed reforms would eliminate the commonlaw rule requiring unanimous consent of all cotenants for property-management decisions and replace it with a three-tier set of rules:

1. For decisions affecting the title, including the transfer, sale, lease, exchange, mortgage, or other disposition of the property, cotenants holding a supermajority of the interests in the property would have to consent. The committee suggested an 80-percent threshold.

2. For other decisions affecting the property, including changing the existing use or building an improvement, cotenants holding a simple majority of the interests in the property would have to consent.

3. Any single cotenant, without the consent of others, could take any reasonable action necessary to preserve the property, including ordinary repairs and payment of expenses such as taxes, insurance, or mortgage installments.

By eliminating the common-law rule requiring unanimous consent for all management decisions, the drafting committee hopes to alleviate the gridlock that can prevent active management of real property when even a single cotenant withholds consent. But the committee also recognizes that the rights of dissenting cotenants must be protected. Under the first two tiers, the majority who propose to take action must deliver a 60-day advance notice to all cotenants. This provides a reasonable period for a tenant to object and resolve any differences with the cotenants holding a majority interest, or file a lawsuit if agreement proves impossible. The draft act also creates a statutory right to reimbursement of any expenses incurred in taking an action affecting the property.

The drafting committee will continue to meet and revise its draft over the next year, with final approval possible by summer 2023. All RPTE members with interest or expertise are invited to participate in the drafting committee’s efforts to reform the rules governing the management of tenancies in common. Sign up to follow the committee’s work at www.uniformlaws. org.

Published in Probate & Property, Volume 36, No 5 © 2022 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.

Probate & Property September/October 2022