"I like to say it's the worst problem no one's heard of"
By Carey L. Biron
WASHINGTON, June 20 (Thomson Reuters Foundation) - Dubbed the worst problem no one has heard of, an obscure land rights law is winning attention as lawmakers overhaul arcane U.S. inheritance rules that are exploited by predators.
At the root of the problem is so-called heirs' property - a type of enforced communal ownership - which can arise when land or a home is passed on without a clear will.
The issue has disproportionately affected poor and minority Americans, making an inherited property impossible to sell or - by contrast - imposing an unwanted sale on a rightful heir, sometimes to the benefit of a developer.
"I like to say it's the worst problem no one's heard of," John Pollock, one of the first researchers to look into the issue nationally, told the Thomson Reuters Foundation.
Pollock said the campaign for change was "still getting started", driven by recent legislative victories.
Until recently, laws across the country had been stacked against holders of heirs' property.
In the absence of a clear will, all heirs - however distantly connected to an original titleholder - were seen as enjoying equal ownership of a property.
Furthermore, courts tended to favour selling a contested property as a whole, believing it would retain the most value.
This meant anyone with a distant claim could force a sale — often resulting in stressful, quagmired legal cases and a huge loss of wealth. Even outside of such predatory practices, the property's value would remain locked up.
"This land has lots of different values — historical, ancestral — and it's a significant source of untapped wealth," said Pollock, who runs the Heirs' Property Retention Coalition, a group that coordinates organisations dealing with the problem.
"For a lot of communities, there is value here that they can't access because of these problems."
RIGHTING A WRONG
The issue has particularly hurt African Americans, whose landholdings dropped 80 percent in the 20th century, according to research published by the U.S. Forest Service.
According to another study, also backed by the Forest Service, heirs' property is considered "one of the primary contributors" to that massive drop.
Governments at multiple levels are only now recognising the enormity of the problem — and are finally starting to act.
Two years ago, the Federal Reserve Bank of Atlanta held its first event on the issue, noting that heirs' property is especially widespread in the U.S. southeast.
"The negative impact of heirs' property on household wealth and community vitality is significant," Ann Carpenter, a senior advisor with the Atlanta Fed, said in a statement.
There has also been progress on the legal front, with a network of campaigners pushing states to enact legislation that addresses the worst aspects of the convoluted inheritance laws.
In April, Iowa became the 11th state to pass such legislation, and similar laws are pending in three other states and in Washington, where it is expected to pass this year.
In Iowa, the motivation was to protect family farmland.
"The family farm is still the backbone of Iowa's social life," said James E. Nervig, the bill's main drafter. "Those over 65 own more than half of that farmland today, so you'll soon have a major passage of land to new owners."
Under Iowa law, heirs to a farm could not split a property if some wanted to sell and others were against; nor could those who wanted to keep the property offer to buy out the others.
The new law — modelled on a "uniform" bill that backers say is relevant across the country — offers judges overseeing such cases more flexibility to allow both those options.
"It really swept though the legislature without any opposition," Nervig said of the bill.
UNIFORM LAW
The uniform law, used to draft legislation in each of the 11 states that have addressed the issue, has three key goals:
- When someone tries to force a sale, they must first offer their interest for sale to the remaining owners.
- Courts must take into account the full value — personal, historical — of a piece of property, not just its market value.
- And any sale needs a visible process, rather than a quiet auction at which only a developer in the know might show up.
The law does not ease all aspects of owning heirs' property, but it does seem to be having an effect, close observers say.
In 2011, Georgia became the second state to pass the act.
"Prior to that, it was very easy for folks to buy one family's interest and force the sale of a property," said Skipper G. StipeMaas, executive director of the Georgia Heirs Property Law Center. "The uniform act slowed down what was historically used as a mechanism by business owners and wealthier individuals to acquire land."
StipeMaas's own family land was heirs' property, taking four decades and two lawsuits to clear — an excruciating process.
"Not only does this erode a family's ability to build wealth," she said. "What's also being eroded is that family's cohesiveness."
VULNERABILITY
Statistics on the full extent of heirs' property are not available but it appears to be widespread.
Last year, scholars from the University of Georgia estimated that 10-15 percent of land in the southeast is heirs' property, typically in farming areas or "declining or distressed" cities.
In a handful of counties around Atlanta, they estimated, $2 billion worth of land is tied up as heirs' property.
That's where 83-year-old Mildred Shields used to live, about a mile from downtown Atlanta in a house her father bought when she was a child.
After her father died, the house was juggled between Shields and other family members, even though Shields continued to pay the taxes, said her daughter Phyllis Shields.
In recent years the house sat vacant — until Mildred began getting legal citations regarding code violations at the home.
It was only when she looked to sell that Shields realised it was heirs' property and could not be sold until she proved no one else could claim ownership — an arduous process completed with the help of the Georgia Heirs Property Law Center.
Phyllis Shields said the situation was so complicated, it left her mother vulnerable.
"If someone had walked up to my mom and said, ‘I'm an attorney, and I'll give you a dollar [for the property] and straighten all of this out,' she would have signed," she said.
After a year and a half of work, the title was finally clear. Mildred Shields sold the house in May.
(Reporting by Carey L. Biron, Editing by Lyndsay Griffiths.)
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