Splitting up the farm: When family can't agree (Part 1)

The greatest threat to a family farm isn't always markets, weather, or input costs. Sometimes, it's family disagreement. 

In this episode of Straight Talk with NDFB, the Harvesting Legal Knowledge series continues with NDFB Executive Vice President and CEO Jeffrey Missling and attorneys from Ohnstad Twichell Law Firm.

Part one of this two-part conversation explores partition actions — the legal process that can divide or force the sale of farmland when co-owners can't agree on what happens next. 

Ohnstad Twichell attorneys David Piper and Tiffany Findlay explain what a partition action is, why these cases arise, and the circumstances that can lead family members to court. The discussion provides an overview of the legal framework behind partition actions and the challenges farm families face when inherited land becomes a source of conflict.

Whether you're involved in succession planning, expect to inherit agricultural property, or simply want to understand the legal realities of shared land ownership, this episode lays the foundation for understanding one of the most difficult issues that can challenge farm and ranch families. 

Be sure to join us for Part 2, where we'll take a closer look at the emotional side of the process and strategies for navigating these disputes.

Harvesting Legal Knowledge video

Contact us at emmery@ndfb.org

The statements made and information provided in this podcast are for educational and informational purposes only. The statements do not constitute legal advice, nor are they intended to create an attorney-client relationship. Every situation is unique, so you should not rely on any statements in this podcast as a substitute for personalized legal counsel. Before taking action or making any decisions which may affect your legal rights and obligations, you should consult with an attorney licensed in your jurisdiction.

Transcript

[Straight Talk theme]

[00:11] Emmery: What happens if you can't agree on how to split the farm? Welcome to Straight Talk with NDFB. I am your host, Emmery Mehlhoff.

Farming and ranching are tough businesses and legal issues can just complicate things. That's why this season features Harvesting Legal Knowledge of a conversation between NDFB and the Ohnstad Twichell Law Firm. NDFB's CEO Jeff Missling and the attorneys at Ohnsted Twichell, break down key legal topics impacting farmers, ranchers and ag businesses every day. 

[00:43] In this two part episode, we'll explore Partition actions, the legal process that divides the farm when heirs can't agree and things you should know about navigating the process.

[00:56] As always, if you have a specific legal question, be sure to consult an attorney who can address your situation.

[01:03] Let's get into the episode.

[Straight Talk stinger]

[01:07] Jeff: Welcome to something we're calling Harvesting Legal Knowledge. It's a collaboration between NDFB and Ohnsted Twichell Law Firm. My name is Jeff Missling. I'll be kind of serving as your host. I serve as the Executive Vice President and CEO of North Dakota Farm Bureau.

With us today, today we have Tiffany Findlay and David Piper. So welcome folks. We're kind of talking about real estate, the issue of partition in particular, which is dividing jointly owned property. If people are wondering if they've heard that word before and all that goes along with that. And one of the lead in questions maybe to this topic would be what's a good solution when the joint owners of property can't get along?

[01:50] David: Yeah, so I mean obviously it's, it's a difficult area to deal with. You've got family issues that have arisen and there's things that people just can't get over and figure out. And you think of, you know, mom and dad on the land and they, they pass it on to kids, whether it's two or three or four more and maybe one or more of them farm and one of them wants to farm and the other ones maybe want to farm also.

[02:17] And it's, "Okay, well how do we split up this land?" How do we, how do we treat everyone maybe not equally, but fairly because there's, you know, the, a partition is, is essentially when the parties can't figure out how do we utilize this land, how do we use it?

And says, okay, well we're at, we're at our wit's end. We can't figure out together. We need to get the court involving to get our attorneys involved. And the court has two options. Essentially the court can either say, okay, you know, we can divide this up. We've got three siblings here. We've got three sections of land. We can divide it up. Each person gets a section. That's easy. 

But what do you do when it's two or three siblings and there's six or seven quarter sections? Some of it's pasture, some of it's crop plants, some of it's really good crop plants, some of it's, you know, lesser quality.

[03:02] How do we divide that up? We've got maybe one sibling or two siblings out of three who farm or want to farm, or maybe one that has a kid, kid who wants to farm, might want to keep farming. You know, how does that play out? So, you know, unfortunately, when you get to that point, if the parties can't figure out how to divide it themselves, we need to get the court involved.

And the court can say, okay, I'm going to either sell this and you guys can all buy it at a sale, or you can try to. And your neighbors can come and try to bid you up. And then you run the risk of losing the family farm that's been in the family for generations to be sold to you to the neighbor or some, you know, some out of state industrial farmer who's got, you know, tens of thousands or millions of acres that are just trying to, you know, build up as much time as they can.

[03:45] And now we're just lost another local farmer or maybe a couple local farmers. So the partition statute is... There's actually a separate statute in North Dakota, which is interesting because a lot of times we've got, you know, statutes for certain areas, but not a specific subsection of an area.

So for real estate, we've got this subsection that governs partitions. And one of the things that's really interesting is that if you've got a couple siblings and one of them wants to start a partition because they just can't, you guys just can't figure it out, which happens.

You know, I mean, we've got different personalities with siblings,or maybe it's cousins that own the land now because mom and dad have passed it on to their kids and then their kids pass away. And now we've got cousins dealing with land and all that stuff. We see that.

[04:35] So it's: What do we do? So you file what's called a partition action, says, hey, court, we want you to help us figure out how to divide this up. Or it's a person who says, you know what? I'm 80 years old. I just want the money. I want to go live someplace warm. I want to do this. I want to give it to local church. I want to do something. I don't want to be a landlord anymore. I'm tired of being a landlord.

And you know, my brother or my nephew, they have a different idea of what the land's worth than I do. And that's not right or wrong. That's just. It is what it is. If they... and if brother says, I'm going to pay you 6,000 bucks an acre and it's worth eight, you don't want to take that, you're forced, your hand is forced to say, okay, well, if you're not going to buy for that, and they. That brother owns an undivided 1/2 interest with you, you know, if you sell an undivided 1/2 to someone else, it's going to get devalued because they don't get the full ownership interest. So the court can, you know, have an appraiser who's hired. They can have a referee who's generally going to be an attorney hired. And the referee says, okay, I'm going to hire an appraiser.

I'm going to talk to the parties. I'm going to figure out what the best thing to do here is. And it's either going to be, it's going to get sold at an open auction, a public auction, or listed with the realtor, or if, if the person who brought the, the partition, if they say, you know what, I just want out, I want to, I want to sell this, they can ask the court to sell it. And in that case, if they specifically ask for it to be sold, there is a mechanism within the statute that says, okay, other sibling, you can actually buy it, but it's got to be fair market value. So brother thinks, I'll make it a deal. I'm going to buy it for 6,000 bucks an acre because the court says I get to buy it.

[06:21] Well, it's, it's fair market value. So there's gonna be an independent third party appraiser who gets hired. They're gonna determine what the fair market is based on local land that's sold off in an area. You know what the rent rates are in the area and that kind of stuff. And then if it comes in at $8,000 or $9,000, and you know, brother has the option, he doesn't automatically have to accept it, but he has that option to buy for that amount. And if he doesn't want to or he can't, then you Know, the court's probably not going to force just her to sell it because that's going to devalue his, his interest and that person come and start a partition if they buy it, and then they could buy it from brother. So then the whole family loses it. 

So yeah, it's, there's, there's a lot of ins and outs, but in that case, the court's probably going to put the whole thing up for sale if brother doesn't want to exercise that right, you know.

[07:11] And then what happens when you got a tenant involved? If you've got brother and sister who are in their 70s or 80s, they don't farm. They inherited it from mom or dad. They held onto it because it's their tie to North Dakota. They, they moved somewhere else because of a spouse or whatever, they got an opportunity somewhere else.
 
And now they're absentee landlords. And you know, you've got a five year lease in place to the tenant, you're in year two and one party wants to sell it, one sibling wants to sell it, the other one doesn't because they want to keep their, you know, whatever roots they have in North Dakota for a little bit longer, which makes sense. I get it.

One wants to sell and one doesn't. You know, what happens to that tenant? Does, does he or she still get to have the rest of that lease run out for that remainder of the three or four years? Do they get a chance to buy it? Because they have, you know, not a legal interest as far as an ownership, but they still have a legal contractual interest to rent it.

[08:07] So, so what do you do? So there's, there's all those kinds of issues. You know, some of this can be avoided, right? Some of it can be if mom and dad sit down, hey, we gotta have a hard family discussion. And that's kind of where Tiffany comes in again with the estate planning, the farm, succession planning.

[08:22] They're, they're hard conversations to have. They're, they're super hard to have. You know, there's, they're incredibly difficult because it's like, okay, well, so and so, whether it's son or daughter, they, they help farm it from when they could walk because that's what they loved. They love spending time with mom and dad on the farm.

One of the other siblings doesn't, you know, how do you deal with that when that person's put that time in? Do you reward them? Maybe? Do you not? Because you love your kids equally and you want to treat them equally? Maybe it's, it's not for me to say, but it's, it's dependent based on family, family to family.

So, you know, a lot of this stuff can be avoided. Maybe not a lot of, but some of it can be avoided. If you just sit down, have that hard conversation. What are we going to do with this? How do we divide it up?

[09:07] And it's. Yeah, I mean, it's, it's heavy stuff, it's difficult stuff, but having those conversations can hopefully avoid some of this. Because after mom and dad are gone, if, if mom and dad could have these conversations with kids and, and say, here's what we're thinking of. Here's what we want to do. We want you to be involved who may not do what you want us to do, but we're going to have these conversations. When mom and dad are gone, siblings aren't mad at mom and dad because they're dead. They miss them. They're mad at their sibling because that sibling got more.

Or, or, or something. Yeah. And it, maybe, maybe that sibling had something to do with getting more, maybe they didn't. If mom and dad's goal is to keep the family farm in the family and avoid or not create more hostilities or tensions between their children, you have this conversation. So, you know, kind of talking about how what do you do? Your brother, your sister, they sue you for partition. I mean, you know, you've got to protect yourself. If, if you don't answer that, that lawsuit, they could get what's called the default judgment against you. And if they say, hey, I want the north half of this, I want this pasture, I want this quarter, and then my sibling can get the other quarters. If you don't answer that, the judge could enter a default judgment against you. And if your sibling asks for all the valuable quarters and you get the other ones that are less valuable, you've got a tough road to hoe to undo that.

[10:34] So the first step is to take it seriously. Hire an attorney, you know, have them submit an. Ask on your behalf and then start talking through the process. Okay, how do we, how do we find a resolution? Because again, litigation, it can take years. It can take, you know, well over a year. The, the courts are booked out.

You know, you can't get a calendar agent. I don't know if I served in action until a year from now. Maybe 14 months, depending on the calendar. It's important to take those seriously. You know, get someone who knows what they're talking about. We've unfortunately seen a large uptick in partitions in the last few years just because that generation is getting older and, and they're either deeding the land to their kids or they're passing away and deeding through their, their estate or whatever.

And it's an issue. And there, there's no right or wrong answer on how to, how to handle that succession. It's just what mom and dad want to do. But it does create potential issues down the road. The more you can talk and plan, the better.

[11:30] Jeff: I had a couple more questions or partition-related questions, I guess. But does a partition always result in a sale? And I think I heard you say not necessarily true, right?

[11:40] David: Not necessarily. I mean if, if there's, you know, if it makes sense and the land doesn't get devalued, the court can either agree to, or the court can order that be split up. And it's possible that you could do equal acreage, but unequal value because not every acre is created equally. Right.

Obviously if there's pasture and cropland, they're going to be different valued even if there's, you know, from quarter to quarter or within the same quarter.

This acre in the southwest quarter is not the same as the northeast because drainage or maybe it's near a riverbed.

So it's, you know, more sandy and that kind of stuff. But there's gotta be something to make sure whoever gets the less valuable land gets the same value. So if there's a, a north half and a south half that gets split up, the north half is worth, you know, 3,000 an acre and the south half is worth 5,000 there's going to be what's called an, an owelty payment where the person that gets the south half has to make a monetary payment to the person who gets the north half to make sure that they get treated, you know, fairly and gets the same value.

[12:41] So I mean, yeah, it's, there's a situation, a scenario where the land can be, can be, it's called partitioned in kind where the siblings or, you know, whoever it is, they each get to keep some of the land. There's, there's scenarios where the land could be a quarter to get sold maybe because nobody wants that one in particular or just because like that one can't be divided and the other stuff can be divided and the court says, you know, we're going to, we have an owelty payment, so we're going to use this quarter, we're going to sell it.

You, John, get these three quarters. You Sarah, get these three quarters. There's still a difference in value. So we're going to sell this seventh quarter and then Sarah gets a little bit more because John got the better land. So that's that situation.

And again, it's going to depend on everyone's land, their individual land, because every, every acre is different.

[13:36] Tiffany: I think that's a good point to, to really parse out. So, I mean, all property is unique. We, we don't, we can't put a certain value on every single acreage, even within the same quarter, you know. So it's something that's very much focused on even when we're negotiating an agreeable partition between joint owners, much less a litigious partition.

The valuation and, and what factors are considered when partitioning out the land, you know, having that appraisal on what the actual dollar value of the property is, is very useful, but there are other factors that can be considered, you know, like the location of the land, what the use of the land is, you know, who's renting it, who's actually using that land for farming in their practice and in their actual business.

[Straight Talk stinger]

[14:27] Emmery: You've been listening to Straight Talk with NDFB, our Harvesting Legal Knowledge Season. To watch the entire interview with Jeff and Ohnstad Twichell, please click the link below. If you have any questions, contact us at emmery@ndfb.org.