Can Tenants in Common Bind Co-Tenants to Long-Term Leases?

When co-owned farmland is leased, must all co-owners agree to lease the property?  Must all of them agree to a termination of the lease?  Those are interesting and important questions.  Recently, a federal court in Ohio was asked to address the matter in the context of farmland co-owned by a father and son.

In this case, the mother and father owned a tract of farmland.  Over a period of time, they transferred undivided fractional interests in the farmland to a son – the defendant in the case.  Mother eventually died, with father remaining in the farm home.  At the time the case was filed, the son owned an undivided 94 percent interest in the farmland and the father owned 6 percent.  The plaintiff had been the tenant on the property for a number of years and was father’s grandson and nephew of the defendant.  The father entered into an 11-year lease with the plaintiff for $150/year.  However, the defendant did not consent to the lease and claimed that it was unenforceable and that the plaintiff would be trespassing if he attempted to farm the land.  The plaintiffs sought a declaratory judgment action regarding the legal sufficiency of the lease, and the defendant filed a motion to dismiss. The court was required to determine only whether there was a legally plausible claim alleged.

The court addressed the legal standard for possession when tenants in common lease the real estate. In Ohio, tenants in common each have a distinct title and right to enter upon the whole of the real estate and take possession even if the ownership share is less than other tenants in common. If a tenant in common is not in possession of the real estate, that co-tenant is entitled to receive the reasonable rental value of the property from the co-tenant in possession consistent with the co-tenant’s ownership interest.  The court also noted that, under Ohio law, when an owner conveys property via a lease, the owner retains the fee simple interest in the property. Ohio courts have held that the possession of the tenant is synonymous with the lessor’s possession.  Thus, tenants in common have a present possessory interest in the property. So, the father’s possession in this situation is actually the co-tenant’s possession, so the lease does not divest either the plaintiff co-tenant’s or defendant co-tenant’s present possessory interest in the land.

The defendant’s motion to dismiss the case was based on the argument that a tenant in common cannot convey, encumber, or divest the rights of a co-tenant. The court disagreed because of the principle that a lease does not divest the possession of the land from the co-tenant. The court held that because the defendant’s possessory rights are not divested, there would be no need for him to approve the lease.  Thus, the court declared that the plaintiff had stated a claim for which relief could be granted, so the action would not be dismissed.

The court, however, went on to state that it believed that when a 6% owner leases a farm to a third party for 11 years, it would be inequitable for the lease to remain with the land following a partition sale. It is likely this statement is dicta because it was not germane to the issue before the court and the motion to dismiss.  H & H Farms, Inc. v. Huddle, No. 3:13 CV 371, 2013 U.S. Dist. LEXIS 72501 (N.D. Ohio May 22, 2013).

What Result in Iowa?

In Iowa, the duty of an in-possession co-tenant to his or her other co-tenants to account for the rents owed to the out-of-possession co-tenants is the same as in Ohio. Iowa Code § 557.16 explicitly states that a co-tenant in possession is liable for the reasonable rent to the co-tenant not in possession. This provision was adopted in 1917 and has largely remained unchanged.

The more complicated question is how Iowa law deals with a farm lease when a co-tenant landlord files a partition action. In 1907, the Iowa Supreme Court held “[w]here there is a valid lease of an entire premises, and the lessee is in possession an action of partition cannot be maintained by one of two or more tenants in common. No decree can be granted which will interfere with the lessee's right of possession, and if partition be granted it must be subject to the rights of the lessee. Moreover, parties otherwise entitled to partition may, by agreement, express or implied, bar themselves of such right.” Henderson v. Henderson, 114 N.W. 178 (1907). This rule requires that there be a valid lease on the premises.  But, once there is a valid lease, the tenant’s rights seemingly cannot be dislodged by a partition action.

On the question of whether only one co-tenant binds all parties to a lease when there is disagreement amount the other co-tenants, in. Miller v. Gemricher, 183 N.W. 503 (Iowa 1921), the court upheld the propriety of a criminal trespass complaint when the tenant was notified by the 2/3rds tenant in common owner that did not want the tenant on his land despite an “oral” lease with the other 1/3 tenant in common.  This case seems to indicate that when a tenant has notice that a majority tenant in common does not consent to the tenant’s possession, then a lease is not binding. It is unclear from the case how the lease was executed or whether it would be binding under property law analysis because the court focused on the criminal elements of trespass and the tenant’s knowledge he was notified to leave.

In Ohio the issue came down to whether possession was fully granted. In Cohen v. Hayden, 157 N.W. 217, 219 (1916), a partition action occurred while a valid lease was in effect. The tenant was evicted by the new owner of the property. The court held that the tenant in common was liable for damages for breach of quiet enjoyment to the evicted tenant.  This legal issue in the Cohen case was discussed with approval in 2011 by the Iowa Supreme Court in Duck Creek Tire Serv. v. Goodyear Corners, L.C., 796 N.W.2d 886 (Iowa 2011). This seems to imply that the tenant has a possessory interest pursuant to the lease that cannot be disturbed.

An additional factor to consider is Iowa’s statutory termination notice for agricultural leases.

Iowa Code § 562.6 has been interpreted by the courts to be ready broadly to ensure that tenants continue their exclusive possession of the premises until notice is provided. In Ganzer v. Pfab, 360 N.W.2d 754 (Iowa 1985), the court upheld the continuation  of a lease for another year when no timely termination notice was sent before the ownership of the farmland changed due to a contract forfeiture. In examining the issue, the court discussed Read v. Estate of Mincks, 176 N.W.2d 192 (Iowa 1970) in which the court had earlier concluded that the protections of the agricultural tenancy termination statute defeated the common law rule that the tenancy did not survive the tenant’s death. In that case, the court upheld the tenancy for another year because no timely termination notice had been provided to the tenant prior to his death. The court concluded that the “common-law rule must yield to the legislative provision for security of farm tenancies.”

The court stated that the “broad protection the statute provides for farm tenants, should not, absent a clear statement of legislative intent, be subjected to judicial exception in cases where the landlord’s rights in the premises are cut off…”

Based on these cases, it is likely that the Iowa court could preclude a partition action during the pendency of a farm tenancy. If a partition action is allowed to proceed, however, the farm tenancy will be protected until a valid statutory termination notice is sent to agricultural tenants.