When Tenants in Common Own the Farm

It’s a common situation that often leads to conflict. A father dies without a will and his three children inherit his farm through the rules of intestate succession. Or maybe an aunt dies with a will leaving a one-third share of her 80-acre pasture to her nephew and the remaining two-third’s share to her niece. In both cases, the parties inheriting the property are tenants in common.

Most Iowa landowners understand the basic rights of tenants in common. They each have an undivided interest in the whole property. Regardless of their respective ownership interests, they each have the right to possess the entire parcel. A tenant in common with exclusive possession of the entire parcel must pay rent to the other tenants in an amount reflecting the non-possessing tenants’ ownership shares. When tenants in common die, their respective shares are passed to their heirs in the same manner as their other property.

These basic rules aside, tenancies in common can get complicated. When the tenants in common can’t agree about how to manage the property, whether to sell the property, or who should rent the property, heated conflicts can arise. In such situations, the rights of the respective tenants in common are not always clear. Following are a few common questions we’ve received at the Center and some guiding principles to address them.

My sister, brother, and I inherited our parents’ 240-acre farm as tenants in common. My sister and I just found out that our brother signed a lease with his son to farm the property for this crop year. My sister and I do not believe that our nephew is the best person to lease the farm. Do we have any rights?

First, Iowa Code §557.16 provides that cotenants in common have the right to recover from a cotenant in possession their respective shares of the “rental value” of the property. In other words, at a minimum, you and your sister would each be entitled to receive a one-third share of any rent received by your brother for your nephew’s use of the property. The more important question you are asking, however, is whether the lease signed between your brother and your nephew is enforceable against you and your sister.

The Iowa Supreme Court has stated, “Ordinarily a lease of the entire estate by one tenant in common is not binding on other tenants in common who have not authorized or ratified it.”[i] This general rule would mean that your nephew would likely have no rights under the purported lease, as against you and your sister. However, the Iowa Supreme Court has also ruled that where a lease is made by one tenant in common and the lessee takes possession and continues to pay rent, it will be presumed that the lease was made with the knowledge and consent of the other tenants in common, absent evidence to the contrary.[ii] In other words, if you and your sister wish to contest your nephew’s right to lease the property, you must act promptly. You should seek legal counsel to preserve your rights. Your first step will likely be to inform your brother and your nephew, in writing, that you are not ratifying the lease and that you do not recognize it as giving him any legal right to the property.

Our neighbor has always leased the farm my parents left to my brother and me as tenants in common. The neighbor rents it pursuant to an oral lease that has been automatically renewed every year for the past 10 years. This year, I want to terminate the lease, but my brother disagrees. What can I do?

This is a more complicated question for which there seem to be no Iowa cases directly on point.[iii] Presumably, however, if you sent a termination notice to the neighbor before September 1, it would be recognized as your refusal to agree to a continued lease for the following crop year. Without such agreement, it is unlikely the neighbor could enforce that lease, as against you.

My three first cousins and I can’t agree how to manage the 160-acre parcel of land left to us in equal shares by our aunt. What can I do?

Because of the difficulty of jointly managing such property, many tenants in common desire to terminate the co-ownership arrangement. This is most easily accomplished through a voluntary agreement to divide the property or to have one tenant purchase the shares of the others. Many times, however, cotenants are unable to agree on a fair division. Consequently, the law allows a tenant in common to ask the court to partition such property. The default method of partition is by a sale and division of the proceeds.[iv] However, a tenant in common can ask the court for a partition in kind, which would divide the property into separate parcels. To prevail in such an action, the tenant seeking the relief must show that the partition is “equitable and practicable.”[v]

In a partition action, the person bringing the action is initially required to advance the costs.[vi] However, all parties to the action will ultimately be responsible for the costs, including attorney and appraisal fees, in proportion to their ownership interest.[vii] The exception to this general rule is that costs created by a contest must be paid by the losing party, unless the court orders otherwise.

Conclusion

The difficulties often stemming from owning property as tenants in common should prompt property owners to evaluate their estate plans and clear them of potential landmines. While you cannot always predict how your heirs will interact once you are gone, you can avert some possible problems through considered, lifetime planning.