TRENTON – Aiming to better preserve family wealth passed on in the form of real property, the Senate advanced legislation sponsored by Senators Troy Singleton and Andrew Zwicker known as the “Uniform Partition of Heirs Property Act” that would establish new requirements concerning partition actions to more strongly protect the interests of cotenant property owners who may object to the action of another owner.
“For many families, especially in historically marginalized communities, real estate is their most valuable asset. But right now, unfair legal loopholes allow outside investors to force the sale of inherited property—often at below-market prices—stripping families of their wealth and legacy,” said Senator Singleton (D-Burlington). “This problem is especially pronounced in lower-income families, where individuals are more likely to pass away without a will or with only a simple will. With this law, we can better preserve familial wealth and prevent the exploitation of grieving families.”
Under existing law, any real property held by multiple owners as cotenants may be subject to a partition action, which can result in a partition in kind, which is the physical partition of property based on the individual owner’s interests, or a partition by sale, for which individual owners are compensated out of the total purchase price proportionate to their interests in the property. This process can pose significant issues when an unrelated investor acquires an interest in a property, and then petitions for a partition or sale.
The bill, S-1400, would concern the handling of partition actions filed in court concerning real property with multiple owners when at least one of whom had acquired title to the property from a relative. Specifically, provided the property meets certain characteristics, it would create new requirements for the partition process that include the ability for a court to appoint a special master to generally oversee the process, whether it be a partition in kind or through a sale. This special master would then direct a disinterested real estate appraiser to appraise the land and permit all cotenants to object to the valuation or, if all cotenants accept a valuation through another process, the special master could accept that value.
“Individuals who inherit the property of a loved one are often already burdened by grief or other necessary arrangements, making them particularly susceptible for an unrelated party to exploit the situation for personal gain,” said Senator Zwicker (Hunterdon/Mercer/Middlesex/Somerset). “This bill would establish a process to protect the interests of family members, allowing for a fair market valuation and additional opportunities for cotenants to buyout the others. Through this process, already adopted in roughly two dozen states, familial wealth will be better preserved and exploitation will be more difficult.”
The fair market valuation provided for by the special master, when agreed upon by all parties, would be used to guide additional processes providing for cotenants to buyout the interests of a cotenant or cotenants seeking a sale. If there remains a cotenant seeking a sale after such a buyout process, any partition by sale ordered by a court under the bill would be conducted as an open-market sale unless the court finds that a sale by sealed bids or auction would be more economically advantageous or in the best interests of the cotenants as a group. Any such open-market sale would proceed under a licensed real-estate broker agreed to by the parties or appointed by the court absent agreement of all the parties. The broker would be required to offer the property for sale in a commercially reasonable manner at a price no lower than the previously determined value of the property.
The Senate passed the bill in a unanimous vote.