How Do You Sell Inherited Tennessee Real Property When Heirs Dispute?

What happens when you own a piece of real property with another person or people – be they family members, friends, or even strangers – and you have differing views about what to do with it? Maybe one of you wants to sell the property and the other wants to hold onto it and let the property value increase. This situation routinely arises when a parent dies and the property he or she owns passes, via a will or by operation of law, to the surviving children. Each co-tenant (also referred to by the legal term “tenants in common”) owns an undivided interest in the subject property. For example, if two co-tenants were to own a piece of property in equal 50% shares, neither is entitled to a specific 50% of that property. Accordingly, co-tenants need to be aware of their legal rights when a disagreement regarding the property arises. In situations such as this, the law of the State of Tennessee provides what is known as a partition lawsuit. A co-tenant’s right to seek partition in this State is undisputable.

Under Tennessee law, a partition action can be brought by one or more co-tenants which asks the court to divide the real property into appropriate shares among the owners vesting title thereto solely in each individual. The individual owners may then move forward with their shares independently, utilizing it as he or she sees fit. Partition actions may be filed in the circuit or chancery courts of Tennessee, but they must be filed in the county where: (i) at least a portion of the subject real property lies; or (ii) any defendant resides. However, when all claimants join in the petition, the action may be brought in any county in the State. All co-tenants must be made a party to the action.

Filing an action for partition is a very detail-oriented process, and it is necessary to understand every step of the process prior to bringing a partition action. Your petition must set forth the names of all owners, where they reside, and whether they are an infant or married. You must then file and serve a copy of the petition and a summons upon each defendant.  In cases filed in Tennessee’s chancery courts, service may be accomplished by publication. This makes the chancery court a desirable venue, particularly when identifying and/or locating all of the co-tenants is difficult.

Courts will then appoint commissioners “of good personal character and integrity and knowledgeable in the type of property to be partitioned” to divide the premises and allot shares to the respective parties. These commissioners may partition the land by tract or by the division of each tract into shares, as they and the court deem equitable. The commissioners will then submit their findings in a report, which the court will confirm unless “good cause is shown” as to why the commissioners’ determination was inappropriate. The Court will then vest title in the appropriate parties and apportion all requisite fees.  Attorneys’ fees for the parties may be taxed as costs in cases where the property is partitioned.

Instead of seeking a partition by division, as set forth above, a co-tenant may petition for the sale of the subject real property only if: (i) the property is situated in a manner that cannot be partitioned; or (ii) where the property is situated so that it is to the manifest advantage of all the parties that the property should be sold instead of partitioned. The commissioners appointed by the Court may also recommend that the property, or a portion thereof, be sold rather than partitioned. Partition by division is often more appropriate when the subject real property is a large, undeveloped tract that can more easily be divided. This is true since each remaining parcel – once the division has occurred – still retains value and utility. Conversely, when the subject real property is relatively small and cannot easily be divided (for example a parcel with a single-family residence thereon), a partition for sale is appropriate.

When a partition for sale is requested (or recommended), the Court will determine whether any encumbrances exist on the property, as these must be satisfied by the sale. Additionally, the Court will routinely determine a reasonable minimum price for the property and the manner in which the property is sold. Parties can often maximize their value by requesting the property be listed by a private real estate agent. On the other hand, a judicial auction may streamline the process at the expense of securing a higher sales price.

Once the property is sold and all encumbrances are satisfied, the remaining proceeds are routinely paid into the Court and held in escrow. This allows the Court to make its determination as to any credits and/or set-offs to which the parties may be entitled. In Davidson County, these determinations are made by a Special Master appointed by the Court who puts his or her findings in a report. Like a commissioners’ report, the parties are given an opportunity to object thereto. The Court will then either confirm or modify the Special Master’s report and order that the sale proceeds be dispersed accordingly.

In sum, while the ability of a co-tenant to seek partition cannot be disputed, it is a detail-oriented process that can often be confusing. Accordingly, it is essential that a co-tenant understand his or her rights to receive an equitable apportionment of the real property or sales proceeds.

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