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ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
partition; property; inheritance
Purpose
Establishes the Uniform Partition of Heirs Property Act (UPHPA).
Background
When two or more heirs or devisees are entitled to distribution of undivided interests in any real or personal property of the estate, the personal representative or one or more of the heirs or devisees may petition the courts for partition before the formal or informal closing of the estate. After notice is provided to the interested heirs or devisees, the court must partition the property in the same manner as provided by law for civil actions of partition. The court may direct the personal representative to sell any property that cannot be partitioned without prejudice to the owners, and that cannot conveniently be allotted to any one party (A.R.S. § 14-3911).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
Uniform Partition of Heirs Property Act
1. Requires the court to partition real property pursuant to the UPHPA beginning on the general effective date.
2. Defines heirs property as real property that is held in tenancy in common and that satisfies all of the following requirements:
a) there is no agreement in a record that binds all the cotenants and that governs the partition of the property;
b) one or more of the cotenants acquired title from a relative, whether living or deceased; and
c) any of the following applies:
i. 20 percent or more of the interests are held by cotenants who are relatives;
ii. 20 percent or more of the interests are held by an individual who acquired title from a relative, whether living or deceased; or
iii. 20 percent or more of the cotenants are relatives.
3. Requires the court, in an action to partition real property, to determine whether the property is heirs property, and, upon doing so, partition the property pursuant to the UPHPA unless all of the cotenants agree otherwise.
4. Stipulates that the UPHPA does not limit or affect the method by which service of a petition in a partition action may be made.
5. Requires a plaintiff, if the plaintiff seeks to provide notice of a partition action and the court determines the property is heirs property, to post a conspicuous sign on the property not later than 10 days after the court's determination and maintain the sign while the action is pending.
6. Requires the sign to state that the partition action has commenced and to identify the name and address of the court and the legal description of the property.
7. Allows the court to require the petitioner to publish the name of the petitioner and the known respondents on the sign.
Determination of Property Value
8. Requires the court to determine the fair market value of the heirs property by ordering an appraisal, unless one of the following applies:
a) if all cotenants have agreed to the value of the property or to another method of valuation, the court must adopt that value or the value produced by the method of valuation;
b) if the court determines that the evidentiary value of an appraisal is outweighed by the cost of the appraisal, the court, after an evidentiary hearing, must determine the fair market value of the property and provide notice to the parties of the value.
9. Requires the court, if it orders an appraisal, to appoint a disinterested real estate appraiser licensed in Arizona to determine the fair market value of the property assuming sole ownership of the fee simple estate.
10. Requires the appraiser, on completion of the appraisal, to file a sworn or verified appraisal with the court.
11. Requires the court to provide notice of the appraisal to each party with a known address not later than 10 days after the appraisal is filed if the appraisal is conducted in this manner.
12. Requires the notice to include:
a) the appraised market value of the property;
b) that the appraisal is available at the court clerk's office; and
c) that a party may file with the court an objection to the appraisal not later than 30 days after the notice is provided, which must state the grounds for the objection.
13. Requires the court, if an appraisal is filed, to conduct a hearing to determine the fair market value of the property not sooner than 30 days after a copy of the notice of the appraisal is provided to each party, regardless of whether an objection to the appraisal is filed.
14. Allows the court, in addition to the court-ordered appraisal, to consider any other evidence of value offered by a party.
15. Requires the court, after the hearing but before considering the merits of the partition action, to determine the fair market value of the property and provide notice to the parties of the determination of value.
Cotenant Buyout
16. Requires the court, if any cotenant requested partition by sale after the determination of value, to provide notice to the parties that any cotenant, except for the cotenant that requested partition by sale, may buy all the interests of the cotenants that requested partition by sale.
17. Allows any cotenant, except for a cotenant that requested partition by sale and not later than 45 days after the notice is provided, to file notice with the court that the cotenant elects to buy all the interests of the cotenants that requested partition by sale.
18. Requires the purchase price of each of the interests of a cotenant that requested partition by sale to be the fair market value of the entire parcel, multiplied by the cotenant's fractional ownership of the entire parcel.
19. Stipulates that after expiration of the 45 day period, the following rules apply:
a) if only one cotenant elects to buy all the interests of the cotenants that requested partition by sale, the court must notify all the parties of that fact;
b) if more than one cotenant elects to buy all the interests of the cotenants that requested partition by sale, the court must allocate the right to buy those interests among the electing cotenants based on each electing cotenant's existing fractional ownership of the entire parcel divided by the total existing fractional ownership of all cotenants electing to buy, and provide notice to all the parties of that fact and of the price to be paid by each electing cotenant; and
c) if no cotenant elects to buy all the interests of the cotenants that requested partition by sale, the court must provide notice to all the parties of that fact and resolve the partition action as otherwise specified.
20. Requires the court, if notice is provided to parties as provided above, to set a date not sooner than 90 days after the date the notice was provided by which electing cotenants must pay their apportioned price to the court.
21. Stipulates that after 90 days, the following rules apply:
a) if all electing cotenants timely pay their apportioned price, the court must issue an order reallocating all the interests of the cotenants and disburse the amounts held by the court to the persons entitled to them;
b) if no electing cotenant timely pays its apportioned price, the court must resolve the partition action as if the interests of the cotenants that requested partition by sale were not purchased; and
c) if one or more but not all of the electing cotenants fails to pay their apportioned price on time, the court must provide notice to the electing cotenants that paid their apportioned price of the interest remaining and the price for that interest.
22. Allows any cotenant that paid their apportioned price, not later than 20 days after the court provides notice that one or more electing cotenants fails to pay their price, to elect to purchase all of the remaining interest by paying the entire amount to the court.
23. Stipulates that after the 20-day period, the following rules apply:
a) if only one cotenant pays the entire price for the remaining interest, the court must issue an order reallocating the remaining interest to that cotenant, and the court must promptly issue an order relocating the interests of all of the cotenants and disburse the amounts held by the court to the persons entitled to them;
b) if no cotenant pays the entire price for the remaining interest, the court must resolve the partition action as if the interests of the cotenants that requested partition by sale were not purchased; and
c) if more than one cotenant pays the entire price for the remining interest, the court must reapportion the remaining interest among those paying cotenants, based on each paying cotenant's original fractional ownership of the entire parcel divided by the total original fractional ownership of all cotenants that paid the entire price for the remaining interest.
24. Requires the court to promptly issue an order reallocating all of the cotenants' interest, disburse the amounts held by the court to the persons entitled to them and properly refund any excess payment held by the court.
25. Allows any cotenant who is entitled to buy an interest, not later than 45 days after the court provides notice to parties as outlined, to request the court to authorize, as part of the pending action, the sale of the interests of cotenants named as respondents and who were served with the complaint but that did not appear in the action.
26. Allows a court, if it receives a timely request and after a hearing, to deny a request or authorize the requested additional sale on such terms as the court determines are fair and reasonable, subject to:
a) a sale authorized in this manner may occur only after the purchase price for all interests subject to sale have been paid to the court and those interests have been reallocated among the cotenants as provided; and
b) the purchase price for the interest of a nonappearing cotenant is based on the court's determination of value.
Partition Alternative
27. Requires the court to order partition in kind if all interests of all cotenants that requested partition by sale are not purchased by other cotenants, or, if after the conclusion of a buyout, a cotenant that has requested partition in kind remains, unless the court finds that partition in kind will result in manifest prejudice to the cotenants as a group.
28. Requires a court, when considering whether to order partition in kind, to approve a request by two or more parties to have their individual interests aggregated.
29. Requires the court, if it does not order partition in kind, to order partition by sale pursuant to open-market procedures.
30. Requires a court to dismiss an action if no cotenant requested partition by sale.
31. Allows the
court, if it orders partition in kind, to require that one or more cotenants
pay one or more other cotenants amounts so that the payments, taken together with
the value of the
in-kind distributions to the cotenants, will make partition in kind just and
proportionate in value to the fractional interests held.
32. Requires the court, if it orders partition in kind, to allocate a part of the property to cotenants that are unknown, unlocatable or the subject of a default judgement, if their interests were not bought out.
33. Stipulates that this part of the property must remain undivided.
Considerations for Partition In Kind
34. Requires the court to consider all of the factors when determining whether partition in kind would result in manifest prejudice to the cotenants as a group:
a) whether the heirs property practicably can be divided among the cotenants;
b) whether partition in kind would apportion the property in such way that the aggregate fair market value of the parcels resulting from the division would be materially less than the value of the property if it were sold as a whole, taking into account the condition under which a court-ordered sale likely would occur;
c) evidence of the collective duration of ownership or possession of the property by a cotenant and one or more predecessors in title or possession to the cotenant, who are or were relatives or the cotenant or each other;
d) a cotenant's sentimental attachment to the property, including any attachment arising because the property has ancestral or other unique or special value to the content;
e) the lawful use being made of the property by a cotenant and the degree to which the cotenant would be harmed if the cotenant could not continue the same use of the property;
f) the degree to which the cotenants have contributed their pro rata share of the property taxes, insurance and other expenses associated with maintaining ownership of the property or have contributed to the physical improvement, maintenance or upkeep of the property; and
g) any other relevant factor.
35. Prohibits the court from considering any one factor listed to be dispositive without weighing the totality of all relevant factors and circumstances.
Open-Market Sale and Bidding
36. Requires, if the court orders a sale of the heirs property, the sale to be an open-market sale unless the court finds that a sale by sealed bid or an auction would be more economically advantageous and in the best interest of the cotenants as a group.
37. Requires the court to appoint an agreed-upon broker and establish a reasonable commission if an open-market sale is ordered and the parties, not less than 10 days after the entry of the order, agree on a real estate broker licensed in Arizona to offer the property for sale.
38. Requires the court, if the parties do not agree on a broker, to appoint a disinterested real estate broker licensed in Arizona and establish a reasonable commission.
39. Requires the broker to offer the property for sale in a commercially reasonable manner at a price not lower than the fair market value of the property and on the terms and conditions established by the court.
40. Stipulates that if an appointed broker obtains an offer to purchase the property for at least the determine fair market value within a reasonable amount of time, both of the following apply:
a) the broker must comply with prescribed reporting requirements; and
b) the sale may be completed in accordance with state law other than the provisions of this act.
41. Allows the court, if an appointed broker does not obtain an offer to purchase the property for at least the determined fair market value, to do any of the following:
a) approve the highest outstanding offer, if any;
b) redetermine the value of the heirs property and order that the heirs property continue to be offered for an additional time; or
c) order that the heirs property be sold by sealed bids or at an auction.
42. Requires the court, if it orders a sale by sealed bids or at an auction, to set the terms and conditions of the sale, and conduct an auction pursuant to existing statute governing auctions.
43. Entitles the purchaser to a credit against the price in an amount equal to the purchaser's share of the proceeds, if the purchaser is entitled to a share of the proceeds of the sale.
44. Requires an appointed broker, unless required to do so within a shorter time, to file a report with the court not later than seven days after receiving an offer to purchase the heirs property for at least the fair market value of the heirs property.
45. Requires the report to contain the following information:
a) a description of the property to be sold to each buyer;
b) the name of each buyer;
c) the proposed purchase price;
d) the terms and conditions of the proposed sale, including the terms of any owner financing;
e) the amounts to be paid to lienholders;
f) a statement of contractual or other arrangements or conditions of the broker's commission; and
g) any other material facts relevant to the sale.
Commissioners
46. Requires commissioners appointed by the court to be disinterested and impartial and not be a party to or a participant in the action, in addition to other requirements and disqualifications as outlined.
Uniformity of Application
47. Requires the courts, in applying and construing this act, to consider the need to promote uniformity of the law with respect to its subject matter among the states that enact the UPHPA.
Relation to Electronic Signatures in Global and National Commerce Act
48. States that this act modifies, limits and supersedes the Electronic Signatures in Global and National Commerce Act.
49. States that this act does not modify, limit or supersede federal code related to authorization of electronic delivery of any notices described in federal code.
Miscellaneous
50. Defines terms.
51. Makes technical changes.
52. Becomes effective on the general effective date.
House Action
GOV 1/24/24 DP 9-0-0-0
3rd Read 2/21/24 55-0-4-0-1
Prepared by Senate Research
March 12, 2024
ZD/cs