HOUSE BILL NO. 4924

July 20, 2023, Introduced by Rep. Dievendorf and referred to the Committee on Judiciary.

A bill to amend 1961 PA 236, entitled

"Revised judicature act of 1961,"

by amending section 3304 (MCL 600.3304) and by adding chapter 34.

the people of the state of michigan enact:

Sec. 3304. (1) All persons holding lands as joint tenants or, subject to chapter 34, as tenants in common may have those lands partitioned.

(2) Chapter 34 supplements this chapter, and, if an action is governed by chapter 34, it supersedes the provisions of this chapter that are inconsistent with chapter 34.

CHAPTER 34

PARTITION OF HEIRS PROPERTY

Sec. 3401. This chapter may be known as the "uniform partition of heirs property act".

Sec. 3402. As used in this chapter:

(a) "Ascendant" means an individual who precedes another individual in lineage, in the direct line of ascent from the other individual.

(b) "Collateral" means an individual who is related to another individual under the law of intestate succession of this state but who is not the other individual's ascendant or descendant.

(c) "Descendant" means an individual who follows another individual in lineage, in the direct line of descent from the other individual.

(d) "Determination of value" means a court order determining the fair market value of heirs property under section 3406 or 3410 or adopting the valuation of the property agreed to by all cotenants.

(e) "Heirs property" means real property held in tenancy in common that satisfies all of the following requirements at the filing of an action to partition real property:

(i) There is no agreement in a record binding all the cotenants that governs the partition of the property.

(ii) One or more of the cotenants acquired title from a relative, whether living or deceased.

(iii) Any of the following apply:

(A) Twenty percent or more of the interests are held by cotenants who are relatives.

(B) Twenty percent or more of the interests are held by an individual who acquired title from a relative, whether living or deceased.

(C) Twenty percent or more of the cotenants are relatives.

(f) "Partition by sale" means a court-ordered sale of the entire heirs property, whether by auction, sealed bids, or open-market sale conducted under section 3410.

(g) "Partition in kind" means the division of heirs property into physically distinct and separately titled parcels.

(h) "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(i) "Relative" means an ascendant, descendant, or collateral or an individual otherwise related to another individual by blood, marriage, adoption, or law of this state other than this chapter.

Sec. 3403. (1) This chapter applies to an action to partition real property filed after the effective date of this chapter.

(2) In an action to partition real property under chapter 33, the court shall determine whether the property is heirs property. If the court determines that the property is heirs property, the property must be partitioned under this chapter unless all of the cotenants otherwise agree in a record.

(3) This chapter supplements chapter 33. However, if an action is governed by this chapter, it supersedes the provisions of chapter 33 that are inconsistent with this chapter.

Sec. 3404. (1) This chapter does not limit or affect the method by which service of a complaint may be made in an action to partition real property.

(2) If the plaintiff in an action to partition real property seeks notice by publication and the court determines that the property may be heirs property, the plaintiff, not later than 10 days after the court's determination, shall post and maintain, while the action is pending, a conspicuous sign on the property that is the subject of the action. The sign must state that the action has commenced and identify the name and address of the court and the common designation by which the property is known. The court may require the plaintiff to publish on the sign the name of the plaintiff and the known defendants.

Sec. 3405. If the court appoints guardians or guardians ad litem under chapter 33, each guardian or guardian ad litem must be disinterested and impartial and must not be a party to or a participant in the action to partition real property.

Sec. 3406. (1) Except as otherwise provided in subsections (2) and (3), if the court determines that the property that is the subject of an action to partition real property is heirs property, the court shall determine the fair market value of the property by ordering an appraisal under subsection (4).

(2) If all cotenants have agreed to the value of the property or to another method of valuation, the court shall adopt that value or the value produced by the agreed method of valuation.

(3) 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, shall determine the fair market value of the property and send notice to the parties of the value.

(4) If the court orders an appraisal, the court shall appoint a disinterested real estate appraiser licensed in this state to determine the fair market value of the property assuming sole ownership of the fee simple estate. On completion of the appraisal, the appraiser shall file a sworn or verified appraisal with the court.

(5) If an appraisal is conducted under subsection (4), the court shall, not later than 10 days after the appraisal is filed, send notice to each party with a known address. The notice must state all of the following:

(a) The appraised fair market value of the property.

(b) A statement that the appraisal is available at the clerk's office.

(c) A statement that a party may file with the court an objection to the appraisal not later than 30 days after the notice is sent, stating the grounds for the objection.

(6) If an appraisal is filed with the court under subsection (4), the court shall 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 sent to each party under subsection (5), whether or not an objection to the appraisal is filed under subsection (5)(c). In addition to the court-ordered appraisal, the court may consider any other evidence of value offered by a party.

(7) After a hearing under subsection (6), but before considering the merits of the action to partition real property, the court shall determine the fair market value of the property and send notice to the parties of the value.

Sec. 3407. (1) If a cotenant requests partition by sale, the court shall, after determining the value of the property under section 3406, send notice to the parties that any cotenant except a cotenant that requested partition by sale may buy all the interests of the cotenants that requested partition by sale.

(2) Not later than 45 days after the notice is sent under subsection (1), a cotenant except a cotenant that requested partition by sale may give notice to the court that the cotenant elects to buy all the interests of the cotenants that requested partition by sale.

(3) The purchase price for each of the interests of a cotenant that requested partition by sale is the value of the entire parcel determined under section 3406 multiplied by the cotenant's fractional ownership of the entire parcel.

(4) After the expiration of the period in subsection (2), the following rules apply:

(a) If only 1 cotenant elects to buy all the interests of the cotenants that requested partition by sale, the court shall notify all the parties of that fact.

(b) If more than 1 cotenant elects to buy all the interests of the cotenants that requested partition by sale, the court shall 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 send notice to all the parties of that fact and of the price to be paid by each electing cotenant.

(c) If no cotenant elects to buy all the interests of the cotenants that requested partition by sale, the court shall send notice to all the parties of that fact and resolve the action to partition real property under section 3408(1) and (2).

(5) If the court sends notice to the parties under subsection (4)(a) or (b), the court shall set a date, not sooner than 60 days after the date the notice was sent, by which electing cotenants must pay their apportioned price to the court. After this date, all of the following rules apply:

(a) If all electing cotenants timely pay their apportioned price to the court, the court shall 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 the price apportioned to the cotenant, the court shall resolve the action to partition real property under section 3408(1) and (2) as if the interests of the cotenants that requested partition by sale were not purchased.

(c) If 1 or more but not all of the electing cotenants fail to pay the apportioned price on time, the court, on motion, shall give notice to the electing cotenants that paid the apportioned price of the interest remaining and the price for all the interest.

(6) Not later than 20 days after the court gives notice under subsection (5)(c), any cotenant that paid the price apportioned to the cotenant may elect to purchase all of the remaining interest by paying the entire price for the remaining interest to the court. After the 20-day period, the following rules apply:

(a) If only 1 cotenant pays the entire price for the remaining interest, the court shall issue an order reallocating the remaining interest to that cotenant. The court shall promptly issue an order reallocating 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 shall resolve the action to partition real property under section 3408(1) and (2) as if the interests of the cotenants that requested partition by sale were not purchased.

(c) If more than 1 cotenant pays the entire price for the remaining interest, the court shall reapportion the remaining interest among the paying cotenants, based on each paying the 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. The court shall promptly issue an order reallocating all of the cotenants' interests, disburse the amounts held by the court to the persons entitled to them, and promptly refund any excess payment held by the court.

(7) Not later than 45 days after the court sends notice to the parties under subsection (1), a cotenant entitled to buy an interest under this section may request that the court authorize the sale as part of the pending action of the interests of cotenants named as defendants and served with the complaint but that did not appear in the action.

(8) If the court receives a timely request under subsection (7), the court, after a hearing, may deny the request or authorize the requested additional sale on those terms as the court determines are fair and reasonable, subject to both of the following limitations:

(a) A sale authorized under this subsection may occur only after the purchase prices for all interests subject to sale under subsections (1) to (6) have been paid to the court and those interests have been reallocated among the cotenants as provided in subsections (1) to (6).

(b) The purchase price for the interest of a cotenant that did not appear is based on the court's determination of value under section 3406.

Sec. 3408. (1) If all the interests of all cotenants that requested partition by sale are not purchased by other cotenants under section 3407, or, if after conclusion of the buyout under section 3407, a cotenant remains that has requested partition in kind, the court shall order partition in kind unless the court, after consideration of the factors listed in section 3409, finds that partition in kind will result in great prejudice to the cotenants as a group. In considering whether to order partition in kind, the court shall approve a request by 2 or more parties to have the requesting parties' individual interests aggregated.

(2) If the court does not order partition in kind under subsection (1), the court shall order partition by sale under section 3410 or, if no cotenant requested partition by sale, the court shall dismiss the action.

(3) If the court orders partition in kind under subsection (1), the court may require that 1 or more cotenants pay 1 or more other cotenants so that the payments, taken together with the value of the in-kind distributions to the cotenants, will make the partition in kind just and proportionate in value to the fractional interests held.

(4) If the court orders partition in kind, the court shall allocate to the cotenants who are unknown, cannot be located, or are the subject of a default judgment, if the cotenant's interests were not represented under section 3407, a part of the property representing the combined interests of these cotenants as determined by the court, and this part of the property must remain undivided.

Sec. 3409. (1) In determining whether partition in kind would result in great prejudice to the cotenants as a group under section 3408, the court must consider all of the following:

(a) Whether it is practicable to divide the heirs property among the cotenants.

(b) Whether partition in kind would apportion the property in a 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 would likely occur.

(c) Evidence of the collective duration of ownership or possession of the property by a cotenant and 1 or more predecessors in title or predecessors in possession to the cotenant who are or were relatives of 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 cotenant.

(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.

(g) Any other relevant factor.

(2) The court shall not consider any 1 factor in subsection (1) to be dispositive without weighing the totality of all relevant factors and circumstances.

Sec. 3410. (1) If the court orders a sale of heirs property, the sale must be an open-market sale unless the court finds that a sale by sealed bids or an auction would be more economically advantageous and in the best interest of the cotenants as a group.

(2) If the court orders an open-market sale and the parties, not later than 10 days after the entry of the order, agree on a real estate broker licensed in this state to offer the property for sale, the court shall appoint the real estate broker and establish a reasonable commission. If the parties do not agree on a real estate broker, the court shall appoint a disinterested real estate broker licensed in this state to offer the property for sale and shall establish a reasonable commission. The real estate broker shall offer the property for sale in a commercially reasonable manner at a price no lower than the determination of value and on the terms and conditions established by the court.

(3) If the real estate broker appointed under subsection (2) obtains, within a reasonable time, an offer to purchase the property for not less than the determination of value, the real estate broker must comply with the reporting requirements in section 3411 and the sale may be completed in accordance with the requirements of state law other than this chapter.

(4) If the real estate broker appointed under subsection (2) does not obtain, within a reasonable time, an offer to purchase the property for not less than the determination of value, the court, after a hearing, may do any of the following:

(a) Approve the highest outstanding offer, if any.

(b) Redetermine the value of the property and order that the property continue to be offered for an additional time.

(c) Order that the property be sold by sealed bids or at an auction.

(5) If the court orders a sale by sealed bids or an auction, the court shall set the terms and conditions of the sale. If the court orders an auction, the auction must be conducted under chapter 33.

(6) If a purchaser is entitled to a share of the proceeds of the sale, the purchaser is entitled to a credit against the price in an amount equal to the purchaser's share of the proceeds.

Sec. 3411. (1) Unless required to do so within a shorter time under chapter 33, a real estate broker appointed under section 3410(2) to offer heirs property for open-market sale shall file a report with the court not later than 7 days after receiving an offer to purchase the property for not less than the value determined under section 3406 or 3410.

(2) The report required by subsection (1) must contain all of 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.

(g) Other material facts relevant to the sale.

Sec. 3412. In applying and construing this chapter, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact a uniform partition of heirs property act.