Agricultural Land Loss in the Southeast: Overview of Heirs’ Property and Strategies to Reverse the Trend

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landloss.orgIn the early 1900s, an estimated 15 million acres of agricultural land in the U.S. was owned by African Americans. Just a fraction of that land – about 1.5 million acres – is still black-owned and used for agriculture today. Each year, about 30,000 more acres are lost, driven primarily by a lack of estate planning. Jillian Hishaw, Founder and Director of F.A.R.M.S. and David Harper, Executive Director of South Carolina’s Pee Dee Land Trust discussed the work they are doing to reverse this trend in the Southeast at a recent panel on Land Access, Land Security, and Conservation Finance at UNC Kenan-Flagler Business School’s FoodCon sustainable food conference.

Heirs’ Property and its Challenges

When the owner of a parcel of land dies without a will, the land is often passed on as “heirs’ property,”  where the deed remains in the name of the deceased land owner and his or her heirs become tenants in common on the land. When a first generation heir dies, his or her share of the land becomes further subdivided among his or her own heirs; in other words, over the decades a parcel of land may come to be owned by dozens of heirs. Heirs’ property results in an unstable title that both puts the land at risk of sale below market value and limits owners’ ability to capitalize on their land resource. Some sources estimate that up to one-third of black-owned land in the Southeast is held as heirs’ property.

Risk of sale: All tenants in common heirs have the same rights, regardless of whether they participate in maintaining, operating, and paying taxes on the land. One of these rights is that any heir may sell their share – no matter how small – and force a “partition sale” in which the land is sold at auction and the proceeds are divided among the heirs. Although land sold via partition sale is often sold at significantly below market value, heirs interested in keeping the land are often still unable to raise enough capital to purchase the entire tract.

Access to resources: Because tenants in common heirs are not listed as owners on the deed to the land, they are unable to access resources including mortgages and government grants and loans (including USDA, FEMA, HUD, and SBA grants and loans). For example, after Hurricane Katrina, an estimated hundreds of thousands of heirs’ property owners in New Orleans faced challenges accessing federal and state relief funds.

Strategies to Prevent Land Loss

Both current heirs’ property owners and land owners without a will can take steps to secure their interest and their heirs’ future interest in their land. Land owners that are already heirs’ property tenants in common should focus on obtaining clear titles that allow them to capitalize on the land – for example, investing in a working agricultural operation. Advocacy organizations also focus on land owners that are at risk of dying without a will and creating new heirs property, providing resources for estate planning – and often overcoming cultural resistance to creating a will.

According to this resource on heirs property in North Carolina, three common strategies to create more secure ownership of land include forming an LLC; forming a land trust; or creating a tenancy-in-common (TIC) agreement:

  • In an LLC structure, heirs’ property owners transfer their interest in the land to an LLC of which they are collective owners. The LLC creates a single owner for the entire property, which can increase its value. The terms of the LLC agreement can also give the LLC a right of first refusal if one owner wishes to sell his or her share.
  • A land trust must be set up by the people whose names are on the deed to the land. The landowners donate the land to a trust, name one trustee, and designate beneficiaries; the trustee is responsible for making decisions about the property on behalf of the other family members.
  • A tenancy-in-common agreement is a vehicle for spelling out the rights and responsibilities of each heirs’ property owner, and like and LLC agreement, can give the owners a right of first refusal if one owner wishes to sell. A TIC agreement can be a better option than an LLC agreement if one owner lives on the land so that he or she can reap tax benefits associated with land ownership.

Ms. Hishaw’s organization, F.A.R.M.S., is one of several groups in the Southeast working to provide legal aid to both owners of heirs property shares and agricultural landowners without wills. In North Carolina, these groups include the Southern Coalition for Social Justice, the UNC Law School’s Center for Civil Rights, and the Land Loss Prevention Project in Durham. Visit this School of Government maintained webpage for more information on safeguarding farmland for agricultural use.

Julianne Stern is a dual Master of City and Regional Planning and MBA candidate. She is also a Community Revitalization Fellow with the School of Government’s Development Finance Initiative (DFI).

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