Last year, when a Butler County court ruled that a preserved farm could be sold off in pieces, land trusts, estate planners and even the landowner who initiated the lawsuit were surprised. Although the ruling didn't affect the easement restrictions that preserve the land for agricultural use, it raised worries about the long-term management of preserved farmland if preserved parcels were to become fragmented.
Those worries were relieved when the 12th District Court of Appeals reversed the Butler County Common Pleas Court ruling in April. Even so, the case illustrates the risks in joint ownership of land and the need for farm estate planning, whether land is preserved with an easement or not, says Peggy Kirk Hall, assistant professor in agricultural and resource law at the Ohio State University. Her job includes helping conduct estate planning seminars for farm owners. "You want to think about worst case scenarios," she advises.
The Taylor vs. Taylor lawsuit is one of those unfortunate scenarios. Disagreements between family members who share land ownership are all too common, Hall says. "It's a problem we see often." When farmland is passed down to the next generation, it often ends up being jointly owned by two or more heirs. That's generally what will happen if landowners with more than one heir die without making other plans for their property.
Ohio partition law makes sure that those new landowners can all benefit from the property, Hall explains. "We want an owner to be able to capitalize on their ownership rights," she says. At the same time, Ohio's partition law presents a risk for landowners who want their heirs to keep farms together. Heirs don't always agree on what to do with the land they own together. "That's one of the dangers of owning land with other people," Hall says.
No amount of planning can eliminate the possibility of disagreements among heirs, but estate plans can help ensure that farms aren't broken apart and sold off because one heir wants to cash out. For instance, Hall explains, setting up a Limited Liability Corporation to hold land can give landowners a chance to lay out rules for handling land management and sales by the following generation.
In retrospect, Jan Taylor says more planning for her family's farm could have eliminated the conflicts she is now having with her brother, Jim Taylor, who shares ownership of the farm. For instance, the land could have been placed in a trust before she and her brother inherited it and provisions for sale of the land could have been outlined by the trust. "That takes it out of the hands of Jimmy Taylor and Janny Taylor," she points out.
The court case involves siblings Jan and Jim Taylor, who own their family farm near Oxford as tenants in common. Jan wants to sell the farm so she can use her share of the money for her retirement. "It's my only fallback in regards to retirement," she says.
Jim says his daughter and son-in-law made six offers to buy the entire farm, basing their offers on advice from an experienced local realtor. Jim agreed with each offer and would have sold the farm to them. However, Jan did not accept any of their offers.
Jan took the case to the Butler County Common Pleas Court, asking for a partition order. As a legal term, partition refers to a court order requiring sale of co-owned property and division of the profits or division of the land itself between co-owners. But since the easement on the property specifically says the land cannot be divided, Jan expected the court to simply require appraisal and sale of the farm.
Instead, the Butler County Common Pleas Court ruled that the land could be subdivided, claiming the restriction on subdivision in the easement is an invalid and unreasonable restraint on alienation under Ohio law because it doesn't have a "reasonable temporal limitation." That is to say, the restriction on dividing the land doesn't have a time limit or end date. The judge based the decision on previous court rulings related to land with underlying oil and gas leases.
Although Jan wants her share of the money from sale of the land, she does not want to see the land divided because that would make it less useful and appealing as a farm. Ideally, she'd like to see the farm sold as a whole to a young couple who wants to raise cattle or horses, she explains. "They could really take advantage of the acreage."
So, she and the Three Valley Conservation Trust, which holds the easement, appealed that first ruling, and the 12th District Court of Appeals reversed it. The subdivision restriction, according to the appeals court, does not create an "undue restraint" on the owners' ability to sell or transfer the property.
The appeals court noted that perpetual subdivision restrictions contained in conservation easements are valid and enforceable under Ohio law. That means if the land is sold, it must be sold as a whole.
Generally, Hall explains, Ohio law frowns upon restraints on an owner's ability to sell their property, unless the restraint has a time limit or serves a valid public purpose. Conservation easements don't have a time limit, but they do have a valid public purpose, which is outlined in the state's conservation easement statutes.
Jim argues that the land could easily be divided, since about half the acreage is tillable crop land and the other half is hilly with a virgin forest. "Even if it's split, the easement doesn't go away," he says. Jim sees no benefit in keeping the farm intact when two parcels, one for him and the other for Jan, would still have to comply with the conservation easement's requirements. He also clarified that he's not in favor of farm land being developed into subdivisions. Even if the land were divided into two parcels, it would not be developed, he stresses.
The prohibition in easement agreements on dividing conserved land is a considerable restriction on an owner's ability to sell the property, and those restrictions will carry forward to future generations, Jim adds. The permanency of the restrictions limits what can be done in future years. "That's something landowners need to consider carefully before placing a conservation easement on their land," he warns.
Although he disagrees with the appeals court ruling, Jim says he'll accept it. He explains that taking the case to the Ohio Supreme Court would cost thousands more in legal fees, and there's no guarantee the Supreme Court would even take the case due to the court's broad discretion.
Jan, on the other hand, considers the appeals court ruling to be good news. But after more than a year, the land remains unsold. "I'm still on the same path toward getting the farm sold as a whole," she says.
Jim says he should have financing lined up soon and, once the court system works through the partition process, he hopes to buy his sister's share of the farm. "At the end of the day, I'd like to keep the property in the family," he says.
While Jan may be able to meet her original goal of selling the land as she wants, and Jim may be able to buy it, the outcome will not be an entirely happy one for the siblings. The farm may stay together, but the family will not. Jim says the relationship between the two siblings is "probably permanently broken due to this litigation."
The Three Valley Conservation Trust also considers the appeals court ruling to be good news. The initial common pleas court ruling had upheld the conservation provisions of the easement but would have opened the door to subdivision of farms protected by easements, explains Mark Boardman, chairman of the board of trustees for the Three Valley Conservation Trust. "That ruling took away our control," he says.
By reversing the lower court ruling, Boardman says the appeals court upheld the integrity of the easements. "What that means for landowners is that when they put their land in some sort of conservation easement, it is supported by law," he says.
To head off such lawsuits and other disagreements between landowners, the land trust follows a protocol to make sure landowners understand the terms of their easements before they sign. "We're doing our best to make everything clear to everybody," Boardman says. The Three Valley Conservation Trust is also starting to offer estate planning guidance to landowners with easements, he adds. "There are things to consider and it's best to consider them when everyone's happy and well," Boardman says.
The land trust has anticipated the need to defend easements in court and carries insurance to cover legal expenses above a $5,000 deductible. The Three Valley Conservation Trust currently holds 194 easements with more than 20,000 acres protected. The premium for the insurance is based on the number of easements held and amounted to more than $10,000 last year.
When landowners have issues related to their easements, Boardman would rather see them work with the land trust to find solutions, rather than heading to court. In some cases, easements can be amended to meet the changing needs of landowners. In fact, the Taylor easement was previously amended to shift the location of a homesite.
If necessary, the land trust will continue to defend easements in court, Boardman stresses. "We are the legal guardians of the conservation easements, and we take that very seriously," he says.