The process of selling real estate is typically fairly complicated. In order to sell a piece of real estate properly, one usually has to consult with a variety of professionals, such as an appraiser, a licensed agent, a construction professional and others as well. To reap the greatest possible benefit, the seller must also conduct a great deal of market research and be fully conscious of both past and future market trends. Selling a home is tricky enough when the ownership status of the home is straightforward; when ownership status is not straightforward, however, the process of selling a home can be downright maddening. The case of Baker v. Weedon (1972) is one example of a sale of land made complicated by the presence of multiple ownership interests (specifically contingent remainder interests). As we will see, if you are preparing to sell your home and are worried about the complexity of the process, just be thankful you aren’t saddled with the circumstances of Baker v. Weedon!
In Baker v. Weedon, a dispute developed over the sale of a portion of land in Alcorn County, Mississippi. The person who attempted to sell the land, Anna Plaxico Weedon, was married to the original owner, John Harrison Weedon, and had been granted a life estate interest in the land following Mr. Weedon’s death. The will of Mr. Weedon stated that if Anna had any children ownership of the land would be transferred to them upon Anna’s death; however, in the event that Anna died without children, the land would be transferred to his biological grandchildren from a previous marriage. Hence, these grandchildren (who initiated the suit against Anna) had a contingent remainder interest in the land in that they may have someday claimed ownership if Anna died without children.
Anna sold a portion of the land in 1964 to the city. At the time of the sale, the land was appreciating in value in tandem with commercial development in the surrounding area. In fact, the value of the land was projected to increase by over $150,000 in just a few years following the initial trial. Anna felt she needed to sell the portion of land so that she could construct a new home for herself and live comfortably in old age. However, selling the land clearly presented problems as doing so removed the remainder interests of the grandchildren as well as thousands of dollars in unrealized income. The issue presented was whether the court could order a sale of land affected by future interests given the unique facts of the case.
A court may order a judicial sale of land in certain situations. For instance, a court may order a sale in order to avoid economic waste and prevent deterioration of the land. However, when making a ruling, the court must consider what is necessary for the best interest of all parties.
In this case, the court decided that the interests of the life tenant (Anna) and the remaindermen (grandchildren) were not properly served by the sale of the portion of land made by Anna. Though such a sale may have been appropriate under different circumstances, in this case the court reasoned that the sale would have resulted in too great of a financial loss for the remaindermen due to the fact that the value of the land was appreciating so rapidly. The court (the Supreme Court of Mississippi) sent the case back to the chancery court with instructions to find a more equitable solution to the problem.
The facts of Baker v. Weedon are of course exceptional, but they are useful to illustrate the level of complexity which can arise when real property is sold. Let’s be happy this type of situation doesn’t develop very often!
Image credit: MarkMoz12
As Baker v. Weedon demonstrates, sometimes real estate ownership can be a bit tricky. However, owning property often confers a host of benefits. To learn more about the tax savings available to property owners view this presentation by our CPA Jessica Chisholm