Contribution and Profit: Farms and Rural Land
For farm properties owned by more than one person, a common dispute is who is responsible for expenses and who is entitled to profits. With family farms, it is common that one member of the family is primarily responsible for working the farm, while others may own but have moved away for other employment. If profit is made on the harvest, who is entitled to a share? If expenses are incurred for equipment, who must pay the expense? If there is not agreement about the answer, litigation may be needed.
Disputes most often arise where there are joint tenants or tenants in common. This often arises where a farm is passed down through more than one generation without a will. The basic law is that if there is not a will, the property is passed intestate under statute. In such a case, the property goes to the spouse (50%) and any surviving children (50% total). If there are no children, then the spouse and parents of the person that died, or to siblings if there are no children. If there are no living relatives, the property goes to the state.
So what happens if the uncle takes over the farm but the grandchildren receive a 1/16th interest? This can cause resentment if the grandchildren think the uncle is “getting rich” on “their” farm. Or if the uncle is “losing money” paying to maintain the farm and the grandchildren think they should be receiving income.
This is where two issues dealing with joint tenants or tenants in common come in to play. The Uncle is entitled to contribution from the other owners for expenses for the betterment of the property such as buildings, fences, repairs, etc. The other owners are entitled to a portion of profit if the farm makes money.
If a dispute breaks out, it is common for the tenant in possession to seek partition and also contribution for the expenses he/she has put out to make the property economically viable. The other owners may counterclaim for profit and seek a portion of the income from the farm. This dispute can be resolved in the context of a suit for partition (https://baylawllc.com/partition-actions-farms-rural-land/).
Bottom line: if a working farm property is owned by more than one party, eventually there will be a dispute about investments to the property or profits from the property. Be prepared.
Dirk Schwenk is a Maryland Real Estate, Property, Civil Litigation and Maritime Lawyer from Annapolis, Maryland. He provides civil litigation services in real estate issues, contract disputes, environmental and zoning issues, adverse possession and boundary disputes. He graduated cum laude from the University of Maryland School of Law in 1997 and has been in private practice in Maryland ever since.