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By: Jeffrey K. Lewis, Esq., Friday, October 06th, 2023

Two separate, but very similar, pieces of legislation are working their way through the Ohio Legislature and could end up affecting your farmland’s current agricultural use value (“CAUV”). House Bill 187 (“HB 187”) and Senate Bill 153 (“SB 153”) both seek to adjust how property values are assessed in Ohio and some of those proposed changes specifically affect CAUV. 

Both proposed bills aim to make temporary adjustments to CAUV for farmland. These changes will impact farmland that undergo reappraisal or triennial updates in 2023, 2024, or 2025. The adjustment does not alter the CAUV formula itself but rather calculates a farm's CAUV at its next reappraisal or update as the average between the CAUV for that year and the CAUV it would have if it were in a county that had reappraisals or updates in the two previous years.

The Ohio Legislature has provided the following example: “[C]onsider a farm located in a county that undergoes a reappraisal in 2023. If the formula were applied for that year, the farm’s CAUV would be $200 per acre. However, if the farm had been reappraised in 2022, its value would have been $190 per acre, and if it had been reappraised in 2021, its value would have been $180 per acre. Under the bill, the farm’s reappraisal value will be $190 per acre (the average of $180, $190, and $200).” 

Again, these proposals for CAUV adjustments are only temporary, and the current valuation rules will be reinstated starting in 2026. For example, if the farm mentioned above undergoes a triennial update in 2026, its value will be determined without averaging, following the currently existing rules. Furthermore, if the 2023 CAUV tables, which prescribe the per-acre value of each soil type, have already been published before the proposed legislation takes effect, the Ohio Department of Taxation must update these tables within 15 days after the bill becomes effective to reflect the changes introduced by the Legislature.

As of the morning of October 5, 2023, HB 187 has gone through committee and is ready to be voted on by the House. The Ohio Senate had its third hearing on SB 153 on October 3, 2023, but has yet to report the bill to the floor for a vote. Some County Auditors have come out in “indirect opposition” to both bills, arguing that the proposed legislation would create a logistical nightmare for tax billing purposes. Lastly, there are some differences between the two pieces of legislation - unrelated to CAUV - that would have to be worked out between the House and Senate before we have a final bill that could take effect. We will continue to monitor the situation and keep you up to date on any changes. 

Posted In: Property, Tax
Tags: Farmland, cauv, tax, property tax
Comments: 0
By: Robert Moore, Tuesday, May 31st, 2022

Legal Groundwork

By Robert Moore, Attorney and Research Specialist, OSU Agricultural & Resource Law Program

One of the more common ways that farm families involuntarily lose farmland is through partition.  Under Ohio law, any person that is a co-tenant (co-owner) of real estate has partition rights.  Essentially, partition rights allow a co-tenant to force the other owners to buy them out or force the land to be sold.  Partition is a harsh, but arguably necessary, right of every co-tenant of real estate.  With proper planning, partition can be avoided.

Partition law is codified in Section 5307 of the Ohio Revised Code.  A partition is initiated by a co-tenant filing a petition for partition with the common pleas court.  A partition must be filed in the county in which the real estate is located.  Any co-tenant, even one owning a small percentage of the real estate, may file the partition.  The petition is very similar to filing a lawsuit and all co-tenants are served notice the petition.  All defendant co-tenants are provided an opportunity to respond to the petition.

After all co-tenants have been served and had an opportunity to respond to the petition, the court will appoint a commissioner.  The role of the commissioner is to essentially oversee the petition process on behalf of the court. The partition commissioner is permitted to physically divide the real estate if the property can be divided without the loss of value.  Due to the unique nature of farmland and the variation within each parcel, administrators rarely will physically divide the land.  Instead, the commissioner will usually decide to sell the land at auction and divide the sale proceeds among the owners. The first step in selling the land is to obtain the value of the land by appraisal. 

After the value of the property is established, each party will be given an opportunity to buy the land at the appraised value.  If no party wishes to purchase, the land will be ordered sold by the court.  The land may be sold at sheriff’s sale but the parties usually agree to sell the land at public auction.  The one issue that the feuding co-tenants can usually agree upon is that they are likely to get a better price at an advertised auction rather than a sheriff’s sale.   The land must bring at least 2/3 of the appraisal price at auction.  After the land is sold, the proceeds are divided among the co-tenants in proportion to ownership.

The reason that partition law is a necessity is that Ohio law provides very little guidance to co-tenants as to how to manage their co-owned real estate.  For example, Ohio law implies that unanimous consent must be obtained in the management of real estate.  Therefore, one co-tenant holding a minority ownership percentage can prevent the land from being leased or sold.  Ohio law solves this issue by providing partition rights.  Basically, the law says that if the co-tenants cannot resolve their differences, then any one of them can force sale the land and divide the proceeds.  Partition is necessary because the law seeks to allow individuals to divest themselves of any asset they may own.  Without partition, a person could be forced to own real estate that they may not want to own and/or do not receive financial benefit.

Consider the following example.  Amy, Bob and Charlie inherit a farm from their parents.  Amy and Bob want to lease the land to a neighbor farmer but Charlie insists he is going to farm it.  Charlie has no experience farming and Amy and Bob know it will end up in a disaster if Charlie gets his wish.  Any potential tenant that Amy and Bob consider is contacted by Charlie and told the farm is not for lease.  Amy and Bob get frustrated and decide to file a partition because they are tired of dealing with Charlie and do not think they will get a fair, financial benefit from the farm if Charlie is the operator.  The court orders the farm sold and Amy, Bob and Charlie share the proceeds.

The risk of partition is not limited to just the initial family members who may own the land.  Any future owner also has the same partition rights.  Spouses, children and anyone else who may  become a co-tenant can force a partition.

Using the same scenario as above, assume Amy dies.  Her parents assumed that Amy’s share of the farm would go to her children (their grandchildren) but Amy never got around to doing and estate plan. So, under Ohio law, everything goes to her husband, Dale.  Dale has no attachment to the farm and just sees dollar signs now that he is a 1/3 owner of the farm.  Dale quickly files for partition and forces the sale of the land so that he can have money to buy the boat he has always wanted.

This example illustrates how easy it is for someone to become a co-tenant and gain partition rights.  Deaths, divorces, and poor business and estate planning can allow someone to become a unexpected and unwanted co-tenant.  Partition law does not care how long farmland has been in the family or how vital it is for a farming operation. Partition law treats a city lot that has been owned for a few months the same as a 1,000-acre farm that has been in the family five generations.  Partition can lead to harsh results that should be avoided if possible.

With proper planning, partition can be averted.  In the next installment, the various strategies to prevent partition will be discussed.

See the prior blog post “Ohio Case Illustrates the Risk of Leaving Farmland to Co-Owners” by Peggy Hall for a discussion of a Madison County case and the perils of partition.

Posted In: Property
Tags: Partition, Forced Sale, Farmland
Comments: 0
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