Rethinking the intersection of inheritance and the law of tenancy in common.

Author:Waldeck, Sarah E.

This Article is about "identity property," which it defines as property that is strongly linked to one's sense of self and family and is valued by its holder primarily for what it represents. Identity property is often jointly inherited by siblings or other relatives, who take as tenants in common. Standard doctrine relies on familial bonds and the unilateral right of partition to mitigate the problem of bilateral monopoly and to foster cooperation in the management of the tenants' common resource. The Article argues that, in the context of identity property, this standard account is wrong. Rather, because the law favors partition by sale, the exit of one tenant often means that the remaining cotenants will be forced to sell the identity property. Because the remaining tenants perceive the property as nonfungible, the threat of exit is powerful enough to exacerbate the bilateral monopoly and decrease the likelihood of cooperation. The Article relies on the example of the family cottage to elucidate the meaning of "identity property" and examines the formal agreements that relatives who jointly own cottages make when they decide to opt out of the tenancy in common default rules. These formal agreements reveal a willingness to sacrifice the right of exit in order to increase the odds that co-tenants will continue to own the identity property. The Article argues that the law should heed the message of these formal agreements and adopt a more flexible approach to the inheritance of identity property, including the possibilities of temporal partition and facilitated agreement.

INTRODUCTION I. A REPRISE OF TENANCY IN COMMON LAW A. The Law as Applied to Inherited Identity Property 1. Family Cottages 2. Tenancy in Common Law in Action B. Tenancy in Common Opt Out II. THE CONSEQUENCE FOR PROPERTY LAW III. TREATING IDENTITY PROPERTY DIFFERENTLY A. Temporal Partition B. Facilitated Agreement CONCLUSION INTRODUCTION

Property textbooks are full of legal doctrines that were once important but now merit little more than an historical footnote--the fee tail, the Rule in Shelley's Case, the destructibility of contingent remainders. This Article suggests that tenancy in common, while not yet passe, is no longer as robust as it once was. No one with legal sophistication who wishes to jointly own property opts for a co-tenancy. Instead they form limited liability corporations, limited partnerships, or trusts. Most modern tenancies in common, in contrast, occur accidentally through the confluence of default property rules and poor estate planning. Often the property that is the subject of these accidental tenancies is extraordinarily dear to both the testator and the heirs. The accidental nature of many tenancies in common, coupled with the kind of property involved, should prompt an overhaul of our approach to this ancient form of ownership.

Margaret Radin famously wrote that there is a relationship between property and personhood. That is, "[m]ost people possess certain objects they feel are almost part of themselves." (1) In Radin's formulation, such objects are "bound up with the holder" (2) and essential to the self; the loss of these objects harms the individual and interferes with the ability to flourish and develop. As Stephanie Stern has recently argued, emerging social science has called into doubt the extent to which any one piece of property can be essential to the self. (3) As such, this Article does not rely on Radin's "personhood" terminology and instead refers to the inherited property with which it is concerned as "identity property." (4)

"Identity property" is Radin's personhood property ratcheted down. Identity property is closely linked to one's sense of self and family and is valued primarily for what it signifies and embodies, not for its economic worth. As with Radin's "personhood property," identity property is nonfungible and thus cannot be replaced even by a mostly identical item with the same market value. (5) Unlike personhood property, however, identity property is not essential to human flourishing or serf-development. Rather, identity property is cherished because of what it represents about one's family and own history. Identity property can emerge from a wide variety of experiences such as, for example, activities during a formative period in one's life or long-lasting relationships.

Often identity property is connected to familial history. For example, identity property might be the appropriate label for hunting rifles, or for recipes that are written in the hand of the original baker, or for a crystal lowball cocktail glass. All of these items are "heirlooms" in the sense that they can be passed on from one generation to the next. They are not, however, the only property that an individual might pass along, nor are they necessarily the most valuable or the objects that have been in the family the longest. But all of these objects can have a particular significance because of how they were used by the person who is bequeathing them and how an heir participated in that use. If, for example, Grandma always used a particular recipe on the first day of Christmas, and her granddaughter always spent Christmas with Grandma, then the recipe is both an essential element of the granddaughter's own Christmas and a means by which the granddaughter can maintain a sense of connectedness to her past. A certain cookie during the holidays, or a particular rifle on the opening day of deer season, or a crystal glass for a Friday evening gin and tonic--each can create a sense of continuity though one's own experiences and a sense of seamlessness with the past. Such objects can, however, also raise thorny inheritance questions.

Because of identity property's unique value, its owner is likely to keep the property throughout her life and pass it along at death. The property may be the subject of a specific devise or bequest to a single heir; in that case, others who also cherish the property may be chagrined, but the situation is straightforward and the named beneficiary will simply take the property. What is just as likely, however, is that identity property will fall into a class gift ("All of my property to my children," for example) or pass through intestate succession to multiple takers. In either case, the heirs will own the identity property as tenants in common.

When personal property has been jointly inherited--particularly personal property with little market value--we expect heirs to swap their way out of joint ownership. One child will take the crystal cocktail glass, another will take the hunting rifle, and yet another will take the recipe holder. The heirs involved in the informal settlement may have lingering doubts about whether they struck the best possible deal, but joint ownership is fleeting and everyone eventually moves on.

If, however, the composition of property within the estate forecloses the possibility of an informal swap, matters become more difficult. This scenario is most common when an estate has a single piece of identity property with a high market value. Few heirs will be willing to swap a cocktail glass for a Monet, regardless of how much each reminds them of their father. While some estates, like the one with the Monet, will have personal property that both warrants the identity label and has a high market value, the more likely scenario is that an estate will have real property that both merits the identity label and has a high market value. Unless the heirs are willing to sell the property--and if it is identity property they likely are not--they will have to find a way to successfully share it.

The inheritance of identity property raises questions about how to best encourage cooperation among co-owners. Property that is held as a tenancy in common is a kind of "commons" or shared resource. One perennial question is what conditions foster cooperation between participants in a commons, so that each individual may harness the gains from the efficiencies that can accompany joint ownership.

Much of the work on common resources, and particularly on tenancies in common, emphasizes that co-tenants are locked into a classic bilateral monopoly: with respect to many issues, they have no one to negotiate with except each other. Bilateral monopolies tend to raise transaction costs and encourage unproductive strategic behavior. When co-tenants are related, the law counts on familial bonds to encourage cooperation. The law further provides a strong right of exit in the form of a unilateral right of partition. According to the standard account, the threat of exit provides additional reason to cooperate and mitigates the problem of monopoly. No tenant is truly locked into the monopoly because she can choose to exit through partition.

This Article argues that, in the context of identity property, the standard account is wrong. Indeed, property law lacks a satisfactory default doctrine for situations in which identity property is inherited by more than one individual. Because the law of tenancy in common de facto favors partition by sale over partition in kind, the exit of one co-tenant often means that any tenant who values the property because of its identity characteristics will be forced to sell. As such, the exercise of the right to exit through partition is akin to a nuclear option. The mere threat of exit is powerful enough that it enables tenants to free ride or shirk obligation and thereby exacerbates many of the problems implicit in bilateral monopolies. In addition, the available information about formal agreements between co-tenants in identity property suggests that its holders willingly sacrifice exit and the opportunity for financial profit to increase the odds that they will continue to own the property. All of this suggests that the law of tenancy in common needs a more flexible and creative approach to coownership than standard doctrine currently embraces.

Part I reviews the default...

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