Photo by Frances Gunn on Unsplash

Question:

What is the best way to keep 33 acres of land together and have the ownership shared between 4 siblings. One sibling (myself) wishes to build a house on the land but is worried about protecting financial equity for her children and how to apply for a construction loan on property she does not own. One sibling has plans to farm the land in the future. How do we protect the value of the land as a unit, but also protect each sibling’s financial investment in the land in case of catastrophe (i.e. what if my husband and I die and our children need to take the equity in the house we built?).

Response:

This is very complicated and there very well may not be an ideal situation. For your sibling who wants to farm some of the land, it’s not so complicated. They can probably simply enter into a lease with the other siblings, paying something for the right to farm the land. This should probably a long-term lease so it makes  sense for them to invest in whatever farm equipment is necessary and to maintain the property.

For you, it’s much more difficult. As you suggest, you will not be able to get conventional financing unless you own the land. And your children would not be able access their equity in the property unless they sold the house or were able to borrow against it, which they could not do if they did not own it. The only solution may be for your and your husband to purchase the lot on which you would build the house, separating it from the rest of the land. Your siblings might want a right of first refusal should you or your family decide to sell it in the future so that they can control who owns the property.

You also may want to put the property into a trust or limited liability corporation or partnership to create a structure for its management. This can be especially important as time passes. While the four of you may be able to make decisions together, this could become more difficult when it’s your children or spouses getting involved, given the increased numbers and more diverse interests.

Given all these issues, you and your siblings should talk this through and engage a land use attorney who might have some other suggestions on how to achieve your goals.

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