USDA to Provide $67M to Help Heirs Resolve Land Ownership and Succession Issues

August 3, 2021

The U.S. Department of Agriculture (USDA) is providing $67 million in competitive loans through the new Heirs’ Property Relending Program (HPRP).

The program aims to help agricultural producers and landowners resolve heirs’ land ownership and succession issues. Intermediary lenders—cooperatives, credit unions and nonprofit organizations—can apply for loans up to $5 million at 1% interest once the Farm Service Agency (FSA) opens the two-month signup window in late August.

After FSA selects lenders, heirs can apply directly to those lenders for loans and assistance. Heirs’ property issues have long been a barrier for many producers and landowners to access USDA programs and services. The USDA said the relending program provides access to capital to help producers find a resolution to these issues.

“While those affected are in all geographic and cultural areas, many Black farmers and other groups who have experienced historic discrimination have inherited heirs’ property,” Vilsack said. “USDA is committed to revising policies to be more equitable and examining barriers faced by heirs’ property owners is part of that effort. This helps ensure that we protect the legacy of these family farms for generations to come.”

HPRP is a loan and will need to be repaid as directed by the 2018 Farm Bill.

Heirs’ property is a legal term that refers to family land inherited without a will or legal documentation of ownership. The FSA considers heirs’ property to be land that has been passed down to subsequent generations via intestate succession (that is, without a will) or via a will that divides real estate assets equally among all heirs. When a landowner dies without a last will and testament or estate plan, state law determines which heirs or classes of family members inherit the land of the deceased, and the ownership share for each heir.

This form of property ownership results in the land being owned in common by all heirs-at-law, each of which owns a fractional interest in the land. As a result, the absence of clear title prevents the owners who farm the land and pay real estate taxes from gaining access to the legal, financial and managerial transactions needed to effectively manage the land.

Eligible Lenders

To be eligible, intermediary lenders must be certified as a community development financial institution and have experience and capability in making and servicing agricultural and commercial loans that are similar in nature.

If applications exceed the amount of available funds, those applicants with at least 10 years or more of experience with socially disadvantaged farmers that are located in states that have adopted a statute consisting of enactment or adoption of the Uniform Partition of Heirs Property Act (UPHPA) will receive first preference.

The UPHPA helps preserve family wealth passed to the next generation in the form of real property. If a landowner dies intestate, the real estate passes to the landowner's heirs as tenants-in-common under state law.

States that have adopted UPHPA include Alabama, Arkansas, California, Connecticut, Florida, Georgia, Hawaii, Iowa, Illinois, Mississippi, Missouri, Montana, Nevada, New Mexico, New York, Rhode Island, Texas and South Carolina. This also includes the Virgin Islands.

ALTA supports the thoughtful approach the UPHPA takes to provide a fair and equitable framework for resolving disputes between the owners of heirs’ property. In too many cases, the forced sale of heirs’ property results in devastating outcomes on personal and economic levels.

In addition, a secondary preference tier has been established for those that have applications from ultimate recipients already in process, or that have a history of successfully relending previous HPRP funds. When multiple applicants are in the same tier, or there are no applicants in tier one or two, applications will be funded in order of the date the application was received, according to the USDA.

Selected intermediary lenders will determine the rates terms, and payment structure for loans to heirs. Interest rates will be the lowest rate sufficient for intermediaries to cover cost of operating and sustaining the loan.

Additional information for lenders, including how to apply for funding, can be found in the HPRP final rule.

Relending to Heirs

Heirs may use the loans to resolve title issues by financing the purchase or consolidation of property interests and financing costs associated with a succession plan, according to the USDA. This may also include costs and fees associated with buying out fractional interests of other heirs in jointly owned property to clear the title, as well as closing costs, appraisals, title searches, surveys, preparing documents, mediation and legal services.

Heirs may not use loans for any land improvement, development purpose, acquisition or repair of buildings, acquisition of personal property, payment of operating costs, payment of finders’ fees or similar costs.

Intermediary lenders will make loans to heirs who:

  • Are individuals or legal entities with authority to incur the debt and to resolve ownership and succession of a farm owned by multiple owners.
  • Are a family member or heir-at-law related by blood or marriage to the previous owner of the property.
  • Agree to complete a succession plan.

Contact ALTA at 202-296-3671 or [email protected].