The First Right of Refusal

About 35 years ago, my brother and I were looking for a ranch. We had little money, but lots of time and energy.

We heard about a property we might be able to buy at an affordable price. It was listed for sale with a real estate broker with whom I was acquainted. He explained the situation like this.

Two brothers, Frankie and Al, had owned a ranch for many years. They had purchased it primarily as a hunting club. One of the brothers ran the business affairs and the other had made a hobby of making physical improvements like dams and roads. Over time they purchased additional property and the ranch grew to over 1,000 acres. In addition, it was adjacent to two land-locked sections of BLM ground – giving them almost 2,000 acres on which to hunt. The had it almost to themselves.

They had also built a very nice home on the property and they invited family members to hunt. Some of their guests actually paid a fee which allowed them unaccompanied access to the ranch.

Over the years, the brothers agreed that in their old age, they would sell the ranch if they needed money for retirement. Little did they know that Albert would drop dead from a heart attack at about the age of 50. Al was married and his portion of the ranch went to his wife. Having no other means to support herself, Albert’s wife asked Frank to purchase her interest in the property, or (at least) allow her to sell her half.

Although Frank did not agree to purchase her half, he did agree to letting her subdivide and sell subject to Frank having a first right of refusal to purchase.

Their agreement included a division of half the ranch into five 120 acre parcels. The parcels were put on the market for about $100,000 each with seller financing. As offers came in, Frank had the right to either match the offer or let Albert’s wife sell to the buyer.

The price was acceptable, but nobody wanted to be the guinea pig for Frank. It became clear to us that the agent and Albert’s wife were frustrated by their inability to obtain a viable offer.

My agreement with the seller’s agent was that we would split a 10% commission, but I couldn’t see making an offer just to watch Frank take the opportunity away from us. The $100,000 price was a little too rich for Rob and I to handle on our own, so we found a partner who would become  co-owner if the deal came together.

Then I got an idea that made a lot of sense. If the seller wanted to get the property sold, she might need to pay a higher commission. If she were willing to pay 20% and the selling agent was willing to accept 5%, we could pay me 15% even if Frank purchased the property. That would fund a pay out of 5% to me and each of my partners. Once I proposed this idea, my partners were a go. If Frank acted on the first right, we would each be compensated for our efforts.

The seller’s agent and the seller were fine with idea. At this point we made our $100,000 offer and waited to hear from Frank. He acted upon the first right.

There were  four remaining parcels available and we still didn’t know exactly what to expect from Frank, so we made an offer that would repeat itself on each of the remaining parcels with a commission being paid to me (and indirectly my partners) each time Frank acted.

Frank not only exercised his first right, but he became so annoyed that he outright purchased the remainder of the ranch. I received a commission of 15% on all five parcels. My partners and I were disappointed that we couldn’t own the property, but we were compensated for our disappointment.

Some significant information can be gleaned from this story. First of all, it is clear that a first right of refusal has a negative impact on one’s ability to sell property. And, it is clear that the first right decreases the value of the property – in this case about ten percent. In my opinion the actual decrease in value was even higher than that.

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Life Estates – They Serve a Purpose

To many of us, the Life Estate appears to be something that we’ll never see. I remember first learning about life estates when I took my first real estate course in 1977. It seemed like a neat trick.

A life estate can be granted to an individual by the owner of a property. First there must be a legal description describing the parcel. Secondly, the grantor of the life estate must have clear title and all the owners must sign on. The person granted a life estate has the right to use the described property during their lifetime.

The owner of a life estate can also transfer the use to another individual during their lifetime, but as soon as they die, the title reverts to the underlying property owner. I’ve been involved in several properties where life estates have existed both as a benefactor and as an underlying property owner.

One problem with life estates is that it can be a hassle removing the recorded documentation from the public record. Once a life estate is created, it is recorded to create public notice that the individual is receiving the right to use of the property until they die. When that person dies, a death certificate must be obtained and recorded to demonstrate that the estate is over.

My experience has been that there are often better ways to accomplish the intent of a life estate than to actually create one. A contractual arrangement can create the same arrangement without creating a recorded document. If you’re on the receiving end, it is probably better to receive the real thing, but if you’re deeding somebody those rights, you might want to consider some other option.

I am currently in the process of searching for death certificates for two individuals who retained a life estate allowing them to hunt deer on our property until their death. In their case, all the recipients did to document the Estate was to state that they were retaining a Life Estate and access rights when they created the grant deed.

It is simply written on the deed and it worked. They have been deceased for years, but the life estate was never removed from title. I recently received a call from a grandson who thinks he can produce the two death certificates I need in order to clear title.

It has taken several months to track down this relative who has good enough legal standing to obtain the death certificates and provide them to me. After I receive the death certificate I’ll give it to the title company and they will then remove the Life Estate from our title report.

In about 1986, a group of us had an opportunity to sell our duck club, but we didn’t have any motivation to sell.  When the buyer told us he’d grant us Life Estates for the purpose of duck and pheasant hunting, we changed our minds.

The ensuing contractual arrangement has allowed us to continue hunting that property for more than 20 years – a very good deal. With luck, some of us may be hunting there for another 20 years.

In our recent partition suit, an agreement between us and one of the other owners helped seal the deal. We agreed to allow him to use a cabin and hunt on the surrounding 320 acres until his death or five years, whichever comes sooner. He’s not in great health, but the arrangement made selling his interest more palatable for him and was acceptable to us. Although this arrangement is not a true Life Estate, it has some of the same characteristics.

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Partition – Ending Co-tenancy

The situation

Ten parcels of ranch property owned by one partnership with about 25 members, one LLC with three members, a family trust with 20 heirs and four individuals including one who was deceased and still on title.

 

That was the status of our ranch in year 2003. We owned an undivided interest equivalent to 949 of the 2,540 acres and we owned different portions of each parcel. It was a mess.

 

Our first attorney couldn’t even get out of the box before he admitted we needed somebody else. Our second attorney got us half way there and decided to retire. Our third attorney took over and completed the job.

 

Now it’s over. All that’s left is to sign a few deeds. The judge signed a stipulated judgment (what all the parties agreed to through mediation) and  that agreement is on its way to the Alameda County Recorder’s office.

 

Why choose the partition route?

Partition is the last thing one must do to resolve untenable property ownership. All other options should be explored first. For ten years we attempted to work out an arrangement to have co-petitioners in a partition suit so we wouldn’t have to take everybody on by ourselves, but that attempt failed and in the end we were forced to go alone.

 

What’s the legal basis?

In general, every co-owner of property who owns property in co-tenancy and doesn’t have some type of partnership agreement has the right to sue for partition. If the property can be subdivided and distributed to co-owners (in kind distribution) the law says that’s the best resolution. If the property cannot be divided up into appropriate parcels, the law says you sell and divide up the money proportionate to each ownership interest.

 

We evaluated our situation. Although some said it could be done, we decided that there was no way to subdivide the ranch. The parcels ranged in size from 20 acres to 640 acres. Zoning laws did not allow parcels to be split. Ownership interests couldn’t be fit into the existing parcels without major ownership changes.

 

We held firm that the ranch would have to be sold.

 

Why didn’t we leave things the way they were?

One family group owned 5% of the ranch. They had at least five people hunting and each could kill two bucks. They showed no interest in conservation of the deer herd. If all the owners killed deer at a proportionate rate we would be taking more than 100 bucks per season. The ranch didn’t have 100 deer on it, let alone 100 bucks. Similar issues existed with at least one other owner.

 

The ranch was (and still is) suffering from disrepair. Since nobody claimed the ranch as their own, nobody took responsibility for doing the little maintenance things that are necessary to keep things working properly. Ponds dams needed work, fences were patched with temporary fixes, gates were held together with bailing wire etc. The few buildings on the property were ready to fall down.

 

Once we initiated the action, all the partners had to respond to the law suit or default on the action. If they defaulted, they would have no say in the outcome and would be forced to accept the judge’s decision.

 

Just getting the case ready for and in front of a judge took about two years. Once we got a court hearing, we then went through a year of delays as attorneys for the defendants sought extensions for any or no reason during the first few court dates.

 

Finally, mediation was scheduled for the spring of 2007. Getting meetings arranged took a few months, but the mediator was efficient and knowledgeable. He made it clear to each owner that if a mediation solution could not be reached that the ranch would be put up for sale. At least one of our co-owners was so angry with us that we thought the mediation might not be successful.

 

However, ultimately everybody realized that there was a solution to fit all. We bought out two owners of a total of 400 acres. Another co-owner bought about 250 acres. We agreed to take four parcels that approximated our ownership share and others did the same. We gave some property to another co-owner.

 

One year after completion of the mediation, the suit is over. After about four or five years of effort, the ranch will have four ownership entities. Everybody is better off. The guy who owned 94 acres and hunted on 2,540 may not have as good a hunting scenario, but he now owns 160 acres by himself and he got it without paying anything for the additional acreage.

 

Along the way we had to resolve ownership by one co-owner who was deceased and we gave another individual a five-year right to use one of the cabins on the property. Another individual received five years grazing rights on a section of ground.

 

Instead of 949 acres co-owned and unmanageable, we now have 1,300 acres we can manage as we see fit. I haven’t calculated the legal fees, but we paid attorneys two to three thousand dollars a month for several years. Whatever it cost, it was worth it.

 

Create a functional partnership agreement

The best way to prevent this problem is to enter into a partnership or co-tenant agreement whenever you become co-tenants with anybody. The partnership agreement must describe the process for selling whenever an individual wants to opt out of ownership. Keep in mind that not all partnership agreements are fair and equitable. I’ve seen some agreements that left the co-owners with fewer rights than they would have without an agreement.

 

Please keep in mind that I’m not an attorney and the purpose of this information is to give you the benefit of our experience. However, before you take action on your own, hire an attorney to tell you to resolve your issues. A good attorney may appear to be expensive, but in the long run good legal advise can be invaluable.

 

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Time to Buy a Ranch or Duck Club?

Is this the time to buy a ranch? Duck club? Maybe not, but it is definitely the time to make serious progress towards buying hunting property. Here are some ideas to get you started.

 

If you want a hunting ranch, you must have the means to buy it and you probably won’t get enough money to buy a ranch by putting money in your savings account or buying stock – unless you can identify the next Microsoft and buy it early.

 

Why not? If you put money in savings or buy stock, you’ll have to use after-tax money to buy your ranch. The government will take 15-25% (or more) of the return you get on your earnings. So, unless you have a huge income, you’ll not be able to come up with enough buying power, or at least it will take longer to do so.

 

On the other hand, if you purchase investment real estate, you will likely be able to transfer your equity from real estate investments to the ranch you choose and defer the taxes indefinitely.

 

Yes you will have a tax obligation, but you won’t have to pay it until final liquidation of the ranch. If you own the ranch until you die, the tax consequences will be irrelevant in your lifetime.

 

We’re in a buyer’s market. Now is a good time to purchase some types of real estate investments. The first type is the “no-brainer.” A no-brainer is an investment that comes along very seldom, but when it does, you’ll know it. Buy it. But because you can’t count on no-brainers here’s some other ideas.

 

If I were a young aggressive investor with time on my side, I’d be looking for vacant land that has future development potential. I’d be trying to purchase with very little cash from a seller who could give me time to seek development approval before I had to come up with significant money.

 

Or, if I were flexible about where I could live, I’d be attempting to use the buying power for my personal residence to purchase a home that had surplus property attached to it. Down the road the surplus property could be subdivided off and used to generate funds for a ranch purchase or other real estate investment.

 

I’d also be looking for small residential properties that have investment bonus potential. Some properties have the potential to blossom as investments as time passes and neighboring properties come available. Often these properties sell for prices that do not reflect the “bonus” aspect.

 

One situation like this is a house that, when combined with the house next door, generates surplus property – sometimes an extra building lot. The extra building lot may not be anticipated by the sellers. Unfortunately the down side is you don’t know when or if the neighbors will sell. But, if the home is in a typical residential area, the odds are in your favor as statistics show home owners tend to sell every five years or so.

 

If you pull it off, you get the benefit of the appreciation of the property plus the bonus value created by subdividing off the generated lot.

 

Sometimes properties may become appropriate for zoning changes that cause the property to take a leap in value. The big guys have the advantage here, and zoning changes don’t always work to your advantage, so you’ve got to be careful with this one.

 

And, I wouldn’t quit looking for hunting property. An interest in a duck club or a small club you can purchase with a couple friends. You may find a small ranch that has enough hunting potential for you and also an occasional friend. Then as you accumulate more buying power, you can expand or combine funds from the sale of the smaller hunting property with other equity to purchase a larger ranch or duck club.

 

By purchasing any high quality investment real estate, you are getting closer to owning a ranch. When the right ranch appears, get it into contract and sell your other property. By using the IRS 1031 Tax-Deferred Exchange rules, the equity can be transferred to the ranch along with your tax obligation.

 

These are some of the ideas I’ve used to speed up the process of building up buying power, but don’t stop with these. Use your own creativity to make your investments successful. In order to do that, you’ll probably need to set asside time to study real estate investements in your area and ponder over investment strategies. Make good decisions.

 

As I’ve said before, once you get to the point where you can own recreational property, you have an investment that gives you a continuous source of personal enjoyment while you own it, along with long-term income potential for your future should you decide to sell.

 

The first step is to get started and today’s buyer’s market is a good time for that.

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Landowner view of Condemnation

During 2003, thinking it was a good time to buy a property to suit my own investment needs, I scoured the multiple listing service for an attractive buying opportunity.  On one occasion, I found a property that seemed to be listed below market value.

The property listed was advertised to be a 32-acre site with county road frontage. The price appeared to be too good to be true.

 

Knowing that good opportunities don’t last, I jumped into my car and drove to the site. No “for sale” sign, no indication of what was for sale. I made a mental note of what appeared to be the subject property and contacted the listing broker.

 

He quickly explained why the price seemed low. It was not an independent parcel. The owner was looking for a buyer who would step in to obtain a variance and subdivide his property so that the 32-acre listed parcel could be purchased.

 

Knowing that this was something I might be able to accomplish, I made an offer to purchase the property and set the offer up so that I could buy it without using a lot of my own cash – always an important issue when you’re a real estate broker. Cash flow is usually the biggest problem when you’re self-employed.

 

The property was listed for $325,000. I asked the broker to represent me as my agent and offered $260,000 with a $500 deposit to be increased to $5,000 after a variance for the lot split was approved. The owner would carry 50% of the purchase price at close of escrow and the note, with annual interest only payments at 6% interest, would be due three years after close of escrow.

 

The seller accepted the offer. It turns out there was more history on this property than I knew when I made the offer, but I was satisfied with my opportunity and proceeded to make application for a variance that would allow the property to be split.

 

The unique circumstances surrounding the parcel led to an approval of the lot split. But, it was a lengthy process that took over a year to complete. The issues surrounding the process were quite interesting and make a good story, but this is about what happened next – after the approval.

 

The property I acquired was adjacent to lands owned by a local open-space park district on two sides. During the subdivision process, it entered my mind that the park district was a logical buyer for this parcel and I was surprised that they had not tried to purchase it. After the split was approved, I was even more surprised when the park district approached me with an inquiry. (As it turns out they had attempted to purchase it.)

 

Since I intended to sell the property to make money anyway, I was more than willing to sit down with them to discuss their intentions with hope of selling the property quickly (and for a profit).

 

After a cordial meeting between me, my attorney and park district representatives, I delivered a comparable sale to the park people, via my attorney. The comparable sale was a 20-acre parcel that had sold for $695,000 more than a year before my purchase. I didn’t say exactly what I wanted, but my intent was that $695,000 would be about right.

 

I was shocked when their official response was that they would pay $300,000 and that they would commence condemnation proceedings if I didn’t sell “voluntarily”. They showed me their appraisal in an attempt to back up their offer and were using my purchase price ($260,000) as a key element of it.

 

Needless to say this put a crimp in my long-term goal (selling the property for a profit). My original purchase price of $260,000 was just the beginning of what I had into the property.

 

Between the original offer and when the park district made their offer (about a year and a half), several things had happened. First I had taken on a silent partner who agreed to pay $175,000 for a 50% interest in the property ($350,000 for the whole property) while explaining to him that the property would be worth at least $550,000 once the approval was obtained. The reason I had sold for that price was because I’d covered my original investment (reducing my risk) while retaining the ability to make more money when we made the final sale of the property a couple years down the road and I didn’t have enough cash to continue this lengthy process comfortably.

 

Therefore my partner would take a loss if I accepted the park offer. Not only that, but my investment had grown during the approval process and I’d also drilled and paid for a test well to the tune of about $10,000 before taking on the partner.

 

But, most importantly, the property was worth the $695,000 price supported by my comparable sale.

 

It wasn’t long before I began looking for an attorney who specialized in condemnation cases. I was not surprised to find out that the condemnation attorney would want to be paid 20 to 35% of the amount of the gain I would receive by going to court.

 

For example, I had been offered $300,000 and I hoped that I would win a suit at a value of about $700,000 (I had the advantage of being in the real estate business and being quite certain about what the property was worth). Therefore the attorney would be paid approximately a quarter of the difference or $100,000. (I wonder if the park attorneys were able to make this calculation?)

 

During our fee negotiations, my attorney could see that this was a good opportunity and took a percentage at the lower end of the scale. At 20%, he ended up making the difference between $730,000 and $300,000 or about $86,000. I also paid my appraiser $15,000. As the initiator of this process, the park (tax payers) paid most of the other fees, such as court costs. I don’t know what their (tax payer) total expenses came to, but I’m sure it wasn’t cheap.

 

In May of 2005, the park took possession of the property. I hired my condemnation attorney in July of 2005 and the case was heard in June of 2006. After the jury had spoken, the park paid interest on the unpaid balance of the purchase price at 3% per annum from the date they took possession until I was paid in full.

 

I was upset enough about what I considered to be bullying by the public agency, that I refused their final appraisal price of $625,000 and all their ensuing offers including one for $700,000 a couple days before the trial started.

 

The fact that they had raised their appraisal price from $300,000 to $625,000 (using the same sales data) was an indication to me that they had not been dealing in good faith. And, because my attorney fees would be the same whether or not I went to court, the resulting jury award produced the largest sales net of any selling opportunity afforded me.

 

Although the week of sitting in front of a jury was frustrating, the satisfaction I received by having my day in court outweighed the pain of trial. Having received a public decision by a jury of peers, the information about my case is public information.

 

If I had accepted a settlement, my guess is that the park attorneys would have required me to sign an agreement not to speak about the case, which in my opinion included bullying and hardball by the park after I had made a fair and good faith offer to settle – which would have saved the public a lot of time and money.

 

Not all condemnation cases are so distasteful. In fact I’ve witnessed public agencies that behaved fairly and above board while exercising the power of eminent domain. It’s just a mater of who you’re dealing with, how much money they have and sometimes property history.

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How Much Is Enough?

 

(Caption: The size of the pond and the catch vary with ”the beholder.”)

The small sycamore tree stood atop a 20 foot high mound where it had been spared by quarry equipment. It remained an island in an otherwise barren gravel pit. From our vantage point, my brother, Rob, and I could see a valley quail sitting atop the branches of the scraggly sycamore – probably a lookout. 

  

(Caption: Above is a photo of myself an PH Kobus Grobler with a wildebeast that I shot from a ground blind at a water hole. In South Africa, game ranches manage habitat for maximum sustained harvest of game by keeping the game animals in and the poachers out. Such control over the game is critical to their financial success. In North America, hunting game in high-fence enclosures is generally frowned upon. But, there are many other factors, besides fences, that can improve your hunting such as managing hunting pressure and making your land more attractive to wildlife.)

 We had learned that the best ammo for long range shooting with our slingshots was cat’s eye marbles. They didn’t travel fast, but they carried a lot of “retained energy” as modern ballistic experts would say. The other advantage was that they made good lobbing – and you could follow the track of the projectile and adjust your aim with each shot. Rob didn’t need to adjust on that day. His aim was true and at a range that I recalled to be about 150 yards, he dropped that quail from the tree. 

I was somewhat surprised and disappointed when I visited the sight a couple years ago. A house has been built where we stood, but the gravel pit remains nearly unchanged and the scraggly sycamore is still in place. The shot of a lifetime was really only about 30 yards. Things sure change over time.  The hunting ground of our youth seemed endless, but in fact it encompassed only 100 acres or so. Conclusion: When your equipment is propelled by rubber bands, you don’t need as much hunting country. 

Our first local deer hunting spot was a 5,000 acre ranch that held a good blacktail buck population. We were quite fortunate to be able to hunt the ranch and could still hunt during the morning and then spot bucks under the shade of oaks and buckeye trees during the afternoon.    Of the 5,000 acres, we probably hunted on more than half of it during the three or four days we’d hunt each summer.

There was plenty of territory for us and the deer. Action was fast, but results were predictably low. Over the approximately five years we hunted there Rob killed three deer with bow and arrow. I didn’t kill any, but I did have my chances. 

Today that ranch is leased out to a small group of hunters who pay for the right to hunt. My guess is that there are five of them and they hunt primarily with rifles, taking a buck apiece each season. I’m sure their success rate is 100% or very close to that. Which brings me to the question – How many archers could that ranch support? We know it can support five rifle hunters with 100% success. If the archery success rate were close to the 30% that Rob and I experienced (relatively high), the ranch could support three times as many bow hunters with fewer deer taken.

(Caption: In sharp contrast to the game ranch hunting in South Africa is stone sheep hunting in British Columbia. Stone sheep live and thrive on remote high-mountain slopes where they require huge expanses of habitat to survive. The difficulty of finding and shooting a stone sheep ram make them a rare and expensive trophy. However, the hunting experience is very similar to hunting other less expensive big game such as mule deer, which also require large habitats and remote territory.)

One can make a very good case that archery equipment expands habitat. Rick Copeland, manager of Wilderness Unlimited, a California hunting operation, understands that archery equipment extends habitat. That’s why two of their deer hunting ranches are open only to archery equipment. Members can hunt the ranches during the A- Zone archery season and again during the A- Zone rifle season. By hunting only with bow and arrow, they are expanding opportunity and maximizing the use of the non-migratory deer population. 

Weapon choice is not the only vaiable that effects the amount of hunting that a property can support. Of course the quality of the habitat is a huge factor. When we purchased an interest in our first 140 acre duck club we were amazed at how much hunting pressure it could handle. The habitat on the parcel was dense with berry bushes and thick patches of stinging nettles. Tall stands of Johnson grass and many other weeds added to the ability of game to utilize the property – especially pheasants. 

The heavy growth and several large sand hills effectively parceled the property so that hunters could hunt ducks or geese with little interference from the others. After title to the property changed hands when we sold, the new landowners removed all the dense habitat and disked up the open space between corn fields. The property character changed and the amount of hunting pressure it could support dropped accordingly.  Although we still have reasonable hunting, it’s not like it was. 

The same principle applies on upland ranches. Ranchers that graze heavily leave little escape cover for deer, turkeys or pigs, but ranchers who leave habitat in place have more game that supports more hunting pressure.  

Of course other factors, like topography are a major consideration. So is water, climate and soil structure. Some property is just plan more productive. On hill ground in California, creeks, springs and waterholes play a major role in wildlife density and game management and weather patterns can vary greatly within only a mile or two.  Exposure to the sun plays a huge role in habitat quality. 

Location plays a role in many ways. Who are the neighbors? Do they hunt?  If  the neighbors do hunt, how hard?  Do they stay within their boundaries? Is poaching a constant problem? Are there roads through your property to cause disturbance and increased trespassing.  

The aggressiveness of the partners is a major consideration. If you’re in a partnership, how much will each partner be allowed to hunt? It should be spelled out. Will there be hunt days and rest days? How many guests will each partner be allow to bring? You have the ability to craft out an agreement that improves the quality and equality of hunting opportunity for the partners.  

In the end, the partner that hunts is the one who will enjoy the property the most. There are always those who seem to reap the most rewards, but that’s life.  

The days of picking up your shotgun and heading to the hills to hunt without paying a fee are long gone. The next question is, are you going to put yourself in control of your destiny or roll the dice to see if you can find a place to hunt?  In fact, not only your destiny as a hunter, but also the destiny of all hunters is tied to the answer to this question. 

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The Undivided Interest

In the summer of 1992, I published a real estate newsletter. One of the areas of discussion was related to the benefits of partnerships. In that summer’s issue, I wrote the following:

 There are several ways that one can hold title to real estate. One of the common methods of taking title, when there is more than one owner is as tenants in common. Using this method of holding title, each owner can own an exact percentage of the property, and the ownership interests need not be equal. Each owner, regardless of the size of the interest held, has a right to the use of the entire property. This method of owning property, in which the ownership interest is called an undivided interest, can create a major problem between owners, especially with hunting property. If Joe and I own a piece of property together and Joe owns 99% and I own 1%, as tenants in common, I have the same basic right to use the entire parcel as Joe does. Not only can I use the entire property, but Joe cannot require me to contribute towards any improvements of the property. In addition, I can encumber the property, and if Joe decides to sell, the new owner must be my partner with the same ground rules that I had with Joe.  Needless to say, the value of Joe’s property is greatly affected by my interest. If Joe decides to sell, the buyer will not only be concerned about  what type of person that I am, but there is no control over who I might sell to,  or how many. I could divide my 1% into five .2% interests and sell each of them. From an ownership standpoint, an undivided interest is only good if you own a very small interest in a property, and you buy it at a good price. Then, you don’t have much to lose. The entire mess, created by undivided interest, can be avoided by entering into a good partnership agreement. 

As you can imagine, owning hunting property as Tenants in Common with unequal undivided interests is a very unfair arrangement. 

Since the time I wrote that segment, I have lived through a very difficult relationship as a co-tenant in a ranch that I own with my brother, father and several other individuals. After acquiring 10% interest in the ranch in 1983, we went on to acquire several other undivided interests over the course of 20 years. Eventually we reached the point where we owned 53% of the 1800 net-acre ranch spread over 2560 total acres.

(Caption: Although there are problems associated with owning property as tenants in common, sometimes it is the only option. During our 25 year experience as owners of an undivided interest, we’ve experienced generally good hunting. Here’s a friend, Joe,  with a gobler taken on the ranch.)

In 2004, after realizing that we were at a stalemate as far as arriving at a position where we could own our share of the ranch as sole owners, we initiated what is called a Partition Suit. As the initiators of the suit, we became the Petitioners and the others became the Defendants.

The law provides the Partition as a method of ending undivided interests. At some time in the past, somebody concluded that co-tenancy could become unbearable and unfair and that when that happens, the law should provided a way to end the problem by dividing up the property so that each owner could end up as sole owners of their share.

Unfortunately, it’s not always possible to sub-divide property into usable, legal and appropriately valued properties so that each individual can receive a parcel. When that is the case, the owners can either negotiate a settlement or have the court sell the entire property and divide the proceeds among the owners according to their ownership interest.

Since we concluded that the property could not be appropriately divided, we asked for a sale of the property in our Petition. It was fortunate that the co-owners were able to agree to a compromise agreement in which some of the owners sold and others retained property, thereby preventing the sale from coming to fruition.

Today escrow closes on one more ownership interest and we will own enough of the ranch to end up owning two entire sections by ourselves. This is a major improvement over the co-ownership we’ve endured for almost 25 years. The two sections will be owned by my brother, father and I as a Limited Liability company (LLC) with an agreement as to how we will operate.

The suit lasted for over three years, three attorneys and cost many thousands of dollars, but the end result will justify the means and, in my eyes, all of the owners have benefited from the suit. One of the smallest ownership interests (5%) will lose out on significant hunting rights, but for 25 years they enjoyed a windfall of hunting opportunity at next to nothing cost. In the end they were able to increase their ownership from 90 net acres to 160 net acres and own a quarter section of ground as sole owners with no out of pocket cost. Although their hunting territory will be reduced from 2560 acres to 160 acres, they’ve improved their financial position considerably through negotiation and they totally control the hunting (and all other rights) on the parcel they’ll own.

Please keep in mind that this is information I’ve gained from personal experience, but I am not a lawyer. The law is complex and is constantly subject to change, so if you plan to take any legal action you should first consult with your attorney.

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All a Goose Hunter Could Ask For

Hunting partner, Tom Billingsley, and I arrived at the Web Tract ferry about 8:45 on Saturday morning Dec 1. One truck was in line ahead of us and the driver hopped out of his truck as we pulled up.

“I’ve been here since 8 O’clock,” he bellowed. “There was no 8 O’clock ferry and if it doesn’t show up at 9 I’ll give up.”

“Oh island life,” I thought to myself. “Obviously this guy’s life style is not at the right pace for island living.”

We could already see large flocks of geese rising up on Webb Tract a couple miles from where we waited. Eagerly we drove onto the ferry and then to the property. From the levy overlooking the south end of our 140 acre hunting ground we could see hundreds of geese and swans loafing in the most southern pond, a pond of only 5 to 10 acres in size.

After a brief discussion we concluded that we’d be better off if we entered the property from the North end. With a south wind, we’d disturb the property less if we approached from down wind. When we set up to hunt, the wind would reduce our impact upon the birds at the south end, and hopefully we’d have a continuous draw of birds overhead giving us opportunities to pass shoot.

As we drove into camp, we could see that the northern ponds held even more waterfowl than the southern. In fact this may have been the largest concentration of geese, swans and sand hill cranes that I’d ever witnessed at close range.

Upon our arrival the birds became nervous. Tom and I sat down in camp chairs to observe. As the flock grew ever-more excited they began to lift off. Thousands and thousands of geese rose from the ponds. As they lifted off they carried with them droplets of water which fell back to the ground. The trailing beads of water fell like strings of diamonds creating a cascade of reflections backlit by the morning sun. The sound of calling geese, cranes and swans mixed with the roar of wing beats and the reflecting waterfall made the scene spectacular. We sat and stared like privileged guests at a sacred ceremony.

Webb Tract hadn’t always been a goose Mecca. Thirty years ago, my brother, Rob and I saw an ad in the San Francisco Chronicle Sportsman’s Corner. The ad read something like this: “Delta duck and pheasant club for Sale – seeking six partners, $18K each.”

This was what we were waiting for. We called the phone number on the ad and viewed the property within a few days – could hardly wait to plop down our money, except we didn’t have enough. We told the seller that we’d pay him when sold our rental house and he said OK.

We became one of the first to purchase an interest in what was later to become the False River Farms duck club.

As farmers, we never received enough money, from our share of the crop, to pay for the debt service, taxes and reclamation district fees. One winter, the island flooded and we were strapped with additional charges for reclamation.

The hunting was fantastic, and our prayers for a hunting paradise were answered. Despite the poor financial showing, we were never unhappy with our decision to purchase.

After the island had been returned to a normal and semi productive state, we were offered a chance to sell the property and maintain a life estate – for hunting purposes. This was truly a case of having our cake and eating it too. The sale price was such that we turned a reasonable profit for our years of enjoyment. And, to this date we still have excellent hunting on the property. Except now we hunt geese more than ducks and pheasants, but we still bag a few of them too.

(Tom with four white-front geese, also know as speckle bellies)

You see the rough edges, berry bushes, small marshes and tule patches that used to provide habitat for pheasants and ducks are gone. In an effort to clear the island of such quagmires, the new owners removed most of the wildlife infrastructure. Now they plow, plant or drain everything possible. I suspect that this process also produces the highest yield crop wise. What used to be fantastic duck and pheasant habitat has been converted to perfect goose habitat. The geese prefer the open space, wheat sprouts and left over grain which liters the corn and wheat fields.

If I were asked, “What is the best real estate investment that an individual can make?” I would respond that purchase of property that can be utilized by the owners is the best investment of all. A personal residence is first and foremost. A business person should always consider owning the property that his business is located upon. After that, I would say that recreational property, used with a high degree of frequency, is probably as good of an investment as anything. If the property falls within the individual’s affordable range, and if use of the property remains enjoyable, the owner has the added advantage, from an investment point of view, that there is no need to sell.

When there is no need to sell, the owner can wait indefinitely for the right buyer to come along. Sooner or later somebody will want your property more than you do. In the mean time one can continue to enjoy the fruits of land ownership and be in control.

In the case of our Webb Tract property, the new owners did not need the hunting rights, and we were not interested in selling, so the only way to purchase our property was to offer to let us keep them. As a hunter, they are the reason for ownership, so the hunting rights are invaluable. Upon sale of the Webb Tract property we were able to purchase a second duck club where we still enjoy hunting to this day.

Today, the parcel we once owned and now hunt provides some of the finest goose hunting that exists. During the months of December and January, the 5,000 acre island attracts many thousands of geese – primarily white-fronted, snow, Ross’s and small Canadian geese like Aleutians and cackling geese.

Our weekend hunt produced lots of action. Tom and I each bagged several white-fronts with a pheasant on the side. Lola retrieved her first goose and I managed a rare triple on geese when a large flock of white-fronts passed overhead.  

All this took place in bright sunny weather with a moderate breeze and temperatures in the 40’s and 50’s. Throw in a couple rib eye steaks provided by Tom and you’ve got all a bird hunter could ask for.

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