Legal Definitions - Owelty

Owelty refers to a payment made by one co-owner to another to equalize the value of their shares when a piece of real estate is divided between them, but it's impossible to split the property into physically identical or equally valuable portions. Essentially, it's a balancing payment to ensure that each party receives an equitable share of the total property value, even if the physical division isn't perfectly even.

Here are some examples of how owelty might apply:

• Divorce Settlement for a Family Home:

  Imagine a divorcing couple, Maria and John, who jointly own their family home valued at $600,000. Maria wants to keep the house to maintain stability for their children, and John agrees. However, John is entitled to half the property's value. Since the house cannot be physically divided, a court might order Maria to pay John an owelty of $300,000. This payment allows Maria to retain full ownership of the physical property while ensuring John receives his fair financial share, thus equalizing their distribution of the marital asset.

• Division of Inherited Farmland:

  Consider three siblings, Sarah, Tom, and Lisa, who inherit a 90-acre farm. Thirty acres contain the original farmhouse, barns, and a well-maintained orchard, making this portion significantly more valuable. The remaining sixty acres are undeveloped pastureland. If Sarah wants the thirty acres with the farmhouse and orchard, while Tom and Lisa each take thirty acres of the less valuable pastureland, Sarah would likely be required to pay an owelty to Tom and Lisa. This payment would compensate them for receiving less valuable portions of the land, ensuring that all three siblings ultimately receive an equal total value from the inherited estate.

• Partition of Commercial Property:

  Two business partners, Alex and Brenda, decide to dissolve their partnership and divide a jointly owned commercial property. The property consists of a retail storefront on one side and an adjacent undeveloped lot on the other. The storefront portion generates immediate rental income and has a higher current market value. If Alex takes the storefront portion and Brenda takes the undeveloped lot, and the current market value of Alex's portion is substantially higher, Alex would pay an owelty to Brenda. This payment would balance the immediate disparity in value, ensuring both partners receive an equitable share of the total property's worth during the dissolution.