Owelty is a sum of money decreed by a court as part of a judgment of partition, to be paid by a party who received a share of greater value to other parties. It is actually compensation by one former joint owner to another when a partition results in the unequal division of land[i].
An award of owelty occurs only in cases where a just or equal division of value in property is not possible. A court has to determine whether an award of owelty is necessary, whether an amount of owelty is adequate, and if the payment of it is burdensome or not for the party who is liable to make the payment.
Usually, payment of owelty along with unequal division is preferred to a partition by sale. It is preferred to avoid a partition by sale where not all parties are willing to accept a sale. But, when the payment of owelty is not practical considering the circumstances, partition by sale will be preferred.
A court may require owelty to be paid when partition in kind cannot be made equal among the owners without prejudice to the rights or interests of some[ii]. It is obviously impossible, in many cases, to divide an estate into parts of exactly equal value. Differences in buildings, location, water, wood, fertility, and other incidents affecting value frequently need to be adjusted by payment of money[iii].
Parties to a voluntary partition also may agree to the payment of owelty in order to equalize the shares allotted to each co-owner.
Determination of owelty is made with the assistance of court appointed referees or commissioners. A commissioner is required to submit a report to the concerned court regarding division of property and recommend whether owelty is to be paid or not. A commissioner in a partition action who submits to a court that a property cannot be divided without injury to its value must provide factual analysis in support of that decision[iv].
A referee may or may not have the power to award owelty depending on the prevailing statutes in the respective jurisdictions. In some jurisdictions, a referee can only decide whether owelty is to be awarded or not along with making a division of property and may recommend a specific amount to be awarded. But, it is up to a court to fix an amount of owelty.
Generally, owelty is a monetary award but there can also be alternative methods of compensation. It can be by way of a lien in favor of a party who received lesser value over the property of the party who received greater share[v]. A lien would be only for the difference of the value of shares received by the parties. This is to assure proper payment of owelty due by a party to another.
Where owelty is required and immediate payment of the same is not practical, the amount may be charged as a lien against the excessive allotment[vi]. A lien on the property starts from the date of judgment. A reasonable time or a fixed future date must be given for making the payment. A subsequent purchaser of a property would be held to have constructive notice of the lien with regard to owelty on the property.
[i] Chesmore v. Chesmore, 1971 OK 49 (Okla. 1971).
[ii] Levorsen v. Freeman, 2005 Minn. App. Unpub. LEXIS 343 (Minn. Ct. App. 2005).
[iii] Updike v. Adams, 24 R.I. 220 (R.I. 1902).
[iv] Venetta v. Arrowood, 1997 Ohio App. LEXIS 925 (Ohio Ct. App., Ross County Mar. 10, 1997).
[v] Keenan v. Wade, 182 P.3d 1099 (Alaska 2008).
[vi] Sawin v. Osborn, 87 Kan. 828 (Kan. 1912).