Facebook founder Mark Zuckerberg may be one of the richest men in the world, but his dream of owning a Hawaiian paradise has turned out to be more challenging to realize than he’d planned.
Why? It all started with an obscure type of property lawsuit called a quiet title action. If you have no idea what that is, join the club! This legal action set off a series of events culminating in an auction today, March 22, that could determine the future of Zuckerberg’s would-be island paradise.
Read on to learn how a quiet title action stirred up trouble for Zuckerberg, and how it could throw a wrench in your own homeownership plans, too.
What is a quiet title action?
“A quiet title action is a lawsuit, intended to establish or settle ownership disputes when there is a disagreement on the title and uncertainty as to who is the rightful owner of a property,” says David Reischer, attorney and CEO of LegalAdvice.com. The lawsuit is brought to remove any claim on a title and is intended to “quiet” any conflicting claims on the property.
If a quiet title action is successful, any questions of ownership are eliminated. The plaintiff is named the sole legal owner of the property, in perpetuity.
Quiet title actions exist in most states, but the laws differ from state to state, says Kara Stachel, who runs a national law firm and title company.
That said, quiet title laws are typically used for an owner to establish marketable title. Marketable title means the property is free from defects and any likely claims of litigation.
In Florida, for example, most title insurance underwriters will require an owner who purchases property at a tax deed sale to file a quiet title action naming the previous owner. A final judgment quieting title must be obtained for an owner’s title insurance policy to be issued.
Here’s another scenario where quiet title might come into play. Let’s say your grandmother decided to downsize and put her home on the market. She accepted an offer and went into contract—but passed away before the sale was finalized. At the reading of her will, you find out she left the home to you.
In this case, both the home’s potential buyer and you are justified in filing a quiet title action because each party has a valid claim to the property. Once the lawsuit is filed, the courts will help determine who will become the rightful title holder or if the title will be divided equally between the parties.
What does quiet title have to do with Mark Zuckerberg?
In 2014, Zuckerberg and his wife, Priscilla Chan, bought a 700-acre beachfront parcel on the island of Kauai by purchasing two adjacent beachside properties for a reported $100 million. But peppered throughout the property were chunks of land owned by hundreds of native Hawaiians. While none are known to live on the land at this time, the law states they could if they wanted to.
“Those lands were granted to native Hawaiian farmers in the 19th century,” says Stachel. “But the ownership of the lands wasn’t documented as it was passed down to the next heirs over the years.”
That’s because Hawaii state laws give broad rights to Hawaii natives for inheritance of large tracts of land.
“Specifically, the Kuleana Act of 1850 granted Hawaiian natives ownership rights that can descend to subsequent generations without the formal transfer of deeds or titles,” explains Reischer.
Essentially, any heirs of the original 1850 owners are entitled to the property, known as kuleana lands, without any written titles. Another wrinkle: The number of heirs has grown exponentially since 1850, making it hard to pin down exactly who owns what.
So what happened when a man worth $34 billion looking to build a private oasis found out he might have to share his personal paradise with hundreds of people? He filed quiet title action lawsuits. And here’s the important part: When two or more individuals own a disputed property—as is the case with kuleana lands—a judge may decide that the best course of action is to put the property up for public auction and have the profits dispersed among the contesting owners. That way, at least, everyone gets something and can go their separate ways.
Meanwhile, the highest bidder gets the property—and in this case, that presumably would be Zuckerberg.
“And then, absent any other environmental protections preventing him from doing so, he would have been able to develop his properties into the residential community he intended,” says Stachel.
Yet once news got out of Zuckerberg’s legal battle, the optics of a tech titan wresting land—even if legally—from poor Hawaiians weren’t good.
Public pressure has since forced Zuckerberg to change his tactics.
“To find a better path forward, we are dropping our quiet title actions and will work together with the community on a new approach,” wrote Zuckerberg in an op-ed in the TheGardenIsland.com in January 2017.
Since then, however, one native Hawaiian named Carlos Andrade, a retired University of Hawaii professor who owns about 25% of four parcels on the disputed land, subsequently filed a quiet title action of his own. To many of his family members, this means they will lose their ancestral lands.
“This has been quite painful for the extended family,” said Wayne Rapozo, a London-based corporate lawyer who is helping to coordinate and finance the legal battle against Andrade’s quiet title suit, according to the TheGardenIsland.com.
In October, a judge ordered a public auction of the land parcels scheduled for March 22 at noon outside the Fifth Circuit Court Building in Lihue, HI, to settle Andrade’s quiet title lawsuit. Zuckerberg’s representatives have stated the mogul does not intend to buy the disputed property.
But some wonder if that new approach involves a deal with Andrade, who has stated that he intends to bid on the property and take it as his own. In theory, he could then turn around and sell it to Zuckerberg, or just leave it uninhabited. In fact, some of Andrade’s distant relatives are now suing him, claiming that he is actually working with Zuckerberg to quiet the title.
“Zuckerberg said he would not own any of the parcels, but I would not be surprised if these properties are sold to record high bidders who act as trustees of a land trust or other fiduciaries whose beneficiaries remain anonymous,” says Stachel.
In other words?
“This is just speculation, but I predict that Andrade will end up selling the land to Zuckerberg,” says Reischer.
Unless, of course, Zuckerberg decides this Hawaiian paradise is more of a headache than it’s worth.
The post How a Weird Real Estate Law May Ruin Mark Zuckerberg’s Hawaiian Home appeared first on Real Estate News & Insights | realtor.com®.
Source: Housing Trends Feed