All I want is my fair share," declared a sister to her brother in a discussion recently during a joint request for mediation assistance in finding a way to distribute a house that once belonged to their parents and now had passed to them jointly. It is not uncommon for people to wonder about getting their fair share in a probate situation or following a death.
Frequently, we are presented with the division of property, a house or a farm which is indivisible or hard to divide. It is natural in such a circumstance that parties to the agreement will have different views toward the value of such property. This is to be expected. For example, a house has value dependent upon square footage, age, location near work, schools, or churches, or whether the house will be sold or not. I believe that differing values are not a deterrent to fair division but a positive attribute. We can use these values to get more than the fair share for each participant. Methods are applicable to mediations of conflicts such as competing claims or tenants in common as the brother and sister above. “You don’t have to settle for less than the biggest piece of pie."
In a mediation setting, we expect certain things to happen. We will share here about a property settlement between a brother and sister, although these methods will work for more participants.
The goals of the mediation are:
– Each participant can be guaranteed a fair share according to his/her own value system;
– Each participant can be guaranteed to get more than the others according to his/her own value system; and
– Each participant can guarantee the same for the other participants.
Today we assume that the proportion each participant gets is already agreed upon. For example, each participant is to get one-half of the property. Our methods also apply for other proportions but we will assume the half-half here for simplicity. In this context, the word “fair” means that each participant will have at least half of the property according to their own value system. So, goal one above is met.
The second goal above is called envy free, that is, by using your own value system, what you get is more than what the other participant will get.
It may appear to the reader, by now, that the attainment of all three goals is impossible. This example shows how the above can be attained. Suppose, for the sake of argument, that a house is to be divided between two parties in a half-half proportion. Say Sam and Barbara are the participants. The instructions are for each to name the value of the house, using whatever they like to arrive at this value. They are not asked to justify it. They submit a sealed (and secret) bid.
The algorithm or ground rules are simple: the highest bidder will receive physical possession of the property and pay the other participant on the basis of the average of the two bids. This will satisfy the above goals. Suppose Sam bids $120,000 and Barbara bids $100,000. The algorithm gives the house to Sam and he must pay half of the average bid. The average bid is $110,000, so, he pays Barbara $55,000.
We asked Sam how he fared. He bid $120,000, so he was willing to pay $60,000 for half of the house, but he paid only $55,000. Therefore, this settlement seems fair to him.
Next, we speak to Barbara. She was willing to settle for half of $100,000, but got $55,000. So, she got $5,000 more than one-half, the same bonus as Sam. Therefore, it is fair to her.
To look at the envy free part, we do a slightly different calculation for Sam. His rise in equity is $120,000-$55,000 or = $65,000, but when he looks at Barbara, he sees she got only $55,000, so he (Sam) got $10,000 more than Barbara.
Poor Barbara? No, not really. She looks at what Sam got and sees he got a $100,000 house and paid out $55,000 for a net gain of $45,000 while she got $55,000, an edge of $10,000.
It is important that the bids be secret. Sam can gain an advantage if he knew Barbara’s bid in that he would pay less, even though Barbara still gets at least $50,000. If Sam bids artificially high, one can show that this gives him less than if he is honest (using his honest value system.)
Frequently, perceptions of fairness by the participants are colored and shaped by counselors, siblings, spouses, traditions, or cultural settings. The main point is that as participants, you must be situationally aware of your feelings and perceptions as you embrace these types of conflicts. As you approach what you consider “fair," will you recognize it?
Is the above mediated settlement superior to having the house appraised by an independent party (with their costs) and the value imposed upon the participants (which often occurs in court settings)? You decide. Attorney fees, competing costs often escalate to the point in adversarial conflicts, that participants may revert to the old saying:
“When the courts are done with it, there is little left for the family.”
Other methods are available for two participants and there are versions of this method for more than two participants. Hopefully, this example shows how two parties can, through mediation and a mediator’s assistance, value and divide a single asset between them to their mutual satisfaction.
Mediation is the process that makes it possible for people to solve problems for themselves. The part I like best about mediation is that “when you agree to it, you win." You get what you accept.
ElGene Ver Dught, J.D., is a mediator-attorney and is the founder and director of Mediation Services of Missouri with offices in Independence and Higginsville, Mo.