Articles from The Massachusetts Focus
Newsletter of Stewart Title Guaranty Company, Massachusetts Offices
Spring 2007, Volume 6, Number 2
by Margaret Fortuna and Mark V. Borst, Underwriting Counsels
Deeds Given Pursuant to a Power of Sale
Question: Will a deed from an executor pursuant to a general power of sale in the decedent’s will pass title to a buyer free of creditor’s claims?
Answer: Yes. The deed of an executor, which is given pursuant to a general power to sell real estate set forth in the will, which transfers property to a purchaser for value, passes the property free of the claims of general creditors. Please be reminded that an executor’s deed given under a general power of sale has no effect on either federal or Massachusetts estate tax issues. For a further discussion of an executor’s power of sale please see REBA Title Standard 10.
Estate Tax Affidavits
Question: My title indicates that title to the property had been held by husband and wife as tenants by the entirety at the time of the husband’s death. As a result, title is now held by the wife, and I have obtained an Affidavit from the wife indicating that there is no federal estate tax due. Is the recording of this Affidavit sufficient to address any estate tax issues?
Answer: Not necessarily. Assuming that we are dealing with a non-taxable estate, the first question to address is when did the husband die? If the husband died more than ten years ago, then the ten-year statute of limitations set forth in G.L.c. 65C would have run, and you would not need to obtain and record an Affidavit relative to this estate. If the ten-year statute of limitations has not run and the decedent died on or before December 31, 2002, then obtaining and recording an Affidavit indicating that there was no federal estate tax due would be sufficient to address the estate tax issue. However, if the decedent died on or after January 1, 2003, then you would need to obtain and record an Affidavit which indicates that there is neither a federal nor Massachusetts estate tax due. Why? After January 1, 2003, the Massachusetts estate tax was “de-coupled” from the federal estate tax. As a result, effective January 1, 2003, the threshold amounts for filing federal and Massachusetts estate tax returns were different. Therefore, both estate tax issues must be addressed. For a further discussion, please see REBA Title Standard 24 as well as REBA form 32.
Tax Takings and Municipal Lien Certificates
Question: My title indicates that there is an outstanding notice of tax taking of record issued by the municipality. My Municipal Lien Certificate (“MLC”) indicates that the taxes are current. Does the recording of the MLC release a notice of tax taking?
Answer: No. In order to properly release a tax taking of record you would need to obtain and record a certificate of redemption from the city or town in question. Under REBA Title Standard 19, an MLC which is issued on or after January 23, 1990 and “if recorded within 150 days after its date, operates to discharge the land described therein from liens for all taxes, assessments, or portions thereof, rates and charges, not shown by the certificate to constitute liens except taxes, assessments, or portions thereof, rates and charges (1) with respect to which evidence of a taking or sale by a municipality has been recorded…” (Emphasis added.) In this example, a tax taking has been recorded; therefore, you must obtain and record a certificate of redemption.
Mechanics’ Liens and General Contractors’ Bonds
Question: A general contractor has obtained and recorded a lien bond which complies with the requirements of G.L.c. 254, §12. However, the general contractor has also properly recorded a notice of contact and statement of account against the property. Does this Section 12 lien bond obtained by the general contractor address the lien filed by that same general contractor?
Answer: No. On its face, it seems somewhat contradictory for a general contractor to obtain a lien bond which would address a lien filed by that same general contractor; however, in order to properly answer this question let’s take a look a G.L.c. 254, §12. Section 12 states that “Any person, including the owner, in interest in connection with a written contract covered by section two or section four may cause to be recorded in the registry of deeds in the county or district where the land lies a bond of a surety company authorized to do a surety business in Massachusetts in a penal sum equal to the contract sum or, if the contract does not contain a contract sum, in a penal sum equal to that person’s fair estimate of the contract sum, all as set forth in the certificate on the bond.” Section 12 goes on to outline the format that this surety bond should take. Section 12 states that, “After the recording of any such bond no lien under this chapter shall thereafter attach in favor of any person entitled to the benefit of such bond and not named as a principal thereon for labor or for labor and materials performed under the contract in respect to which such bond is given.” (Emphasis added.) In our example, the general contactor obtained this section 12 bond and is therefore, the named principal on said bond. Therefore, under the terms and provisions of section 12 as set forth above, this section 12 bond would address mechanic’s liens filed by sub-contractors relative to this property which were recorded after the recording of this bond.
M.E.R.S. Mortgage Discharges
Question 1: My title indicates that a mortgage in favor of Mortgage Electronic Registration Systems, Inc. (“MERS”) as nominee for ABC Bank was discharged by MERS as nominee for XYZ Bank. There is no assignment in favor of MERS as nominee for XYZ Bank. Is this discharge effective?
Answer: Assuming that the discharge contains the appropriate date and recording information and is properly executed, then yes, this discharge is effective.
Question 2: If a mortgage held by MERS as nominee for ABC Bank is discharged by ABC Bank, is that discharge effective?
Answer: No. You would need to obtain a discharge from MERS.
Question 3: If a mortgage held by MERS as nominee for ABC Bank is discharged by MERS with no reference to MERS being the nominee of ABC Bank, is that discharge effective?
Answer: Yes. REBA Title Standard 72 states, “A recorded instrument executed only by (MERS) discharging …. a mortgage, which is held of record by MERS, either as original mortgagee or as assignee of said mortgage, is not on that account defective, whether or not a ‘Lender’ is designated or defined in the instrument whereby MERS acquires such interest … or any lender, is recited in the subsequent instrument, provided that said subsequent instrument is otherwise satisfactory under G.L.c. 183, §54B.” For a further discussion of MERS documents, please see the full text of REBA Title Standard 72 as well as the comment thereto.
Condominium Liens and 6(D) Certificates
Question: My title examination for a condominium unit includes a complaint by the condominium association against the prior owner for past due condo fees; however, there was a clean 6(d) certificate recorded with the sale to the current owner. Do I need to record a certificate of dismissal for the suit against the prior owner?
Answer: No. G.L.c. 183A section 6(d) states that a certificate from the organization of unit owners that sets forth the unpaid common expenses and other sums due “shall operate to discharge the unit from any lien for other sums then unpaid when recorded in the appropriate registry of deeds…” Therefore, if the arrearage stated in the complaint is not reflected on the 6(d) certificate, the lien for that arrearage is released. See also REBA Title Standard Number 66.
Deeds Executed Under Powers of Attorney
Question: I am taking a deed signed under a power of attorney. Is there any special manner that the deed needs to be formatted and signed?
Answer: Yes, as the grantor of the deed remains the selling title holder, not the attorney in fact, the grant line must not read, for example, “John Smith as attorney in fact for Jane Doe grants ….” The use of language similar to “Jane Doe acting through John Smith” would be acceptable. The proper notation on the signature line of the execution of the deed being pursuant to the power of attorney would be language similar to “Jane Doe by John Smith” and should be signed “/s/ Jane Doe by /s/ John Smith” with the attorney in fact signing the principal’s name and then his own (or indicating in typed language the connection).
As a practical matter, although permitted by statute, accepting a deed executed under a power of attorney is discouraged, and some buyer’s counsel are now specifically adding language to purchase and sale agreements stating that the buyers will not accept a deed executed under a power of attorney.
For more information on the proper form of documents executed under powers of attorney, see the Real Estate Notes section of the stewartma.com web site.
Foreclosures of Corporate Property
Question: A title that I am reviewing relies on a foreclosure of a mortgage given by a corporation and still owned by it, but there is no land court judgment. Is this a problem?
Answer: No, the judgment that is issued in foreclosures, usually by the Land Court, but sometimes by the Superior Court, only states that no interested party is in the military. This is not applicable to corporations, limited liability companies and limited liability partnerships, as they by their nature cannot be in the military. Please consult your underwriting counsel if you have other foreclosures and no judgment. By the way, the Soldiers and Sailors Civil Relief Act has been replaced by the Servicemembers Civil Relief Act that was signed into law in December 2003.