Ask the TITLEMAN™ an Arizona publication

Ask the TITLEMAN™

Q & A
John T. Lotardo
Attorney-at-Law

July

Q. I have been having problems with a company trying to sell time shares to me. It’s here in Arizona. Do you know who regulates time shares or are they even regulated by any state agency at all? 

A. To answer your last question first, yes, those selling timeshares are regulated. They have to comply with statutes and regulations. The Arizona Department of Real Estate, the same governmental body that oversees other types of real estate sales and developments such as in subdivisions, oversees timeshares as well. They have a website which is a good resource to get you started- http://www.re.state.az.us/.

Q. I’m using a power of attorney that (I think) is executed properly and recorded to buy a piece of property. The title company is saying it has to be specific to this particular transaction. They don’t know how difficult it will be to get a new one now. It doesn’t seem right. Are they?

A. Well, it depends. First off, each title company who is insuring a transaction has a little bit different underwriting guidelines on what kind of power of attorney they will accept. Many do not require a specific one for the current transaction, while others do. Some like relatively new ones, less than 6 months, while others will accept older ones. In any case, they will require whichever one ultimately is being used to comply with the statutory requirements for execution, witnessing, applicable durability provisions, and authority language.
 
Q. There is a mechanic lien recorded against a piece of property and the lien claimant’s attorney has filed a Lis Pendens. I told the selling agent that all liens should be released, and the Lis Pendens would need to also be released by the judge in order to sell and title insure. If this turns into a foreclosure and is bank-owned, what happens- does the mechanic lien and lis pendens just go away?

A. Though I think you have the general idea, the answer to your question is a bit more complicated when it comes to foreclosure since I am unsure about the issue of priority. Priority is what determines who's on first, what's on second, etc. If a review of the title and related documents determine that the mechanic lien is junior to the foreclosing bank and the bank properly forecloses on the property, then that could wipe out the lien and its lis pendens. Keep in mind that we're assuming that the lis pendens - which is notice of a pending court action affecting the property- is for the foreclosing of the mechanic lien and not for something else. If it's for something else, then we need a bit more snooping to figure what that's all about.

June

Q. I have a question that I hope you can answer. Can a 2nd lien holder, (line of credit) pursue a deficiency judgment against a borrower for a property in AZ? The 1st lien holder has agreed to a short sale and 2nd lien holder will only approve the short sale if the borrower will permit a deficiency judgment. I thought AZ was a non deficiency state and could not pursue the borrower. Is this correct?

A. Good question. You are correct that Arizona has an anti-deficiency statute here. However the rule has limitations. If it does apply, I do not think the borrower can waive it. I assume that we are talking about residential property of 2 ½ acres or less that is limited to and utilized for either a single 1 or 2 family dwelling. The question still remains is whether or not the 2nd was part of the purchase money at the time of acquisition or replaced part of a purchase money. If not, then there’s a chance that the anti-deficiency statute does not apply. This is why a borrower should confirm that are no longer responsible for the 2nd prior to closing. This is something many borrowers do not contemplate when they take a non-purchase money line of credit for example to be used for other things such as trips, cars, etc.

Q. I had some property quit claim deeded to me from my dad. It’s free of liens and I’m the only sole heir. He didn’t have a living will, wasn’t married, and it never went through probate. How do I convert the quit claim deed into a warranty deed? In my home state, I would have to do a heirship affidavit and record it in the county where the property is located, and disregard the quit claim and the tiltle would pass to me through intestate succession. I’m not sure in Arizona..

A. I am presuming that the quit claim deed from your father to you was recorded in the proper County Records. If so, the property transferred to you at the timeof recording. If not, there could be a question concerning validity due to an issue of delivery. Not sure why you want “to convert” the deed to a warranty deed. I am guessing from your question, that your father has died so there is no way, absent probate proceedings, to convert the deed from a quit claim deed to a warranty deed. Unless there is some other reason that the deed is invalid, the title would have passed to you- albeit without any warranties. Any questions concerning this transfer of title as a gift or otherwise should be addressed with your accountant or other financial advisor.

May

Q. A home's owner passed away and now the personal representatives, (both son and daughter) have entered into contract to sell the home. I received a phone call from the personal representative's probate attorney the other day and he advised me that he was reviewing the documents and cannot approve the transaction until after his review. The daughter already signed her set of the documents (deed, etc) but the son who is required to sign on everything with his sister has postponed due to the attorney's phone call. They have not gotten back to anyone about their decision. Questions for you: 1. Can the probate attorney hold up this transaction? 2. The buyer is ready and eager to close on the transaction. What is necessary to move forward?

A As you know, there are timeswhena seller causes a delay in closing. With the son postponing to sign the needed documents, it doesn’t look like you have all that is needed to close. It appears that none of them are sure about closing. You should make a demand on them to explain what’s going on and their intentions. Obviously, your buyer has rights under the purchase contract, which they may want to review at this time to determine their next move as well.

Q. Upon proper foreclosure proceedings of a deed of trust on a house, the past Homeowners Association dues cannot be collected by the HOA, correct? They can only collect dues from the date of foreclosure to current date, correct?

A. That is usually the case. I have seen some trying to collect nonetheless. Some just do not want to give up the fight for the monies against the property and just go after the borrower who has lost the property. Convincing them the error of their ways now does save a lot of work later on.

Q. I recently attended one of your seminars where you discussed various title issues. You mentioned a deed in aid as opposed to a deed in lieu, and you mentioned that several lenders are doing this. I understand that a deed in aid is where the lender can have the property conveyed typically to a single purpose entity as opposed to the lender directly. I represent a hard money lender and we have done several deeds in lieu, but your seminar was the first time I have heard of a deed in aid. Does the lender assign its interest as the beneficiary under the Deed of Trust before the deed is recorded, or is there just a consent that the lender executes saying that the lender consents to the conveyance of the property from the trustee to the new single purposes entity? If you would let me know, I would appreciate it.

A. I have seen lenders do it a variety of ways depending upon various factors such as the state of the property, the status of the loan, the type of property, the nature of borrowers involved, etc. Many times, there is a new agreement executed by the parties outlining what they are intending to do, who takes title to what, when, clarifying the issue of non-merger, who is released from guaranties, etc. That said, the terms are negotiated between the parties so the ultimate agreement is particular to their transaction.

April

Q. A good friend brought a recent column to my attention. The question was from a woman who had signed a Disclaimer Deed on her family home and now was facing divorce and potentially nothing in the settlement. She referred to herself as stupid, as I have so many times in my similar plight. I, too, signed Disclaimer Deeds on two pieces of property here in Arizona and am now facing divorce and potentially nothing - in spite of the fact that I raised his two sons, provided all of the food, clothing, recreation and household expenses for the family for 11 years. It's almost hard to believe that there could be two such ridiculous cases, but that's part of the reason I am e-mailing you.

Was that a legitimate letter? If so, could you e-mail my address to this individual so that she can contact me? I am stunned to learn that someone else is in my position and am anxious to speak with her. I have discussed my case with my attorney and he has never mentioned "transmutation", so I will be sharing your column with him as well.

Thanks so much for any information you can provide. Knowing that I am not "the only one" is reassuring!

A. I am sorry to hear that you too have experienced this same plight. These situations are some of the hardest to deal with because ofall of the emotions involved. Believe it or not, I am sorry to saythe question was legitimate. I will forward your email address to the previous TITLEMANreader in the hopes that she too will realize that "she is not alone." Thanks for writing.

Q. Does a deed in Arizona require a legal description as opposed to common address to constitute a valid conveyance? I didn’t see a statutory requirement for a legal description, but common sense tells me that it’s needed for a title search. But if the conveyance isn’t recorded, and is just an issue between two related parties, is the common address with words of conveyance, signature and notary acknowledgement sufficient?

A. It has to do with notice. From my perspective, I think it is valid as between the two parties. The grantor and grantee should know what they are transferring. In your case, you say it is not recorded. Well, even if the two should be bound, you still have to get the title records cleared up. That said, if there is some ambiguity about what was sold it could be a proof issue. As for third parties, the issue is tricky. Since title examination using a legal description based title plant, the deed would most likely not show up and therefore would not be considered. But, I have seen addresses and/or tax parcel number used in divorce decrees, bankruptcy filings and other types of agreements that have been enough to establish the agreement to transfer. I would think you have a strong case between the parties that the transfer was legitimate. But, as a comrade of mine always says (somewhat kiddingly), it is what the title companies are willing to title insure that matters. In your case, you run the risk of no one wishing to take on that ambiguity once you square it away with the other party. A new deed, adding the legal, a clarifying agreement or even a court may be needed down the road.

Q. A customer has a neighbor that inherited a piece of vacant property and is seeking my input. It appears that they only paid a few hundred dollars for the lot in the 1960’s. Current tax roles appear to list the value as just under $1000. In Arizona, is the tax value normally that same as the appraised value?I suspect this is a lot in the middle of nowhere that was probably bought sight unseen and is, for all practical purposes, worthless. Were there land sale promotions like this in Arizona?

A. It is true that sometimes the appraised value and market value are not identical and, at times, quite far apart. That is due to many factors, including periods of rapid appreciation in the open market (Or rapid decreases in a bad market), limited increases condoned by the local County Assessor, etc. As for these types of sale promotions, I would say they are becoming less common as communities are being developed but there are still those properties in the “middle of nowhere” that are ‘dirt’ cheap.I would suggest getting in touch with a few reallicensees in that area to get some opinions of value from a local perspective. That way, the current (and future)value can be determined.

January

Q. I am working on several deeds-in-lieu transactions (big surprise!). Right now they are just in the negotiation stage. What are some of the title endorsements used in such transactions?Also, I am thinking of leaving the deed of trust in place. Your thoughts?

A. I have found that lenders are considered just the same things as you are in what to do in this market. Some are foreclosing, some are accepting the property back from the borrowers under a deed-in-lieu and some are even having the borrowers deed into another related entity (known as a deed-in-aid transaction). The typical endorsements vary depending upon what the transaction ultimately becomes and what the concerns are for the lender/grantee. Some endorsements you could consider is one of the non-merger endorsements if you in fact are concerned about a merger of title between the lender’s deed of trust and the grantee under the deed in lieu/in aid. Another possible endorsement is a creditor’s rights endorsement. That said, this endorsement is typically heavily underwritten before it will be issued. For these endorsements the title company may require additional documentation, special provisions included in the documents, etc.

Q. Many years ago, “Old Guy” records a Beneficiary Deed for his "Old Girlfriend". A few years later, Old Guy executes a deed from himself into himself and "New Girlfriend", as joint tenants with right of survivorship. Then, Old Guy dies. Does the "Old Girlfriend" have any right to the property, or does the "New Girlfriend" get it? Old Girlfriend has now started a lawsuit arguing a bunch of stuff. Do you think any claim by the "Old Girlfriend" would be legit or affect the title?

A. This sounds familiar. Normally the "Old Guy" could transfer without the Old Girlfriend/ Beneficiary needing to consent. The statute does not require her consent. I am unsure about the assertions found in the lawsuit which may have something else for us to consider and many companies would not want to incur defense costs. A little information should help decipher what is going on here.

Q. I was wondering if you had dealt with the issue of a lender’s policy on short sales. At least one lender has sent an approval letter which says if they find anything false or fraudulent, they will rescind their approval- even after the transaction closes! What is up with that?

A. I have seen this a few times. I find that many will not insure with this type of short sale approval letter from a lender since this conditional approval purports to give the lender a right to rescind a short sale. I don’t know about you, but I would like a transaction to be over and done with once the transaction closes. I was told that this provision was making its way into town from other locations and I am not sure how it has faired there either. It would be best to get the lender to complete their investigation, remove the provision and resend a new approval letter.

The information supplied is of a general nature and should not be relied upon as legal advice. You should consult with your own legal counsel. To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. Copyright © 2010 John T. Lotardo, All rights reserved.

© 2010 Stewart Title Guaranty Company. All Rights Reserved.
Trademarks are the property of their respective owners.
Site Development By ePublishing.