Ask the TITLEMAN™
Q & A
John T. Lotardo
Attorney-at-Law
December
Q. I have a lease question for you. Do all leases terminate when a property goes through foreclosure or does the new buyer take the property subject to them? I have a piece of commercial property with several leases recorded against it. I disclosed them even though the property went through foreclosure. The successful bidder at the foreclosure who is now selling is telling me that they should be gone because of the foreclosure. I asked around and we’re not too sure. They were all recorded before the deed of trust that got foreclosed was recorded. Does that make any difference?
A. It all depends upon the language found in the leases. Some say that the lease is subordinate to any future deed of trust and that they will attorn to any successful bidder under a foreclosure. Others say that it is at the discretion of the new owner. Without certain language, they normally would not be wiped out- being recorded first- unless an actual subordination was executed by the tenant, typically done at the time the new deed of trust was created.
Q. Quick question, can you tell me when “Joint Tenants with right of survivorship” went into effect in Arizona. I think a long time ago, I know community property with right of survivorship was in the 90's.
A. I thought about this as it has bene a while since I looked into this. It was in the mid 1970's where the current community property laws came into being. CPWROS was created by statute in the mid 1990's. However, joint tenancy was around for many decades before all that. I quick peek at the case law shows there's even a case as early as 1937 on joint tenancy.
Q. A lender has requested a co-borrower to sign but will not be on title. Can they do that? I've never had someone request that before. They want them to sign all the loan docs except for the deed of trust.
A. Yes- that can done. It is when the non-title holder also signs as obligor. It is typically disclosed in the documents that this person is not a holder of title and is only signing as part of the note , etc.... they usually are rather specific us in the documents about that.
November
Q. I have a recorded beneficiary deed on my brother’s house. He died at the beginning of the year well after the beneficiary deed was executed and recorded in Maricopa, county. I opted to pay-off the house and did so, just last month. Now I have a prospective buyer and would like to sell this property. Do I need to do anything additional to show/have the house conveyed to me upon death, or will that just be the natural order of things? Is there a document I must have to transfer the deed to my name, prior to sale? Thanks in advance for your help.
A. Thank you for your question and I am sorry to hear about the loss of your brother. You should make contact with your accountant to handle any paperwork that is needed to finalize the tax issues if any. But from a title perspective, it seems this should be straight forward. Most title companies will require proof of death to ensure title transferred. A death certificate will most likely be what they request from you on this.
If the title company has any further requirements for releases, affidavits and other proof matters they will let you know once they have completed their title search.
Q. We are working on a purchase transaction in which title is vested in a trust. The trustee does have the power to sell and convey the property, however, the original trustee is incapacitated. It's a cash transaction. The trust calls for a letter from the settlor’s primary care doctor stating that she is incapacitated, which we do have. Given this information, can the new trustee simply sign as trustee?
A. It seems that he/she would be signing as successor trustee with the statement from the Doctor.
Q. I have a quick bankruptcy question for you. An agent is asking me a general question regarding whether or not you can be your own attorney in a bankruptcy. My off the cuff answer is yes, because I know that people file bankruptcy individually all the time, but I don’t know if after filing they are required to use legal counsel to complete the process. Can you educate me?
A. You are correct, you can be your own representative (pro se). Pro se is okay in bankruptcy proceedings. As far as the process, they do have to go through various counseling per the bankruptcy rules in Chapter 7 (consumer liquidation) but not necessarily require them to be represented by counsel- though I find most times it is easier to be represented.
October
Q. I hope this finds you well. I need your opinion on something and I'm hoping you can assist me. I'm trying to figure out if a deed is a joint tenancy deed or quit-claim deed. The title says quit-claim deed and the contents indicate joint tenants. What can you tell me about this? The holders named under the deed are/were mother and son. She has died and they indicate that the son is the surviving owner. I think it's appropriate to direct them to probate court don't you?
A. Great to hear from you. Whether it is a Joint Tenancy deed or Quit Claim deed is sort like comparing apples and oranges. This is because joint tenancy refers to how the grantees are acquiring title while a quit claim deed reference typically refers to what the grantee is receiving in the deed. So the references are really referring to different aspects of the transfer. Perhaps they can establish by other evidence and further review of the document itself that they were meant to be joint tenants with rights of survivorship. Otherwise, they may have to go through probate. If the deed fails as joint tenancy deed with right of survivorship, then the grantees acquire title as tenants in common which does not have an automatic survivorship right. That said, perhaps an informal probate or affidavit of transfer of real property would work?
Q. The original lender/beneficiaries (husband and wife) of a loan have both passed away. The son was named as the personal representative on behalf of his mother. He then assigned the interest in the deed of trust to himself and his wife, signing as personal representative of both his parents. He said he only probated his mom's estate and signed the assignment as per his lawyer's instructions, thinking his father's estate had been taken care of by his mother. At this point I believe that he will need to probate his father's estate, etc. Is there anything else they can do or is that the only option?
A. Sounds like they did not hold their interest under the deed of trust as joint tenants with rights of survivorship. In addition to a possible probate, the attorney could consider whether or not the affidavit of transfer for interest in real property is appropriate pursuant to ARS 14-3971. You may want to find out the reasoning of the attorney as perhaps he has more information.
Q. A judgment shows the defendants "ABC Entities 1-10 and XYZ Corps 1-10"and then "John Does I-X, Jane Does I-X, ABC Corps etc..." Does this mean the judgments affect any and everything out there?
A. Not exactly. The reference to ABC entities and John Doe, etc. is the way attorneys reference entities and people which they do not currently know the names of- assuming they ever determine them. Sometimes they never materialize as real parties at all. But if they do the lawyers can amend their lawsuit to later add the real entity/party/name when and if they discover it.
September
Q. I have a client who wants to convey property in the state of Arizona. The client is a bank that wants to use a deed of some kind that does not give warranty. This transaction is rather large multi family. Can this type of deed be used in Arizona?
A. I believe they are considering using either a quit claim deed, which gives no warranty whatsoever or a special warranty which gives only warranties on acts of the seller. Either can be recorded in Arizona depending upon the situation but one or the other may or may not be acceptable to a purchaser and/or a title insurer. In a sale transaction, a quit claim deed from seller to buyer is typically not used.
Q. We have a situation where 3 parties come into title and are insured under a policy of title insurance. Then 2 of them deed to the remaining 3rd party some time later. Is that 3rd party, a named insured, covered for the full amount of the policy, or just the 1/3 they originally acquired?
A. It all depends upon the type of policy they have and how they original held title. But most of the time, if they want to be sure they are covered for his/her now 100% interest they should get an endorsement for the addt'l 2/3 interest they acquired.
Q. Mrs. Jones was appointed as Guardian for husband Mr. Jones. Can she take him off the title as guardian? Wouldn't she need a court order to authorize that? Also, what is difference between a guardian and a conservator?
A. The short answer is no or at least not without some additional court orders. You see, a guardianship over the person , at least here in Arizona, is different than a conservatorship over the person's property. It is commonly confused. In Arizona, the letters of guardianship are for taking case of the personal needs of an individual. This would include the daily needs of an individual such as medical needs or even more personal such as feeding and other caretaking. A conservatorship handles the property of the individual such as a home. Sometimes, the court will appoint the same person for both. In the case you noted here, the relative was only appointed to take care of the personal needs of the individual. Therefore they cannot change title to the real property. Further, even if there was letters of appointment of a conservator by the court here, they would most likely have some restrictions placed on he or she when it comes to transferring title. Each court is different just as all circumstances are different based upon the specific facts before them.
August
Q. My mom and her siblings got a title insurance policy on a piece of property years ago. They were insured under the title policy in their individual names. They have gone and created a LLC to put the property in. Do we need to get an endorsement to the policy because of the change in vesting or would the policy still cover them?
A. Many of the old policies would not cover them at all if they transferred the property, especially if they use a quit claim deed. Some of the new policies may cover if they transferred the property into their personal trust. You would have to read the policy itself.
In either case, transferring into an LLC would not. I suggest they have the title policy endorsed adding the new LLC as an additional insured. That way, there's no issue.
Q. I have a question concerning transferring property between spouses in Arizona. If a husband and wife own property in Arizona and they wish to convey the property into the wife’s sole name, do they first need a quitclaim deed from husband and wife to wife, and then a disclaimer deed from the husband or will the one deed suffice? If so, which one should be used?
A. Most times only one deed is used in Arizona. Typically a disclaimer deed is used at the time of acquisition of the property in the other spouse's sole and separate name. If it has been acquired by both already, they can use a quit claim deed is used but you can use a special warranty deed as well.
Q. Here is one of those questions that I get now and then from clients. I have a short sale pending acceptance by the short sale lender. There may be delinquent HOA fees. I have someone saying that in Arizona any delinquent HOA fees cannot be put on the Buyer. That the Seller is the one responsible for those fees and the HOA would have to go after the Seller if the delinquent fees are not paid. I had heard something like that but I don’t remember what it was. Can you shed any light on it?
A. As far as any statutory prohibition on the HOA, the buyer can always assume the obligation of the past dues owed to an HOA. Perhaps the person is referring to the assertion about when can an HOA collect against a owner after obtaining a judgment against the current owner or after a trustee sale. When and against whom an HOA can collect depends the type of amounts owed, when they were owed, etc. – a bit more details is needed to determine all that. For example, past dues can be wiped off the property in the foreclosure. That said, this is not a foreclosure situation but a short sale. It would be wise to get it straightened out now to prevent any unnecessary issues later.
July
Q. Here’s a good question that came up in a recent meeting I was having and thought you may some insights. What happens if an HOA files bankruptcy?
A. As we have seen many times during this current market cycle, Homeowner Association’s are feeling the financial strains like the rest of us. As part of that burden, they are becoming strapped financially and at times may even file for bankruptcy protection. Interacting with an HOA in Bankruptcy is similar to dealing with other entities in a bankruptcy. A review of the type of bankruptcy documentation and/or orders, plans etc. is necessary to determine how to proceed. Some questions come up include, does the HOA have authority to release liens or are they restricted in some fashion such as being placed into a receivership? These and others questions arise based upon each case.
Q. My Father just passed away – and much to my surprise there was a Warranty Deed (which he signed and had notarized) but it hadn’t been filed. He was the only person other than the Notary to sign this Deed. The person listed on the Deed gave me a copy and said she was going to file and pay off the property. Can I stop this filing and do I have a legal right?
A. Sounds like you should contact an attorney pronto. There are a lot of unanswered question here such as when, why and how the deed came into the possession of this person- the “grantee” under the deed. By the way, a deed is “recorded” with the Office of the County Recorder rather than “filed”. These and other issues need to be considered with your counsel. Please contact the local state bar association for referrals.
Q I have two questions for you: I have a property with two Deeds of Trust and a Mechanics lien, which was recorded last. The first Deed of Trust is being foreclosed on, but is also in the process of short sale negotiations. Foreclosure date is coming up soon. The 2nd Deed of Trust Lender is also trying to get $$. If the short sale is accepted, doesn’t the mechanic’s lien still stand? If the property is foreclosed on, does the mechanic’s lien go away?
A. If the short sale is accepted by both the first and second lender, you would still need to deal with the mechanic lien as they have a lien against the property. Perhaps the mechanic lien claimant would be willing to accept a lesser amount to resolve the matter. The question about what happens if there is a foreclosure is bit more complicated. The date of the recording of the mechanic lien does not by itself establish if it gets wiped out by the foreclosure of the 1st deed of trust (or possibly even the foreclosure of the 2nd deed of trust for that matter). The issue is one of priority. In Arizona, liens for work done or materials supplied to the property can have priority over deeds of trust based upon when the work was done and other factors. In other words, a more detailed review is needed to determine what happens with the mechanic lien in a foreclosure.
June
Q. I have a question on a beneficiary deed that I think only you can answer. A Father executed a beneficiary deed to his three kids. Beneficiary deed was not recorded for a few weeks. Father passed away last Friday and beneficiary deed was recorded the following Monday. Does State Law require to have the beneficiary deed recorded before the death of the decedent, or is it a valid deed if it records a couple of days after the death of the decedent?
A. Thank you for the question. Although for most deeds the issue of delivery is crucial, in this instance, the statute requires the beneficiary deed to record before the death of the grantor. In this case, that did not happen. I'm sad to say that they will not be able to rely upon the beneficiary deed to transfer title. In this case, they would need to consider some form of probate whether informal, formal, or, if applicable, affidavit of transfer of title to real property. Note that for the last option, the affidavit cannot be filed with the probate court until 6 months after the person dies and has certain limitations. Sounds like they'll need to talk with an attorney to determine their next move.
Q. If a property is going to trustee sale and I want to look inside to see if I want to bid on it who do I contact to look at the property?
A. You more than likely will not gain access to the property interior- remember this is a trustee sale foreclosing out the borrower from the property. The owner/borrower may not take too kindly with you snooping around his property either. You could contact the Trustee conducting the foreclosure to see if they or their beneficiary/lender has any information they can share with you.
Q. On TV the other day they did a segment on under-water properties and how people were walking away from their mortgages. They said that in Arizona and 9 other states the banks are unable to pursue any deficiency. Is that true? Don’t they sign Notes? How can there be no personal liability? If a borrower’s home depreciates to less than the amount owed and the borrower has the ability to pay, the bank still can’t go after them?
A. There is an anti-deficiency statute here in Arizona for purchase money or basically some form of replacing a purchase money lien for 1-2 family on 2 1/2 acres or less utilized /limited to residential property. There are some Deeds of Trusts where some lenders can get a deficiency -such as non purchase money (meaning take loan out for trips, buy a boat, etc) and other type of property (i.e. DOT on unimproved dirt, commercial). Although there are some cases which discuss the topic, some statutes you may want to take a look at are Arizona Revised Statutes Sections 33-722, 33-729 and 33-814G.
May
Q. I hope that you can answer some title questions for me. I have been researching some issues on judgments and in many state discovered that many liens and judgments are settled through a satisfaction of judgment with the Clerk of the Court. Presumably they were unable to locate the plaintiff or plaintiff’s attorney from a judgment. For example, in Florida you can deposit funds with the Clerk of the Court and the Clerk then issues a satisfaction of judgment. Does Arizona law have a contingency for judgments and liens to be satisfied by the Clerk of Court?
A. You have an option here of obtaining a bond of some sort recorded judgments. Although sometimes judgment lien discharge bonds are issued by a bonding company to remove a lien, a court may judicially remove a judgment lien under certain court proceedings. However, I am not aware of the typical court accepting the funds directly as the court system is typically not set up to accept monies on behalf of judgment creditors.
Q. What’s the best way to destroy the right of survivorship when two parties hold property as joint tenants with right of survivorship? Can one joint tenant just record an affidavit terminating the right of survivorship?
A. From a purely title perspective, that's how I would do it assuming all I want to end up with is Tenants in Common.
Q. I have two single men who acquired title who are now selling a piece of property. They then were legally married in California, and transferred title to reflect both with the same last name. Apparently, one changed his last name to match the other. He has an Arizona driver license in the new name as well as the Assessor’s office changed its records. Is there some court approval needed or what? I just hesitate because if I want to call myself Santa Claus they'd probably make me go to court to change it.
A. On occasion we have had same sex married couples from California acquire title here in Arizona. I would treat them as you would anyone where the name(s) of the title holders change. The question is what is his legal name? Although Arizona really does not recognize their marriage presently, I believe it will recognize a name change done in Ca. More than likely his name was legally changed in Ca- you can verify that. If so, then you would show the vesting in his new name who acquired title in his old name, just to keep the title understandable. Oh, and by the way, if memory serves me, the name Santa Claus is already taken so you may have to pick another similarly festive name.
March
Q. I have an Escrow on an REO, the Escrow Company is based in California, and they have an LLC in Arizona. Do you know how I can find out if they have a License in Arizona? I looked on the Internet but it didn’t narrow down the field at all. I’m thinking they must have some license out there.
A. For entities which are regularly engaged in escrow services in Arizona, they are licensed through the Arizona Department of Financial Institutions. Their website has those licensed listed under “Escrow Agents”. The website is http://www.azdfi.gov/. By the way, Escrow Licenses are issued to the Escrow Company and not specific to the individual persons employed by the Company.
Q. I have a short sale and the seller only has one lender on the property. The lender approved short sale and before they would release an approval letter of the short sale, the lender had the Buyer and Seller sign a form that says if this cancels, the lender is to receive the $1,000.00 earnest money. The contract states the buyer has a 10- day inspection period. Well, you guessed it; the buyer cancelled due to many repair issues and issued a cancellation notice. Both buyer and seller understand and agree to the cancellation; however, the lender is requesting the $1,000.00 earnest money. Looks like the lender gets the earnest money? Have you seen this issue come up before?
A. This issue is a popular one with all the current short sales going on out there in the marketplace. This time, the lender anticipated the risk of a cancellation and had both the buyer and seller agree that the lender gets the earnest money deposited by the buyer. The idea of this lender agreement appears in-keeping with the notion that the seller gets little or no money in a short sale. I assume the agreement does not say that the lender gets the money only if the seller is the one getting the money. Seems to me like the buyer agreed the lender gets the money.
Q. I am not sure if you are able to help me, but I had a question about the title to my Mom's house. I want to transfer the title from the Trust to my one sister and myself, but I think that I need to get my other sister and my sister's husband to sign over rights to the two of us before I can do the title transfer. My question is, am I right?
A. I surmising from your inquiry that your mother passed away and you are now settling her affairs. You should start at the beginning and, by beginning, I mean the trust agreement that your mother created. Most trusts have the details you are looking for. It should identify how a future transfer like this would occur, by whom, when, etc...If you cannot understand it, then you may want to contact a local lawyer to help out, perhaps even the one that drafted it for your mother. You may want to contact your accountant as well to see if he or she can assist you in these final matters.
February
Q. I have a client who wants to do a Beneficiary Deed in favor of a non-profit corporation. It is a corporation that preserves property from development and is used for the benefit of the citizens of our town. He wanted to make sure it would be acceptable to do so. What do you think?
A. Sounds like an admirable thing to do. With a few exceptions such as deeding or granting to the Public or State, (or when he’s promised he wouldn’t) a property owner is free to deed his property to whomever he so chooses. That said, it needs to be done right. I would think the corporation he wants to deed his property to (or more precisely to place as the Beneficiary under a Beneficiary Deed in order for them to receive the property upon his death) should probably be made aware of the idea to see if they have special considerations or concerns. Perhaps they may have another way they like to have such grants handled (many do), especially since a beneficiary deed is able to be revoked by the grantor at a later date. He should make a few phone calls first, including his attorney and accountant and then decide what to do next.
Q. Please tell me: why do I want Title Insurance?
A. Why Title Insurance? That’s a good question as I get this inquiry all the time. Title insurance is all about protection. Depending on the type of policy and type of property, it protects against a variety of threats to your interest in the property. When you decide to buy a new home, you want to be sure that the property you think yours is yours and that no one else will have any liens, claims or encumbrances against it other than those you agreed to- like your new deed of trust for instance. Common threats protected under a title policy may include mortgage scams, identity theft, forged deeds, forged releases and other types of defects enumerated in your title policy. (There are two kinds of title insurance. There is a policy for lenders who finance loans on property, and a policy for buyers of property. The purpose is to protect lenders and buyers from problems that can arise from the sale and transfer of real property like a home. Title insurance is included as part of the purchase of a property and is typically listed in the purchase agreement. The title insurance premium is usually paid as part of the closing costs. Each policy is different and contains differing coverages. Please contact your local title company for more information.)
Q. With all the short sales stories in the papers lately, I’ve a random question for you. If a 2nd deed of trust was a purchase money line of credit, where the full line of credit was used for the purchase of the home, is that debt completely forgiven in a foreclosure? I have a 2nd Lender is asking to for 50%-75% of the loan, saying that they will not relieve the debt after the short sale. Now we’re thinking it may be better to let the property foreclose.
A. I would encourage you and/or the client to seek legal counsel and a mortgage professional as well. That way you can best determine if any credit score issues are relevant for future plans as well as liability if a foreclosure vs. short sale is completed. The use of the funds is important to determine if the 2nd lender can obtain a deficiency judgment. More than likely, since you say all of the 2nd was used to buy the home, then the 2nd lender is probably trying to put some pressure to get paid given the current economy and may be adding some puffery to their statements. That said, this is changing all the time and we may not have all the facts. Also, legislation could revise the deficiency rights of lenders- so stay tuned.
January
Q. I am a home owner in El Mirage, Arizona. Right now, the person I own the home with is unwilling to pay their portion of the house payment. I contacted the lender about this and they stated that I should look into a Quick Claim Deed or a transfer of some sort into my name. I want to keep the home but am unable to make the mortgage payments alone. Is there anything that you can let me know of that I can do to keep the home or just any information about the deed transfer? I do not want to foreclose on this property, but at the same time cannot afford the payments. If there is nothing I can do, then I wouldn’t have any control over the house being foreclosed on.
A. You are in a tough predicament. I assume you both are on title as well as being on the mortgage- here in Arizona most people have what is called a Deed of Trust, which secures the loan with the bank who lent you the money to buy the house. You sound like you want to keep the property and not have it foreclosed upon by the lender. If your co-owner won't pay their share, you could try to force the issue. Is there any agreement between the two of you? If there was some agreement about this, written is best, you could try to enforce your agreement in court for this person to reimburse you. You could also contact a local attorney for some low-cost help. The Arizona State Bar and County Bar has some resources in the regard. I would suggest giving them a call. You should also try to contact the foreclosure consumer hotline of the Attorney General. One of these groups could talk through more of your options. Good luck! (By the way, the deed you are referring to, although could a quick way to transfer title, is really called a Quit Claim Deed and it deeds over any interest without any warranty from one party to another.)
Q. We have a situation wherein the Judgment is made junior in priority due to the original loan we’re foreclosing on being a purchase money loan. They were not listed in the original mailings provided in the title work from the title company. The question is do we need to add mailings for the Judgment creditor? How would NOT noticing the Judgment creditor affect our foreclosure?
A. You should notice the junior judgment creditor. They should have gotten notice. I understand that sometimes they do not get noticed but would be preferable to get this handled sooner rather than later so you do not have to argue with them after the foreclosure that they were wiped out by the foreclosure. If necessary, you may need to either postpone or cancel your pending foreclosure sale. More details should be discussed with the title company involved about what they would want in order to title insure in the future.
Q. I am currently married in the state of Arizona and I’m in the process of purchasing a home and working with the lender. I am purchasing this home as Sole and Separate and my husband will not be on the loan. Just confirming he will need to sign a Disclaimer Deed and I can continue this loan on my own, correct?
A. I think the better person you should be asking is your lender as to whether or not they will allow you to qualify for the loan on your own. If so, some lenders even require the non-titled spouse to acknowledge the loan though they are not on the loan. After you have worked that all out with your lender, your spouse would normally sign a disclaimer deed to confirm that you are acquiring the property as your sole and separate property. Good luck on your new purchase!
Ask the Titleman Archives
JJohn T. Lotardo aka the TITLEMAN™ is Senior Vice-President/General Counsel for Stewart Title & Trust of Phoenix, Inc, State Counsel for Stewart Title Guaranty Company and is a regularly featured columnist. In addition, he is a frequent speaker and presenter on real estate-related topics. Have any questions for him? Send it to him at titleman@askthetitleman.com.
