Question #1
Question:
My father died recently and I inherited the house he and my mother lived
in for 25 years. I put it up for sale and found a buyer quickly. But I was surprised to
find that the title report shows a deed of trust from a debt I'm sure my parents paid off
years ago. My dad wasn't the type to let a debt go unpaid. How can I get rid of this lien
so I can clear the title and complete the sale? I just want to put this behind me.
Answer:
First, get a copy of the deed of trust from the title company. It's
possible that the effectiveness of the lien has expired if the debt is really old. With
certain exceptions, a lien of this type can expire and become unenforceable 10 years after
maturity - the date fixed for the last payment, if it can be determined from the deed of
trust - or 60 years after the recording date, if maturity can't be determined.
Unfortunately, many deeds of trust don't include a payment schedule so maturity may be
impossible to determine.
If the deed of trust has not expired, or it can't be determined if it has expired, look at
the upper left-hand corner of the deed of trust for the name and address of the
beneficiary. If that party is still in business or their successor in interest can be
located, you might convince them that the debt has been paid and get a reconveyance of the
deed of trust. With an old debt, however, you may find that no representative of the
beneficiary can be found.
In this case, your options are a little more expensive. The law allows you to post a
corporate bond - typically for more than the amount of the debt - and record it to clear
title to your property. The bond must describe the deed of trust and be acceptable
to the trustee named in the deed of trust. If the trustee cannot be found, you may
designate a title insurance company as the trustee in place of the beneficiary, if a title
company will agree. The actual bond amount is determined by a formula in Civil Code
section 2941.7.
If you can't afford the bond or can't find a company to act as trustee, another option is
to bring legal action to quiet title. The court would require proof of your
good-faith effort to locate the beneficiary - for instance, by hiring an investigator to
try to locate him or her. If you can prove you made your best effort, your attorney
might be able to get the court's permission to publish a summons in the newspaper and
eventually win a judgment clearing the title to your parents' home.
Question
#2
I am a real estate agent. I have a client who owns a house and is not
working at this time. She has a mortgage of about $110,000. Her boyfriend has been making
the monthly payments since she bought the house. Now she does not want the house anymore.
She told her boyfriend that she will transfer the house to him if he gives her $25,000.
Her boyfriend has very bad credit so he does not qualify to buy the house. Recently she
had surgery and the county paid all her expenses at the hospital. If she gives a grant
deed to her boyfriend and he records it, will the bank call the loan? Will the county
record a lien on the house due to the fact that the hospital paid for the surgery?
Answer:
While it is always hard to guess just what someone else might do in a
particular case, this is one where I would urge caution on the part of your client.
Typically, most promissory notes and deeds of trust prepared by banks
and other institutional lenders contain a “due on sale” clause which allows them
to call the loan due if the borrower transfers the property, or any interest in the
property, to someone else without the lender’s consent. If that clause is in your
client’s loan documents, it would give the bank the legal right to call the loan, but
whether it would actually do so would be a business decision on their part. However, since
the boyfriend is not terribly credit worthy, this might make them more ready to call the
loan than if he had a stronger financial position.
I’m not familiar with the law involving payments of medical
bills by the county, but if it allows them to put a lien on a patient’s property,
they might try and set the transfer of the house aside as being a conveyance in fraud of
creditors. A “fraudulent conveyance” is one by an owner of property for less
than adequate consideration, which prevents a creditor from reaching the property in order
to satisfy its claims. The question, then, is whether $25,000 is adequate consideration
for the house. If there is only $25,000 in equity, and the boyfriend also agrees to assume
liability under the loan, then it might suffice. Unfortunately, this would be a question
of fact to be determined by the court if the transfer was ever attacked.
Please be advised that any transfer of real property can involve
significant tax and legal consequences, particularly where creditors are involved.
Accordingly, your client should not transfer any interest in her property without first
speaking with her own attorney and tax advisor, who can give her specific advice tailored
to her particular circumstances.
