Practical Problems in Titling Property
From the MO Business and Estate Planning Blog by Steve Bahr and Austin Dowling
We recently helped a client involved in a “standard” residential real estate transaction between two parties that knew each other. Our client was the Seller, but this was a very friendly transaction.
The Title Commitment came back fine, except for one small issue, which turned into a very big problem. The title company was showing a judgment against a daughter of Seller (the property was technically held in trust, which doesn’t really matter in this situation) who at one time was included as an owner of the property. We will call the Seller’s daughter, Jane A. Doe. Seller had added Jane A. Doe to the title of the property in the late 80’s as a joint tenant, so that the property would automatically pass to her should anything happen to the Seller; this is sometimes done as a simple estate planning strategy.
The judgment on the Title Commitment was described as being against “Jane Doe”, without any middle initial listed. We determined that the judgment wasn’t even for the property we were selling, but instead was for a piece of property otherwise owned by “Jane Doe” during the time period that she was listed on the title of our Seller’s property. We worked with the Seller and Jane A. Doe to try and figure out what the judgment was for, and what they knew. However, Jane A. Doe continually stated that she had no idea what the judgment could be related to, and no documents related to the judgment were available online (we had immediately put in a document request to the proper jurisdiction to try and get more information about the judgment).
As the Closing Date crept closer and closer, we finally contacted the Plaintiff for the judgment (a local municipality) who was able to tell us more about what the judgment was related to. It turns out Jane Doe’s property related to the judgment had to be torn down, and the Plaintiff had sued for the costs associated with the demolition. Meanwhile, interest had continued to accrue from the date of the original judgment (nearly ten years prior) and the amount owed had nearly doubled! If our Seller wanted to close, they were going to have to pay off this judgment from the proceeds of the sale; that is, they were going to be forced to pay off a judgment that wasn’t even directly against them.
After some additional research, and exactly one day before Closing, we determined that the judgment was for a parcel of property that our Jane A. Doe never owned. In fact, the judgment was against a “Jane Z. Doe”, but like most cases, the middle initial was never listed in the case header and therefore did not show up on Casenet for the Title Commitment. In fact, there was not any way to absolutely confirm our scenario until the Petition was provided to us the afternoon before Closing.
After removing the judgment exception from the Title Commitment, the Closing was completed and our client saved a very significant sum of money that would have severely cut into their proceeds from the sale, had they paid the judgment. There are two big lessons learned from this example:
(1) Adding loved ones to the title of property can always be risky. In this case, our client would have had to pay the judgment if the judgment would have in fact been against their daughter like the title company thought (judgments like this automatically attach to all property owned by the Defendant); and
(2) Always double check the title work, and confirm that the exceptions listed are accurate. Had we simply accepted the Title Commitment’s exceptions as is, our client would have unnecessarily paid off a judgment that was against someone unrelated to them.
Re-titling assets for estate planning purposes, although sometimes a quick and easy estate planning strategy, can be a very risky endeavor with very real consequences down the road if not performed properly. As always, there is no replacement for an experienced Real Estate and Estate Planning Attorney to help you through the process.