I recently helped a client with some estate planning work. In the course of doing this, I had to examine the old deeds they received some years back when they bought their land. One piece came from acquaintances who sold to them years back. When they made that purchase, in order to hold down costs, they asked an experienced friend to prepare the deed rather than hiring a lawyer. Fast forward ten years to when I was examining these deeds and I noticed one where the person selling was listed as “a married person.” No spouse joined in the deed. Only the one name was listed as seller. The seller signed, but there was no spouse signature. Apparently, the property had always only been in the wife’s name.
But the problem is that in our state, it takes two to sell. That is, for married individuals, both parties must sign. This is because Minnesota recognizes that both spouses retain what is called an “inchoate interest” in real estate acquired during the marriage, even if it is purchased in only one name. Failure of both married persons to join in a deed violates the Minnesota Title Standards.
No matter. I told my clients that all we needed to do was get the missing spouse to sign a deed. A very easy solution. But my clients called their seller and then called me back with more bad news. The spouse of their seller had died some months back.
I explained to my clients that the next solution was fairly simple but might cost them some significant money and three or four months of time. This is because what was required was a proceeding in district court, likely either a quiet title action or a decree of descent. “Who’s going to pay for that?” my clients asked me.
Easy. “Your seller,” I explained, “as long as they gave you a warranty deed.” (I didn’t have the deed in front of me.) “You got a warranty deed, right?”
You see, in a warranty deed, the seller warrants and promises good title, and it carries the obligation to make it good. But alas, all they got was a quit claim deed. A quit claim deed passes only the title the giver has – if the giver has a bad title, the giver passes the bad title. With a quit claim deed, the title issue created by the seller was now my client's problem, not the seller's problem. After all, the seller gave no warranty of title.
Every deed in Minnesota has a drafting statement, and this deed bore the name of a drafter I didn’t recognize. (In my region we attorneys all know each other.) So I asked my clients about it, and they admitted that they didn’t use an attorney. They used a friend who seemed experienced.
To make matters worse, before the deceased seller died, they had an extended stay in a nursing home. This presents issues related to medical assistance claims that may have to be either ironed out or paid off.
In the course of sorting all of this out, I learned about more corners my clients cut. Before they bought the land, they obtained no title investigation. It turned out that the land was mortgaged by the prior owners and no satisfactions were ever filed. Thankfully, the notes were actually paid in full, but the lender just hadn’t gotten around to releasing the old mortgages. Some prompting on my part got the satisfactions filed. But that might not have been the case. My clients dodged another bullet.
For most people, real estate is their biggest investment. Had my clients enlisted the help of an attorney, when they bought their land their expenses would have been greater. But they would have had the peace of mind knowing that the deed was properly drafted, the title was good and marketable, and the land was free of mortgages or encumbrances.
In the end, my clients paid for far more for a quiet title action in district court than they ever would have ten years ago for the service of a competent real estate attorney for their purchase. The bottom line is this – every once in a while, cutting corners will come back to bite a buyer of real estate. Don’t let that buyer be you.