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Name on the sales contract, but not the deed

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POSTED January 3, 2013 6:32 p.m.

DEAR BENNY: Some time ago I entered into a sales contract with my then-fiancee to buy a house. Both our names (hers was in her maiden name) were on the sales contract, which we both signed. I turned over my half of the down payment, we went to closing and we owned the house (or so I thought). Some time after that I learned that the deed was in her name only. I went to the closing attorney who told me I didn’t own anything (the house).

Some time later my fiancee-turned-wife agreed to put my name on the deed, and I had to pay the same lawyer to do this, too.

Recently while going through some papers, I found the original sales contract, which reminded me of all this, and I ask, don’t these sales contracts mean anything? I never understood how I could enter into same and not end up with anything.

We basically ended up divorcing over this trust issue (apparently she had a side verbal agreement with the lawyer for only her name to be on the deed; the lawyer never consulted with me about it), I bought her out of the house, and now live in it. --John

DEAR JOHN: I have heard a lot of strange stories in my career, both as a practicing attorney as well as a columnist, but yours tops them all.

Yes, a real estate contract is a valid, binding document. It not only is binding between you (as buyers) and the sellers, but all parties involved in the real estate transaction must carefully honor the terms and conditions spelled out in that contract document.

That means your lender has to make a loan to both buyers, and the title company (called escrow in the West) must also make sure that the terms in the contract are respected.

Your now ex-wife admitted that she had a private dealing with her attorney to put the title in her name only? Was that attorney also representing you? If he conducted the settlement and did not disclose that he represented only your then-fiancee, legally and ethically he was also your attorney.

I suspect that it’s too late to consider a malpractice case against the attorney. Additionally, although you paid additional moneys to the attorney and to buy out your ex, I am not sure that litigation makes sense. Besides, from what I understand, even though you thought you would be required to make the monthly mortgage payments, in fact you did not do that.

However, if the attorney is still around, you might want to ask him why he did not advise you of the deal he cut with your wife. Depending on his response, you might want to consider filing a grievance against him with the local bar association.

But first, research all the facts. Are you sure you did not sign an addendum to the sales contract removing your name as purchaser?

You should also review the land records in the county where your property is located. You want to be absolutely sure of all your facts before you make any allegations.

DEAR BENNY: I have a question regarding a rental house that my brother and I jointly own. The house was our parents’ home and was willed to both of us several years ago. The mortgage was paid off. We have a joint checking account in which we originally deposited $5,000, and we use the account for all house transactions. We have been renting the home for $1,300 per month, and until recently we each took $600 a month out of the account. Due to taxes, insurance and maintenance, the original balance in the joint checking account is gone and the monthly $1,300 income is not enough to maintain the house and still provide a monthly $600 payout to both of us.

My brother is on a fixed income and needs the monthly check that the house provides. I still work and don’t need the rental income. For the last nine months, I have not taken any money from the account and the balance has increased to the point where I could start taking a monthly amount again.

During the past nine months my brother has continued to take out his monthly $600 share and therefore has had a $5,400 payout that I have not. I am wondering what the best way is for me to balance the inequity.

With tax season quickly approaching, will I have to claim the amount as income even though I did not receive it? Should I get my brother to sign a note recognizing the $5,400 shortfall in case we sell the home? Is there a tax advantage in me purchasing my brother’s share of the house? --Gary

DEAR GARY: Let me try to answer each of your questions.

First, should you buy your brother out? There will be tax advantages to you, since you now can claim all applicable deductions on the entire property, not just half. But if the property increased in value since you inherited it, and since your brother is not living in the house (in which case he may be entitled to exclude up to $250,000 of gain or up to $500,000 if he is married and files a joint tax return), he will have to pay capital gains tax at both the federal level (which is 15 percent) and possibly to the state where the property is located.

However, since there is no mortgage, your brother can sell you his half and take back financing. You would then pay him a monthly mortgage as if he were the bank. However, you would then be fully responsible for dealing with the tenants.

How can you pull out your share of the money? Ask your brother; actually, since you have a joint checking account, just tell him that is what you plan to do. However, if you want to help him out financially, at least have him sign a statement that he owes you XX dollars.

You should talk with an attorney about all of the possible scenarios as to how to deal (and work) with your brother.

DEAR BENNY: I was in the original trust to get my mother’s home when she passed, as I had made the payments for 10-12 years and also paid the property taxes. I found out the day before my mother’s funeral from my oldest daughter that there were changes to the original trust and that the house was rented out supposedly before my mother passed away.

My mother never notified me of the quitclaim deed, and I was making the payments normally without knowing what was going on behind my back. I’m trying to find the right lawyer, but what are my rights? I’ve been threatened that the police will come if I go by the house and bother the renters (I also have not been sent a rental agreement copy by my oldest daughter who is the trustee now). Can I put a lien on the home to make sure I get 80 percent of what I have paid? Also, I have only 40 percent of the home now and have never seen any rent money either.

Incidentally, my daughter is in real estate so she has access to everything. What would you recommend? --Flo

DEAR FLO: The facts of your situation need to be clarified. From what you wrote me, you knew several years ago that there were changes to the trust but were never notified of the quitclaim deed? What quitclaim deed? A quitclaim deed is executed by owner to trust when the trust is set up. Is this the deed you are referring to? You write that you are on the deed and the loan? But if the property is in trust, you are no longer an owner of the property? Was there an agreement between you and your mother or with the trustee for you to make the mortgage payments? What was the agreement?

You may have a contract claim against the trustee for the various payments you made, subject to the applicable statute of limitations in your state. If you were on the deed, as you state, then even if there were a later quitclaim deed, that would not have conveyed your interest to anyone unless, of course, you signed it (or your name was forged). In some jurisdictions, you may have what is called an equitable claim to ownership in the property to the extent of your contribution.

You really should immediately consult with an attorney so as to unravel all this out.

 

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

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