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Pros and cons of a life estate
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DEAR BENNY: My cousin and disabled elderly aunt are living in a house that my aunt sold about four years ago in which the agreement included lifetime living rights without the stipulation of rent payment or payment for taxes. Does the owner have the right to demand rental payments now? Is there a website that I might be able to check to find out more information for them? --Patti

DEAR PATTI: There is a lot of information on the Internet; go to your favorite search engine and type in “life estates.”

I cannot give you a specific answer because state laws, customs and procedures differ. Additionally, the way that the life estate is created must be considered. Clearly, the courts will follow any written instructions setting up the life estate.

Here is a general overview of the benefits and burdens of a life estate:

Real estate taxes: It is the general rule that the life tenant is responsible for paying all property taxes during his or her lifetime; if the document creating this estate is silent on rent, the life estate holder does not have to pay any rent.

Ordinary repairs, upkeep and maintenance: These are the responsibility of the life tenant; that person lives in the house and it is his or her obligation to preserve the property.

Improvements: This question comes up often. “I, the life tenant, want to make improvements to the house. Who pays for this?”

Ordinarily, a life tenant has no right to make permanent improvements to the home. If they are made, without the consent of the remainderman (i.e., the person who gets the property at the end of the life estate), it is at the expense of the life tenant. However, it is the obligation of the life tenant to make all of the necessary repairs so as to preserve the property.

Homeowners insurance: Unless specifically spelled out in the will, the life tenant is responsible only for insuring his or her interest, while the remainderman has the obligation to insure the remainder interest. Sounds complicated and confusing, but the insurance carriers can assist in resolving this.

Can the life tenant move out and rent the property? The law provides that a life tenant is entitled to both the possession and use of the property. Included in this “use” is the right to rent the property to another, and keep the rent money. However, any such rent would be taxable income to the life tenant.

Can the life tenant sell the interest? The answer is yes, but the potential buyer would get only what the seller has -- namely an interest that would end when the seller dies.

What rights does the remainderman have? The courts seem to treat a life estate as they do tenants. The general principles give the life tenant the right to peaceful possession without interference from the remainderman.

However, if it appears that the life tenant is not properly maintaining the property, he or she would have the right to inspect and make any necessary repairs. This may require court action.

There may be tax consequences of giving a life estate, and you have to discuss this with your own tax advisers.

DEAR BENNY: I performed a title search on my lot and found that the builder’s mortgage on my lot was not released following the close of our home in July 2007. I have the HUD-1 statement from the closing that indicates the balance due and paid to the builder’s mortgage holder, but it appears the releases were never filed due to the bankruptcy of my builder in October 2007 and the failure of the lender in early 2008.

I made a title insurance claim to my title insurance company, which it denied on the basis that the lender has not filed foreclosure on the underlying mortgage. I consulted one attorney, who advised me that because no one was taking action, I had nothing to worry about and should not pursue the manner. Do you have any thoughts? --Kevin

DEAR KEVIN: I disagree with your attorney and with the title insurance company. Yes, it is true that no one was taking action -- and probably no one will ever take action. But the cloud remains on your title. There is an unreleased mortgage.

When you ultimately want to sell your property, you will have to convey it “free and clear” of all liens -- which includes that unreleased mortgage. Now is the time to resolve this matter.

The first thing I would do is retain another attorney, who should put pressure on the title insurance company. You obtained a title insurance policy that guaranteed you title “free and clear” of all liens. Your title has a cloud, which the title company should take action to clear up.

There are ways of tracking down who took over your seller’s mortgage when he went belly-up; it’s not easy and may take a lot of legwork. And your title insurance company has better resources to locate your mortgage.

Alternatively, you can file what is known as a lawsuit to “quiet title.” Your lawyer will file suit against your builder (in the bankruptcy court if that case is still open), against his lender, and against your title insurance company.

I would not wait until you decide to sell. It’s hard enough to resolve this now. Many states have enacted “sunset” laws, whereby after a period of time (usually quite long) an unreleased mortgage (deed of trust) has no more validity. But you clearly do not want to wait such a long time with that cloud hanging over your head.

DEAR BENNY: I am a member of a neighborhood homeowners association. In 1971, the association (including about 75 houses) was deeded a lot of land that includes a pool and a man-made pond, both fairly small.

Today, less than half the families pay the annual dues, and maintaining the pool has become a real hassle. We are attempting to give the property to the town; however, if the town refuses to take it, what is the personal liability of the homeowners if we let the insurance on the property lapse and stop paying taxes?

There was supposedly an agreement that should the association cease maintaining the property, it would revert to the original owner (now deceased), but no one has been able to find a document stating this. --Caroline

DEAR CAROLINE: First, you state that half of the owners do not pay their association’s annual assessments. What action is the board of directors taking to collect against those owners? Have you considered filing suit (or even initiating foreclosure action) against the delinquent owners? Often, the mere threat of a foreclosure action by a community association will prompt the owner to pay up -- or at least start a payment plan.

You have a swimming pool and a small pond. Both are what we lawyers call “attractive nuisances.” This means that the water will “attract” children to it, and someone can get hurt or even drown.

In that case, the association members would be personally liable. If I were representing the parents of a child who was injured (or died) in the pool or pond, I would sue the association and all of its members.

If the pool and pond are a separate tax lot (or lots), you certainly could stop paying the real estate tax, and eventually the county will sell the property at a tax sale. But under no circumstances should you stop paying the insurance bill; you need the protection of that insurance coverage.

One suggestion: How much will it cost to drain the pond and the pool, and put a large fence around the entire area? Most local governments have requirements, and any pool must have a fence completely around it -- the minimum height is spelled out in the local ordinance.

You could also just fill in the pool and pond, and not have to worry any more about the upkeep or the potential liability.

As for the agreement that the property would revert back to the original owner, have you done a title search? Any such agreement -- to be binding -- must be recorded among the land records where the property is located.

DEAR BENNY: I often hear the words “fee simple.” What exactly does that mean? --Ethel

DEAR ETHEL: The word “fee” comes from the old English feudal system. The lords owned their land -- called a “fief” -- and would parcel out land to their underlings. While those in possession of the land would have certain rights in and to the property, the lord owned the fief in “fee simple.”

In English: full and complete ownership.

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