Reputation First Title Agency

The Tenancy By The Entirety

admin — Fri, 18 May 2012 21:16:19 +0000

This is Dave Phillips and I am going to write a few paragraphs concerning the tenancy by the entirety, an estate available only to a husband and wife.

At common law, the concept was that the wife and husband existed as one unit; hence the term “by the entirety.” This concept is very similar to that found in the joint tenancy. However, regarding the joint tenancy, each owner is considered to own the whole. With the tenancy by the entirety, the husband and wife are considered one unit owning the whole. The significant difference between the joint tenancy and the tenancy by the entirety is that with a joint tenancy, each joint tenant is free to convey its interest at any time. Conversely, with the tenancy by the entirety, one spouse, acting alone, cannot effectively transfer an interest in entirety property.

There is one exception to this rule: One spouse, acting alone, may convey its interest to the other spouse, thereby destroying the tenancy by the entirety. Regarding the tenancy by the entirety, when a spouse dies, the remaining spouse survives herself and her deceased spouse. You may be wondering how someone can survive themselves? Remember that with a tenancy by the entirety, the spouses are considered to be one unit owning the whole. This verbiage simply indicates a passing of the entirety interest to the remaining spouse. When a spouse dies, the tenancy by the entirety terminates, and the surviving spouse will hold in fee simple.

The typical tenancy by the entirety recites the grantee line as: Owner conveys to Mark Thompson and Karen Thompson, husband and wife.

You may also see the grantee line as such: Owner conveys to Mark Thompson and Karen Thompson, as tenants by the entirety.

Severance of the tenancy by the entirety:

Either spouse, acting alone, cannot convey property held in tenancy by the entirety. The property must be transferred by the husband and wife, acting in concert. As mentioned, there is an exception to this rule: One spouse may convey to the other spouse, thereby destroying the tenancy by the entirety. The tenancy by the entirety will also be destroyed by death, as discussed, and also by divorce.

Note: When the tenancy by the entirety is destroyed by conveyance of one spouse to the other, the inchoate dower interest of the wife will immediately attach.

Caution: Do not ever confuse a tenancy by the entirety with dower. When the wife is on title with the husband, she owns a fee simple interest in the land. If the wife is not on title with the husband, she holds an inchoate right of dower. Where there is a tenancy by the entirety there is no dower, and where there is dower there is no tenancy by the entirety.

Summary: The tenancy by the entirety can be created only in a husband and wife. It grants a right of survivorship to the surviving spouse. One spouse, acting alone, cannot transfer any interest in the entirety property. However, one spouse may transfer its interest to the other spouse, thereby destroying the tenancy by the entirety.

My next article will concern dower, so please click on this blog Memorial Day weekend and enjoy the information.

Dave Phillips ~ Title Examiner

The Joint Tenancy With Full Rights of Survivorship

admin — Sat, 12 May 2012 18:19:38 +0000

Let me start by posing a question: how many homeowners in Michigan do you think would intentionally hold title with their co-owner as: joint life estate with alternative contingent remainders? I dare say that the answer is probably one in one thousand.

Now, let me compare and contrast the joint tenancy with full rights of survivorship with the more traditional joint tenancy. This is fun stuff because it is highly analytical stuff. Reference my last article concerning the joint tenancy. Remember that the joint tenancy can be created by a conveyance from the Owner to Bill Smith and Bob Jones, as joint tenants. Now, regarding our current tenancy, let’s look at this example: Owner conveys to Bill Smith and Bob Jones, as joint tenants with full rights of survivorship. There can be variations of this, but the use of the word “survivorship” is essential. The joint tenancy with full rights of survivorship is an ultra joint tenancy, as the last survivor cannot be denied sole ownership of the property. Buckle your seat belts!

Example: Owner conveys to A and B, as joint tenants with full rights of survivorship. The actual state of title would read: Joint life estate held by A and B, with alternative contingent remainders held by A and B. Say what? Exactly my thoughts upon first encounter. Now, let me explain.

First, we have a joint life estate held by A and B. If A were to die, B would be the sole life estate holder. Conversely, if B were to die, A would be the sole life estate holder.

The alternative contingent remainders: the remainder interests of A and B are contingent on one tenant surviving the other. If A were to die, B’s contingent remainder would vest. B would then own the entire life estate interest, as well as the vested remainder. Apply merger, and B would hold in fee simple absolute. Simple!

Well, to this point in the discussion, the joint tenancy with full rights of survivorship is functioning the same as the traditional joint tenancy. After all, A has died and B holds in fee simple absolute. The complexity of the joint tenancy with full rights of survivorship raises its head when there is a conveyance from one of the tenants to a third party. Here we go!!

Example: Owner conveys to A and B, as joint tenants with full rights of survivorship. A then conveys to C. The new state of title would read: Life estate per autre vie held by C, Life estate held by B, with alternative contingent remainders held by B and C. A life estate per autre vie is defined as: for the life of another. It is true that A has effectively conveyed her life estate to C, however, C’s life estate period is measured by the life of A. When A dies, C’s life estate terminates immediately. The determining factor in our current state of title hinges on the alternative contingent remainders. This is what is unique: the relation between A and B still exists after the conveyance from A to C. For C to obtain fee simple ownership, B must predecease A. If A dies before B, C’s interest is terminated. This is because C’s remainder interest is contingent upon A surviving B. Imagine C’s surprise when he finds out that his interest is forever terminated upon A’s death? This displays the sneaky power of the right of survivorship element. A and B, in taking title as joint tenants with full rights of survivorship, indeed have full rights of survivorship. This is the position of current Michigan law.

The joint tenancy and the joint tenancy with full rights of survivorship should be declared synonymous, with the traditional joint tenancy controlling.

Here is my reasoning. Historically, the creation of a traditional fee simple estate had to contain the phrase and his or her heirs after the grantee’s name. Example: Owner conveys to David M. Phillips, and his heirs. Absent the use of this phrase, only a life estate would have been conveyed. In other words, a conveyance from the owner to David M. Phillips would have conveyed a life estate only. Michigan has since abolished this rule and now holds that a conveyance to David M. Phillips will convey a fee simple estate. This speaks of good common sense. If a grantor intends to convey only a life estate, it should be clearly set forth in the deed. Now, back to our current discussion. Most people involved in property transactions have NO idea of the ramifications of the joint tenancy with full rights of survivorship. Indeed, most attorneys I have worked with could not begin to describe this particular estate. How then can we expect a layperson to understand the ramifications of using the word “survivorship”? I think the obvious answer is that we can’t.

Applying the above analysis of the fee simple to our current tenancy, what would we have? Let’s see. Owner conveys to David M. Phillips and Taylor A. Phillips, as joint tenants. Or, owner conveys to David M. Phillips and Taylor A. Phillips, as joint tenants with full rights of survivorship. Result: Both would convey a traditional joint tenancy. Problem solved.

You see, the Michigan Supreme Court or the Michigan Legislature, by declaring the two interests as synonymous, and favoring the traditional joint tenancy, would find themselves in a win-win situation. First, homeowners AND ATTORNEYS would not be hit with unsuspected surprises. Second, there is no destruction of the existing estates. The joint tenancy, the life estate, and the contingent remainder are unaffected. If the grantees choose to hold title via joint life estate with alternative contingent remainders, they can do so by expressing this in the deed. Additionally, you could apply a contract analysis to the joint tenancy and the joint tenancy with full rights of survivorship. The terms, and certainly the analysis, appear to be ambiguous and, as such, the court may determine the ambiguity based on the intention of the parties. Most parties would intend to hold as a traditional joint tenancy.

As additional fuel: In 1988, Michigan adopted The Uniform Statutory Rule Against Perpetuities (USRAP). This was done in part to curb the drastic results of the application of the common law Rule Against Perpetuities, as such. The Rule Against Perpetuities was a monster that was routinely misunderstood and misapplied. Again, this is a result based mostly on common sense. The adoption of the USRAP functions to simplify property transactions by eliminating the guesswork of blindly terminating contingent or executory interests.

If I were drafting arguments for my position, I would start with the common sense position that, as a general rule, very few people understand what they are creating when they hold with “full rights of survivorship.”

Most importantly, by adopting the position of the traditional joint tenancy, it would create a verifiable line between a joint tenancy and a joint life estate with alternative contingent remainders. The joint life estate with alternative contingent remainders would be created with specificity on the face of the deed.

Hope you enjoyed this writing. Please click on next week for my discussion of the tenancy by the entirety.

Dave Phillips

The Joint Tenancy

admin — Sun, 06 May 2012 18:05:55 +0000

Welcome back. Please refer to my previous blog concerning the tenancy in common. In review, there are three common ways in which title to Michigan lands can be owned by more than one person; the so-called concurrent estates. These are: 1) The Tenancy in Common; 2) The Joint Tenancy, including its awkward cousin the Joint Tenancy With Full Rights of Survivorship; and 3) The Tenancy by the Entirety. This writing will concern the second of these; the joint tenancy.

The typical joint tenancy recites the grantee line as follows: Owner conveys to Bill Smith and Bob Jones, as joint tenants. Alternatively, the grantee line may read as follows: Owner to Bill Smith and Bob Jones, as joint tenants, and not as tenants in common.

The joint tenancy is created in two or more grantees. As with the tenancy in common, all joint tenants have the right to occupy and use the premises on an equal footing with the other joint tenants. Unlike the tenancy in common, the joint tenants are not free to apportion their ownership interests. This is because, historically, each joint tenant is considered to own the whole. When a fellow joint tenant dies, the remaining joint tenants do not succeed to the interest of the deceased joint tenant, the joint tenancy simply remains in effect less and except the interest of the deceased joint tenant. Compare this with the undivided interests of a tenancy in common.

The unique characteristic of a joint tenancy is the survivorship element. In our example, we use Bill Smith and Bob Jones, as joint tenants. If Bill Smith dies, full ownership of the property will shift to Bob Jones, exclusively. The joint tenancy allows the parties to avoid probate of a deceased joint tenant.

NOTE: Dower does not attach to property held in joint tenancy! If Bill Smith and Bob Jones hold title as joint tenants, they can convey the property free from the inchoate dower interests of their wives. Dower will only attach to lands of which the husband was seized of an estate of inheritance. A joint tenant is not seized of an estate of inheritance, because when that particular joint tenant dies, the full right to fee ownership passes to the surviving joint tenant(s).

Severance Of The Joint Tenancy:

Similar to the tenancy in common, each joint tenant is free to convey its interest at any time. For example, Bill Smith may convey his interest to Susan Thomas. However, when Bill Smith conveys his interest to Susan Thomas, this conveyance will destroy the joint tenancy held by Bill Smith and Bob Jones and will create a tenancy in common between Bob Jones and Susan Thomas. When there are conveyances to third parties, from an existing joint tenant, the examiner must be extra cautious in setting up the state of title, i.e. the ownership line set forth on Schedule A.

What if we have three or more joint tenants and one is conveying its interest? This is more complicated, but very simple to handle if you follow this example: Owner conveys to Bill Smith, Bob Jones, and Susan Thomas, as joint tenants. This is a classic joint tenancy held by three people. Now, let’s say Bill Smith conveys to Rick Phillips. What is the resulting state of title? The new state of title would read: Bob Jones and Susan Thomas, an undivided 2/3 interest as joint tenants, and Rick Phillips, an undivided 1/3 interest. The interesting thing is that Bob Jones and Susan Thomas remain joint tenants, vis a vis, each other. Rick Phillips becomes a tenant in common with Bob Jones and Susan Thomas. It may seem confusing, but look at this example a few times and it should become clear.

Preview: Our next blog will concern a peculiar form of ownership recognized in Michigan. This form of ownership is known as the joint tenancy with full rights of survivorship. It is a technical tenancy which incorporates elements of future interest law. Attorneys should pay particular attention to what I say regarding the right of survivorship. I will discuss its similarities and differences when compared to the regular joint tenancy.

Dave Phillips

The Tenancy in Common

admin — Fri, 27 Apr 2012 22:55:38 +0000

My name is Dave Phillips. I am the Chief Title Examiner at Reputation First Title Agency. If you are interested in learning some basic and unique insights regarding land title, then this is the blog for you. My intent is to start from the ground up. I aim to walk our readers through the wonderful world of title in rhythmic fashion. I will be contributing one post per week. And this is all being offered as a gratuity, so take advantage.

Well, what better place to start then with a discussion of the historical tenancy in common.

There can be multiple persons owning an interest in real property at the same time. This is often referred to as fragmentation of ownership. The tenancy in common is considered a “concurrent” estate, in that two or more owners are considered to exist side by side. In Michigan, there are three principal ways in which title to real property may be held: (1) the tenancy in common; (2) the joint tenancy and its awkward cousin the joint tenancy with full rights of survivorship, and (3) the tenancy by the entirety. Understanding these tenancies is not only important to the title examiner, it is important to the attorney and the homeowner alike.

A typical tenancy in common recites the grantee line as follows: Owner conveys to Bill Smith and Bob Jones. There is no additional language used. In the alternative, the grantee line may also be recited as follows: Owner conveys to Bill Smith and Bob Jones, as tenants in common.

The tenancy in common is created in two or more grantees. Each owner has the right to occupy and use the premises on equal footing with the other owners. It is also assumed that each tenant in common owns an equal share in the property; however, the parties are free to apportion different interests to different owners. For instance, in the above example, title can be held by Bill Smith, as to an undivided 75% interest, and Bob Jones, as to an undivided 25% interest. It is up to the parties to decide.

Each tenant in common is free to convey its interest at any time. For example, Bill Smith may convey his interest to Susan Thomas. This would create title held by Bob Jones and Susan Thomas. It simply replaces one person for another. (NOTE: The spouse of Bill Smith, if any, would need to sign the deed to Susan Thomas to release her inchoate dower interest in the property). Dower, both inchoate and consummate, will be the topic of a later article.

When an existing tenant in common dies, that interest in the property passes to his or her estate. For instance, using Bill Smith and Bob Jones as the parties, if Bill Smith were to die, the new state of title would by held by Bob Jones and The Estate of Bill Smith, deceased.

In its basic form, the tenancy in common is a very simple form of ownership. It also has its drawbacks: (1) the co-owners may frequently change, (2) judgments may attach to a co-owner’s interest, (3) a bankrupt co-owner’s interest, and yours as well, may be sold in bankruptcy proceedings, (4) divorce or death of a co-owner will disrupt the tenancy and may tie up free transferability of the property. These are just four examples of a laundry list of possible complications. So it would seem that knowing and trusting your co-owner is very prudent.

Important: Remember, the spouse of every male who holds in a tenancy in common must sign to bar dower if her husband is selling or mortgaging.

It’s Friday night and I’m sitting in my quiet office composing this article. Everyone has gone home. It gives me a chance to reflect on all the materials I have studied and covered over the years. My true enjoyment comes in giving this information to all who wish to learn. Writing is my strongest form of communication and I hope that you can benefit from my years of study.

Click onto our blog next week for my discussion of the joint tenancy.

Dave Phillips

Mortgate Life Insurance

admin — Tue, 24 Apr 2012 15:22:34 +0000

You thought you were finished signing the papers, but suddenly you are handed an insurance application asking you to confirm you are healthy and offering to pay off your mortgage

You thought you were finished signing the papers, but suddenly you are handed an insurance application asking you to confirm you are healthy and offering to pay off your mortgage in the case of your death. And if you”re like most people, you sign it and think nothing of the cost as the quote is a low weekly or monthly figure. For most people that”s a mistake, as they don”t realize that a personal mortgage life insurance policy can cost a lot less and offer you a lot more.

But What Does “Mortgage Life Insurance” Mean ?

Mortgage life insurance you purchase through your bank is a group policy between two parties – the bank and an insurance company. You, in any way, are not a party to this contract. That means that the benefits you get as a member of the group – like having your mortgage paid off if you die – end the moment you stop being a member of the group, i.e. you stop paying or if you move your mortgage.

A personal mortgage life insurance policy is yours regardless of which bank or lender your mortgage is with. Mortgage brokers offer mortgage life insurance to clients but often encourage them to look into getting personal insurance instead.

Why Personal Mortgage Life Insurance?

People who buy houses should be looking for quotes from independent insurance agents. With mortgage life insurance from a bank you”re insuring a declining balance for the same premium. Private insurance isn”t like that; it remains level

Buyers should have some coverage for all debt as first-time buyers, who tend to be younger, and with larger purchases, are significantly increasing their debt load. Should the unforeseen happen, their family may have no choice but to lose the home.

And there”s more. While you may make extra payments to be pay off your mortgage early, your life insurance with your lender is fixed as we mentioned above.

And that”s even before you take the control and flexibility available from personal insurance into account. The bank says is that it will pay off your mortgage if you die, but without a new mortgage, it won”t lend your family any money.

The bank is the beneficiary, and even if the family might need the money for something else they aren”t able to remortgage the home because they aren”t the beneficiaries.

How Much Mortgage Life Insurance Do You Need?

Your first step should be to determine if you even need any more insurance than what you already have.

People need to see their insurance needs as a whole, rather than a bunch of problems; you don”t want to end up with too much or too little.

You may also find that you want enough life insurance to cover other potential expenses in the case of your death. Mortgage Life Insurance through your life insurance company is really life insurance in an amount sufficient to cover your mortgage. In addition you can purchase more life coverage to include education and debt. And you can decide who will be your beneficiaries, which is not the case with bank mortgage life insurance.

Shop for your title insurance!

admin — Tue, 13 Dec 2011 22:30:50 +0000

This is a nice article from Fox Business on shopping for title insurance.

http://www.foxbusiness.com/personal-finance/2011/12/12/shop-for-title-insurance-and-closing-services/#ixzz1gMQD3OaY

The more consumers shop for their title insurance, the better for us as a profession. So shop around!

If you have any questions regarding title insurance rates or closing fees, please call our office at 734.432.0100 and we will be glad to help you!

John Shepard
Reputation First Title Agency

WSJ Article regarding the housing recovery that wasn’t

admin — Fri, 01 Jul 2011 21:26:18 +0000

According to this article and interview from the Wall Street Journal, the housing recovery has not happened and may still take years.

Bearish outlooks on housing aren’t hard to find these days, but one stands out even for this market.

Scott Simon, a managing director and head of global asset-giant Pimco’s mortgage- and asset-backed securities teams, is credited with foreseeing the housing crash and helping his firm dodge losses that plagued Wall Street.

In a lengthy Q&A posted on Pimco’s website today, Mr. Simon discusses everything from foreclosures to Fannie Mae and Freddie Mac. Calling his outlook “dour” would be generous—home prices could fall more and the pain could drag on for a decade or more.

Excerpts are below. (Both the questions and answers are from Pimco.)

Q: Could you begin by framing the current state of the housing market? Do you see a double dip market?

A: We are seeing signs of what we have long suspected: There never was a housing recovery. In fact, I argue the market is in a fragile state that is far easier to break than to fix. If policy makers alter the government’s current approach to housing and unwittingly break the market, they may not be able to repair the damage within the foreseeable future. … We anticipate an average decline from here of about 6% to 8% in prices across the country.

Q: Are more foreclosures expected to hit the market?

A: We see potential for a substantial number of foreclosures over the next three years – as many as 6 million to 7 million additional foreclosures, on top of the roughly 2 million we estimate have already occurred. Foreclosures may peak in about two years, but the numbers could still be high for a few years after that and then likely taper off.

Q: Let’s switch gears to discuss housing finance. Is the home-loan market still reliant on government support?

A: Yes, government is essentially considered the mortgage market today, but this needs to be put in context. Government has been involved in housing for some 70 years with pro-housing subsidies of all sorts, from homebuyer tax credits to guaranteeing loans to mortgage interest tax deductions. … If we ended government support in all forms, mortgage rates could rise significantly, because home loan investors would need to be compensated for greater credit risk, and loan availability could decline. Higher rates and less mortgage availability would put downward pressure on home values, with potentially negative consequences for the market and also for the economy as a result of wealth destruction and consumer confidence declining.

Q: What are politicians and policy makers proposing to do about Fannie Mae and Freddie Mac? Are there serious alternatives being discussed to provide liquidity to the market?

A: From what I have observed in visits to D.C., when the conversation comes around to Fannie and Freddie it is very easy for people to get irrational. Fannie and Freddie seem to draw negativity like giant lightning rods because they lost so much money. But what is often overlooked is that the majority of losses have not come from their core business: 20% down-payment, prime mortgages. They got in trouble because they expanded beyond their core business to maintain market share. …But politicians from both parties look at the losses of Fannie and Freddie and think, “I’d better say Fannie and Freddie stink and we should shut them down and that they are evil.” But the market still relies heavily on Fannie and Freddie. If policymakers err in tinkering with that support while the market is so fragile, the unintended consequences could be extreme.

Q: And when do you expect action on this issue?

A: Despite the heated rhetoric, there appears to be no rush to kill Fannie and Freddie, from what I have observed. Initially, we heard talk of getting the government out of housing in two years, and lately the talk is five to seven years. I think in Washington-speak, five-to-seven years more likely means 10-to-15 years, which is actually a more realistic timeframe in my opinion – by then the housing market should hopefully be on firmer ground.

Now, Developments readers, what do you think? Too bearish or not enough?

The importance of title insurance for foreclosed properties

admin — Wed, 29 Jun 2011 13:34:36 +0000

This article was posted by a member of the Title Insurance Law Group on Linked In.

If you are considering the purchase of a foreclosed property, you may want to read the above article.

I hope these buyers purchased title insurance!

This article is a case study why title insurance is more important than ever to protect purchasers. If their claim of ownership fails - without title insurance - the buyers may lose the property and risk the loss of their entire investment of $310,000.00. Adding legal fees would likely increase their costs by thousands of dollars. All matters which would likely be covered by an owner’s policy of title insurance.

With the current foreclosure morass, it is more important now than ever to obtain title insurance to protect your investment.

http://www.linkedin.com/news viewArticle=&articleID=604555458&gid=2948985&type=member&item=59776327&articleURL=http%3A%2F%2Fwww2%2Etimesdispatch%2Ecom%2Fbusiness%2F2011%2Fjun%2F28%2Ftdmain01-windsor-farms-foreclosure-case-a-quagmire-ar-1137227%2F%3Freferer%3DNone%26shorturl%3Dhttp%3A%2F%2Fbit%2Ely%2FiufeRc&urlhash=Kxzn&goback=%2Egde_2948985_member_59776327

Detroit Home Sales Article

admin — Tue, 28 Jun 2011 21:30:45 +0000

http://www.detnews.com/article/20110628/BIZ/106280388/1001/Detroit-home-sale-prices-lag-in-spring-despite-uptick-elsewhere

Informative article on Detroit home sales.

And now for something completely different…the “Lady Bird” Deed

admin — Fri, 08 Apr 2011 22:03:13 +0000

A “Lady Bird” deed is an estate planning tool named after deeds used by President Lyndon B. Johnson to transfer real property to his wife “Lady Bird” Johnson. When using this deed, the grantor conveys her interest in the property to a grantee, yet retains a life estate with full power to convey, mortgage or otherwise alienate the property. The grantor may use this power while alive, but once deceased, the grantee is vested with fee title. “Lady Bird” deeds are valid in Michigan if drafted properly.

There are many variations of “Lady Bird” deed. The most commonly used is where the grantor, usually a parent conveys the property to the grantee children. The grantor reserves for herself a life estate coupled with the power to sell, mortgage or otherwise alienate the property.

The end result is that the grantor/parent can sell, convey or mortgage the real property at any time during her life and upon death the property passes to the grantee automatically by operation of law.

For example, Marge Simpson conveys Blackacre to Bart Simpson and Lisa Simpson and reserves for herself a life estate coupled with an absolute power to convey the property during her lifetime. Marge can sell Blackacre during her lifetime without the consent of Bart and Lisa. Also, after Marge’s death, Bart and Lisa own Blackacre in fee.

I recommend that you talk to a real property/estate planning attorney if you think a “Lady Bird” deed may be right for you.