Update Re: Honey, Did You Sign the Mortgage?

The Iowa Court of Appeals, in the earlier unpublished decision Freedom Financial Bank v Estate of Boesen and Boesen (2010), came to the same conclusion set forth in JP Morgan Chase v Hawkins (concluding that a purchase money mortgage signed by only one spouse is a valid enforceable encumbrance).  However, in contrast, the Court of Appeals had previously ruled in Citimortgage, Inc. v. Danielson (2009) that a purchase money mortgage was invalid if not executed by both spouses (pursuant to the Iowa statutory homestead requirement). The hope was that the Iowa Supreme Court would take this issue under further review and offer some clarity, and it should be noted that the Supreme Court has in fact granted the application for further review in the Freedom Financial Bank v Estate of Boesen and Boesen case. 

Not to be outdone with regards to this issue, the state legislature has proposed an amendment to the homestead statute (Iowa Code § 561.13) as documented in Senate File 400.  The proposed amendment seeks to amend said Code section in pertinent part as follows:

“3.   A conveyance or encumbrance or a contract to convey or encumber the homestead is not invalid…if any of the following apply:
a.    The nonsigning spouse’s interest is terminated by a decree of dissolution of marriage or other order of the court.

b.    The nonsigning spouse’s right of recovery is barred by section 614.15 [Limitations of Actions].

c.    The encumbrance is a purchase money mortgage…   
d.    A court sitting in equity enters a decree holding that invalidating the conveyance or encumbrance or a contract to convey or encumber the homestead would, directly or indirectly, unjustly enrich the nonsigning spouse…”

This issue has become one of statewide debate following recently published news stories detailing the decision and underlying facts of Citimortgage, Inc. v. Danielson.  Again, in this case, a purchase money mortgage was deemed invalid due to the fact that the mortgagor’s spouse did not join in the execution of the mortgage.  Additionally, the mortgagor filed for bankruptcy thus leaving the lender with no other remedy and the mortgagor and his spouse remain in their home “free of charge”.

Often missing from the general public's discussion of this issue is the underlying purpose of this long standing requirement in the homestead statute. It should be noted that the statutory homestead joint spousal signature requirement exists for the purpose of protecting the ownership rights and interests of each spouse.  Hence where one spouse attempts to convey or encumber the homestead, such attempt is deemed invalid without the other spouse’s consent thereto.

Stay tuned for updates on this issue as it continues to be addressed by the state judiciary and legislature, and make sure to contact the firm with any related questions or concerns.
  


  

Real Estate Rundown (Iowa Court of Appeals)

Is It In the Contract?

Malone v Flattery:  Rights of first refusal are presumed to be personal and are not ordinarily construed as assignable unless there is language showing that the parties intended the right be assignable.  The real estate contract in question did not explicitly provide that the right of first refusal was assignable and therefore it is not. 

Neighborly Boundary Battle

Georgia Pacific Gypsum, L.L.C. v New NGC, Inc.:  The court ruled that despite proof of the legal descriptions, payment of taxes, and payment of insurance, a fence line may still dictate who actually owns the disputed land where there is a boundary dispute. “Acquiescence” under Iowa Code section 650.14, refers to the mutual recognition by two adjoining landowners for ten years or more that a line, definitely marked by fence or in some manner, is the dividing line between them. Acquiescence exists when both parties acknowledge and treat the line as the boundary.  Take a note from your dog and make sure you mark your territory properly.  However, I'd suggest not using the same marking procedure that your dog uses.

For Sale By Owner (Sell Your House and Save..... Safely)

Over the past few years the local and national housing markets have experienced a struggle not otherwise seen in recent history.  The real estate market has subsequently transitioned into an ideal buyer’s market due to greatly decreased median home prices, overly saturated markets, and historically low mortgage rates.  Accordingly, many sellers in today’s competitive market are invoking the cost effective approach of placing their home For Sale By Owner (“FSBO”).  FSBO can be an effective tool to convert the cost of real estate commissions into a competitive advantage in pricing, renovations/updates to improve marketability, and negotiating leverage with regards to closing costs. Selling a home FSBO can also be a costly mistake for an inexperienced seller without the assistance of knowledgeable professional. 

In any real estate transaction (especially FSBO), both buyer and seller should take necessary steps to properly ensure all aspects of the sale are handled appropriately and further ensure that they are protected against potentially expensive surprises, delays and liabilities. If you are handling the transaction on your own, it is important to consider the advantages a lawyer can offer.  It would be advisable to consult with an attorney with regards to the following services:

• Review of the abstract and issuance of a title opinion ensuring the property and transaction is free of any and all title issues. 
• Draft, review, and/or evaluate offers and purchase agreements to ensure you are properly protected and aware of the terms and conditions contained therein.
• Host and handle the Closing of the transaction, or represent you with regards to the same if it is to be handled by the lending institution's closing agent.
• Draft, review and/or evaluate (along with the filing of) a Real Estate Contract or Lease.
• Draft or review the transfer documents (Deed, Declaration of Value, and Groundwater Hazard Statement).
• Draft or review statutorily required Seller disclosure documents.

These services can be provided at a very reasonable (often times fixed) rate and are an incredible investment to ensure the transaction is free of costly error and liability.

QUICK NOTE: Real Estate Conveyances from an LLC

A recent change to the Title Standards of the Iowa State Bar Association removes the presumption of authority on LLC conveyance documents, such as a deed. Now, record must show 1) information indicating whether the LLC is member-managed or manager-managed; 2) that the conveyance was in the ordinary course of business; and 3) that the signatory(ies) had proper authority.  An affidavit attesting to these facts, recorded with the deed, is an acceptable and pain-free solution.