Most everyone is involved in one or more real estate transactions during our lifetimes, whether it’s our personal activity or advice from lawyer to client. If we’re not alert and up-to-date, it can be easy to stumble into a problem. Fortunately, Law Tips readers have experts such as our faculty member, Krista Lockyear’s advice on avoiding the pitfalls. In last week’s blog I shared her reminders on Liens in Divorce Decrees and Warranties of Title. If you missed that column, you’ll find it below today’s reading. Now, let’s take in Krista’s pointers on transferring ownership, title insurance and zoning ordinances.
It Takes A Deed to Transfer Ownership
A surprisingly common mistake attorneys make in the practice of divorce law is to set forth in a divorce decree which party is entitled to ownership of real estate but never follow through to ensure that the parties complete the transfer. The decree itself does not transfer title to real estate to either party of the divorce. While the decree may read something like “the parties’ residence located at 111 Utopia Lane, Blissville, Indiana, shall be the property of the wife,” this establishes the division of property, but does not complete it, and cannot be relied upon from a title perspective. All decrees should order the non-recipient spouse to execute a deed in favor of the spouse who is awarded the real estate. A title company may, and should, force the non-retaining spouse to execute such a deed prior to insuring either a refinance or a sale. For obvious reasons, tracking down an ex-spouse can be difficult as more time passes after the divorce, so practitioners should pursue execution and recording of the deed prior to considering a case closed.
Title Insurance – Specific to Insured Party
Title insurance very specifically names an insured owner, which owner must match exactly the tenancy set forth on the deed creating the ownership interest. When the tenancy or other form of ownership changes, coverage may end, or at least change. This happens most often when ownership is changed from an individual name to a limited liability company or a trust or upon divorce. In the divorce scenario, when the couple originally obtained an Owner’s Policy of Title Insurance, it likely insured the husband and wife, as Tenants by the Entireties, not the two (2) individuals. Once a divorce is final, that tenancy becomes severed and the two (2) individuals each own an undivided one-half (½) interest as tenants in common. Newer title insurance policies (ALTA Homeowner’s Policy, specific only to single family residential) expand coverage and provide continuation of insurance upon divorce. However, if the owners are insured under an older policy, they should request from the title company an endorsement, which should be readily provided after the non-retaining party executes and records a deed conveying one hundred percent (100%) of the real estate to the retaining spouse. There is a minimal charge for this endorsement, but it is worth it as the endorsement restores the full limits of coverage to the individual retaining title.
Local Zoning and Subdivision Ordinances
Most communities in Indiana have zoning and land control ordinances that regulate the use and development of real estate. While use issues are relatively straightforward, an unsuspecting attorney can run afoul of subdivision controls relatively easily when dealing with family controlled real estate. It is not uncommon to have clients seeking to divide a farm or homestead among family members. It is not likely, however, that merely performing a survey to obtain a legal description, and filing a deed based upon that new legal description, will be sufficient to satisfy certain subdivision requirements. Since real estate divisions are based on local ordinance, the best option is to either consult a local real estate attorney or your local zoning and planning organization prior to assisting a client with any division of real estate.
I want to thank Krista Lockyear for providing input on important considerations in the real estate arena through these Law Tips articles. You have an opportunity to gain more of Ms. Lockyear’s insights during the 11th Annual Family Law Institute available as an ICLEF Video Replay or On Demand Seminar by Clicking Here.
About our Law Tips faculty participant:
Krista B. Lockyear is a partner in the Corporate Department at Rudolph, Fine, Porter & Johnson, LLP, Evansville, Indiana. Her areas of practice include real estate law, zoning and land use, environmental law, title insurance, probate and estate planning, guardianships and business law. She serves a president of Lockyear Title, LLC; is a member of the Indiana Land Title Association, the Evansville Women’s Council of Realtors and the Volunteer Lawyer Program. As well as contributing her expertise as a member of the ICLEF faculty, Krista is involved with her local and state bar associations.
About our Law Tips blogger:
Nancy Hurley, Law Tips blogger, has long-standing connections with Indiana lawyers. She was formerly a member of the ISBA and IBF staffs for over 30 years. Nancy’s latest lifestyle venture is with ICLEF. We are utilizing her exceptional writing and interviewing skills while exploring how her Indiana-lawyer background fits with ICLEF’s needs. When she isn’t ferreting out new topics for Law Tips, her work can be found in our Speaker Spotlight blogs, postings on the ICLEF Facebook and Twitter pages, and other places her legal experience lends itself.
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