We’ve all heard the aphorism, “No good deed goes unpunished.” Actually it’s one of my personal favorites and anyone who knows me can confirm that I use the line a lot. But real estate is always different, in other words, the principles that hold true in everyday life rarely if ever apply to the parallel universe that is the real estate industry.
This is probably about the right time to differentiate between a “deed,” defined as a deliberate action, and a “deed,” defined as a legal document concerning property rights that is signed and delivered.” The author encourages the reader to perform as many good “deeds” (intentional actions) as is humanly possible, but this article will discuss those other “deeds,” the ones which are like receipts for property and land purchases.
I’ve been asked many times, of all the documents passed at a closing, which one is the most important? That’s an easy one: the deed. Most if not all deeds contain a few essential ingredients: the person or entity transferring the property, the person or entity receiving the property, an adequate description of the property itself, a brief reference to the last or prior transfer of the property, and finally a few technicalities, that the deed be signed, dated and notarized.
Once a deed has been signed and delivered in the course of a real estate transaction, it is recorded at a county registry, town office or city hall, and thereafter the conveyance of the property becomes both public and official.
In a perfect world a deed which is missing one or more key components, or isn’t dated, or contains a defective notarization, wouldn’t be accepted for recording, and the parties involved would at least receive prompt notice that their deed was deficient, and steps could be taken to correct the mistake or omission. But we don’t live in a perfect world, and so more often than not these faulty and defective deeds are quietly recorded where they lie in wait, like ticking time bombs, only to suddenly explode on unsuspecting parties when it’s time for the property to be refinanced or sold.
There’s another problem. Most of the documents presented at closing are prepared by the bank or lender using state of the art software and rigorous quality control — thus errors are few and far between, and easy to spot. Deeds — on the other hand — are manually typed by, you guessed it, human beings, and we all know what human beings are capable of! We humans tend to make mistakes, lots of them in fact, but mistakes in deeds are not your ordinary run-of-the-mill mistakes. A mistake in a deed, if of sufficient gravity, can hold up a future sale of the property, require the assistance of a title insurance company, cost the parties a substantial sum of money out of pocket, or require the parties to seek a legal resolution in court, all because the person typing the deed was distracted or not concentrating on the task at hand when the deed was being prepared.
Let’s briefly cover the three types of problems I often encounter when reviewing titles where faulty or defective deeds cause me an Excedrin headache:
Clerical Errors and other Technical Defects
Of all the things that can go awry in a deed, if you have to pick your poison, pray that your deed only suffers from sloppy work and inattention to detail. Frequently I see the names of one or more of the parties misspelled, or a date is missing, or the notary public signed the document but neglected to affix their stamp. These types of errors are certainly nothing to be proud of, as to the attorney or paralegal who prepared or handled the document, but thankfully these types of mistakes can be rectified by filing a simple explanatory affidavit with the office where the deed is recorded.
Failure to Properly Identify the Property being Conveyed, or Misidentifying It
Another one of my favorite tropes is “going from the absurd to the sublime.” Well, misspelling a buyer or a seller’s name in a deed is certainly an absurdity, but failing to identify the property being conveyed, or identifying the wrong property, now we get into the sublime, and a very bad sublime at that. If your deed is missing an adequate property description, or identifies the wrong property, you should stop off at the local courthouse on your way to the closing because you’ll need to. There are no shortcuts or “quick fixes” to resolving a problem of this magnitude. The buyer who received a deed with this fatal flaw will either have to track down the people that sold them the property and have them sign a corrective or confirmatory deed, or break open the piggy bank and hire a very good lawyer.
Tracking down the original sellers to execute a new deed isn’t always easy: sometimes they can’t be located, one or more of them may be deceased, they may have retired to the tropics, or they may not want to be bothered with it. My advice: avoid this misfortune like the plague.
Do you think this can’t happen? Just recently I reviewed a transaction where the title company involved was supposed to transfer a single lot in a new subdivision to the buyer and instead transferred the entire subdivision. Now what? The original buyer needs to transfer the subdivision back to the builder, the builder then needs to convey the single intended lot to the buyer, oh and let’s not forget the buyer’s mortgage (which mirrored the erroneous deed) encumbered the entire subdivision, that mortgage needs to be released and the mortgage then needs to be rewritten and re-recorded as to the single lot only. This process involves time, money, headaches and drama, all because the person who typed the deed wasn’t paying close enough attention to what they were doing. That’s all it takes, a moment of inattention, to plunge the parties to a real estate transaction into a true imbroglio.
Mistakes involving tenancies are pernicious — mainly because it’s like a game of Russian roulette, there may be a live round in the chamber or maybe just a blank. Sometimes a problem with the recited (or unrecited) tenancy costs you nothing, and sometimes it costs you plenty.
First off, what is a tenancy? A tenancy is the manner in which more than one party hold title to real estate. There are two major tenancies to be concerned with here: joint tenancy with rights of survivorship and tenancy in common.
A joint tenancy with rights of survivorship dictates that if two or more people hold title to real estate in this manner, and one of them dies, their share is automatically transferred to the survivor or survivors by operation of law. No probate or other court involvement is required to complete the transfer. All that must be done, eventually, is to record the death certificate of the deceased party with the recorder’s office. A joint tenancy with rights of survivorship is almost always desired between spouses and parties to civil unions and domestic partnerships, and persons in committed relationships.
A tenancy in common dictates that if two or more people hold title to real estate in this manner, and one of them dies, their share can only be transferred by a court of law in a process commonly known as “probate.” A tenancy in common is frequently desired between siblings and family members co-owning real estate, and investors.
What’s the difference, and what’s the big deal, you may ask? Well, if a couple in a committed relationship buys real estate together they may expect that if one of them dies, the survivor gets the deceased party’s share and then owns the entire property. And two brothers, or sisters, or investors, who buy a multi-family building to rent and earn income together, they may expect that if one of them die their interest doesn’t go to the survivor, it goes to the deceased party’s spouse and children or their favorite charity.
Here’s the kicker: if the attorney preparing the deed neglects to identify the tenancy, just blows it and doesn’t mention either one or the other, you may have already guessed it, a tenancy in common is presumed. Try this scenario on for size: two people in a committed relationship buy a home, the closing attorney commits a blunder and fails to recite the tenancy in their deed, and one of them dies, the survivor literally has to spend thousands of dollars in legal fees and court costs to recover the one-half share of the home that they should have received automatically. And they may have to fight with the legal heirs of the deceased party along the way. Just imagine losing someone that you really care about and winding up in a court battle with that annoying brother in law, just to get your own property!
Many times a gaffe of this nature turns out to be innocuous, because thankfully nobody dies, the hidden threat is never revealed and the property is successfully transferred to a new buyer down the road or the error is subsequently caught and remedied by recording a new deed.
How can we turn these bad deeds into good ones? I know of a real estate firm in Rochester NH where the agents are required to review the deeds at closing, and they do, they know that when lightning strikes down the road they’ll probably be the one who receives the first angry phone call. And yes I would encourage real estate agents to train themselves in the art of giving a deed the “once over” at closing. You may miss the solecism, but you may catch it and save your clients from experiencing a real problem down the road.
Finally I’ll conclude this article with a challenge to any real estate agent who is willing to accept it: Identify your last closing and locate the deed, either from your own file or obtain a copy from the recorder’s office. Take a good look at it — does it appear to cover all the bases? Is there something missing? Did they spell your client’s name correctly? Is there a tenancy recited? You may need to refer to the purchase and sale agreement or possibly the prior deed to know for sure. Regardless, the time to fix a broken deed is right now, and if the closing was recent enough getting a new deed signed will be easy as everyone is still “in the closing mood.”
So, while in the real world we may punish those who commit good deeds (sarcasm supplied), in real estate we honor and celebrate those conscientious real estate attorneys and paralegals who prepare accurate and mistake-free deeds. The only deeds that get punished in real estate are the bad ones.
Now go and escort a little old lady across a busy street! Go and do what we once called “your good deed for the day!”