It's in each party's interest to wrap up property issues during the divorce and not wait till after, when things can get a lot more complicated.
"Doing the deed: Some property-related tips for divorcing couples"
By Adam Whiteman
Real Property - November 2017
Making sure the family house gets properly transferred in a divorce should be high on every lawyer's to-do list, according to Adam Whiteman in the November Real Property newsletter. This means seeing to it that "the property gets quitclaimed and recorded as necessary and…the mortgage is refinanced or…some other agreement is put in place to remove the non-owning spouse from any mortgage that encumbers the property," he writes. Waiting till the divorce is over is asking for trouble, for reasons he explains in depth.
Here are a few of his tips for lawyers on either side of the transfer.
When you represent the spouse receiving the house -
See that the deed is transferred while the case is underway. "It is very difficult to get the opposing party to sign a quitclaim deed to you after the case is closed, and it can be time-consuming and costly to bring the matter back into court."
Likewise, "try to avoid clauses [in the marital settlement agreement] that require the parties to sell property and split the proceeds after the divorce is finalized," Whiteman writes. "This is a recipe for trouble." One of the parties may die or subsequently decide not to sell, he writes. "Try to creatively address these issues [while the divorce is pending] by refinancing and paying off one spouse, or by crediting one spouse based on an agreed value."
Make sure the marital settlement agreement matches the deed. Start by examining the deed and not relying on the client's description of how the property is titled, Whiteman writes. "A mistake I have seen is where the parties wanted to 'keep their property in joint tenancy,' and that is the way the divorce attorney drafted the marital settlement agreement," Whiteman writes. The problem: They actually held the property as tenants by the entirety. When the husband died, "[t]he estate claimed that under Illinois law, the effect of a divorce in Illinois is to convert a tenancy by the entirety deed to a tenancy in common and that the estate, therefore, owned a 50 percent interest in the property."
Refinance and get the ex's name off the mortgage. Your client "may be tempted to keep the old mortgage and just keep making payments thinking that [his or her] name is on the deed and that is all that matters." That's a bad idea for many reasons, Whiteman writes.
For example, "if your ex goes bankrupt [and is still on the mortgage], you might not be able to sell your property until you or your lender file a motion in bankruptcy court to have the bankruptcy stay lifted with regard to the property." And if you have to do a short sale, "your lender may require that your ex (whose name is still on the mortgage) sign certain documents relating to the short sale or prove that their assets should not be considered for purposes of the short sale approval process."
Even with a conventional sale, "your title company (or the buyer's attorney) might demand that your ex sign a document waiving any potential homestead rights," Whiteman writes.
When you represent the transferring spouse -
Get his or her name off the deed. If your client balks, explain it this way: "[I]f a property tax bill is due, you are liable for it," Whiteman writes. "If someone slips and falls on the property, you can be sued. If a gas or water bill needs to be paid, get out your checkbook. If your ex stops making mortgage payments and a foreclosure case is commenced, you will be named as a party."
Likewise for the note and mortgage. As an ex-spouse, even when your name is off the deed, "if your name is still on the note and/or mortgage after the divorce, you are still liable for the debt. The bank will not care that you got divorced…. Also, your old note and mortgage with your ex may affect your credit and your ability to obtain a new mortgage on different property," Whiteman writes.
Fred A. Joshua | FRED A. JOSHUA, P.C.
Divorce Lawyer, Child Custody
Serving Homer Glen, IL and surrounding areas
Telephone: 312 912 9800 | Fax: 312 256 2066