Q: I've heard that there is a federal statute that may have an effect upon the way restrictions are disclosed in a title policy or commitment. Can you tell me what statute that is, what the effect of its provisions are and what I should do?
S.H.
South Hadley, Massachusetts
A: The statute you are referring to is Title 42 USC §3604. That statute, in addition to prohibiting discrimination based upon a number of factors, also makes it unlawful to "make, print, publish, or cause to be made, printed or published any notice, statement or advertisement, with respect to the sale or rental of a dwelling to any person because of race, color, religion, sex, handicap, familial status, or national origin." The United States Department of Justice has interpreted this statute to mean that title companies are prohibited from either providing copies or reflecting as exceptions in title commitments, preliminary reports or policies, restrictive covenants that are in violation of the statute.
In light of this interpretation it would be wise, when taking exceptions for restrictions in the chain of title, to include the following language at the end of the exception: "...but excluding any covenant, condition or restriction indicating a preference, limitation or discrimination based on race, color, religion, sex, handicap, familial status, or national origin to the extent such covenants, conditions or restrictions violate Title 42 USC §3604(c)." Although the foregoing language would not be required if no violative restrictions were included in the recorded instruments, the language is highly recommended so as not to incur liability for missing or misinterpreting any such restrictions. Similar language should be written on restrictions that are provided to the customer.
Gary F. Casaly,
Vice President and
Regional Counsel,
Boston, Massachusetts.
Q: I am examining a title in which record title is held by a husband and wife. The husband has filed for a Chapter 7 Bankruptcy and the Trustee is trying to sell the property free and clear of all liens. I'm now informed that the husband (debtor) has died. What is the effect and can the sale go through?
Anonymous NJ Agent
A: In New Jersey, as in many states, a husband and wife hold title as tenants by the entireties. Historically the theory is that the "entity" of the marriage holds title. A simplified analysis, however, would be that both spouses have a life estate for their own life together with a contingent remainder. The contingency is that they outlive their spouse and then, at the death of a spouse, become the sole owner of the property. This analysis, incidentally would also apply to joint tenancies with the right of survivorship and, possibly in some states, to certain marital estates.
The Trustee in Bankruptcy (under the Bankruptcy Code, and unlike the old Bankruptcy Act) does not take title to the assets of a debtor but only administers them for the benefit of the creditors. In order to sell the assets, whether free and clear of liens or otherwise, the asset must be subject to the jurisdiction of the court, i.e., be an asset of the estate.
Since the debtor's interest in this property terminates upon his death, the bankruptcy estate has no further interest in this asset and can NOT sell the property. Also under New Jersey law, it appears the surviving spouse takes the property free of all claims against the deceased debtor's now-terminated interest.
If both spouses were joint debtors, the Bankruptcy Trustee could, of course, sell the property.
Frank Melchior,
Vice President and
Associate Regional Counsel,
Iselin, New Jersey
Q: Does a recorded state tax lien levied only against a husband attach to real property held by a husband and wife as tenants by the entirety?
E.L.
Honolulu, HI
A: The answer depends on the state law where property is located. Tenancies by the entirety are generally of four types, to be found in approximately 21 states and the District of Columbia. However, in this case, involving Hawaii property, the lien against one spouse does not attach to property held as tenants by the entirety.
Richard Flory,
Vice President and
Assistant Senior Underwriter,
Santa Ana, California
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