If you are a homeowner in Massachusetts, you are entitled to the protections afforded by a Declaration of Homestead. A Declaration of Homestead is filed at the Registry of Deeds in the county where the property is located, and allows homeowners to protect up to five hundred thousand dollars ($500,000) of the value of their primary residence, per family, against any attachment, levy, execution or sale to satisfy debts arising subsequent to the date of the Homestead filing. Any owner occupying a home as a principal residence may file for the Homestead protection. Presently, only one owner may file a Homestead, though if you are married and own the property with your spouse as tenants by the entirety, both spouses and family members receive the benefit of the Homestead protection.
Certain claims are exempt from the Homestead Law. Matters against which a Homestead will not protect include (a) federal, state and local taxes and other liens; (b) mortgages used to purchase the home; (c) orders for payment of spousal or child support; (d) judgments based upon fraud, mistake, duress, undue influence or lack of capacity; and (e) debts contracted prior to the acquisition of the Homestead.
Under the current Homestead law, there are certain questions whose answers are not clear. May a person who owns a home in Trust file a homestead? If a homeowner refinances a first mortgage, is the Homestead terminated? Why is the Homestead available to only one homeowner?
A bill is currently pending in the Massachusetts legislature which would provide the answers to these questions. If the pending bill is passed, it will automatically protect up to $125,000 of equity protection to all homeowners, whether or not a Declaration of Homestead is filed. A filing will continue to protect up to $500,000 in home equity. The Bill will also allow both spouses to file, even if only one spouse is on the title to the house. The Bill would specifically permit filings on homes owned in Trust and protect beneficiaries of trusts which hold title to their principal residence. Finally, the Bill would prohibit mortgage lenders from requiring the release of a homestead in order to secure a refinancing mortgage and will verify that any language in a mortgage purporting to terminate a Homestead will be construed not as a termination of Homestead rights, but as a subordination of those rights to the lender. Stay tuned for the outcome of the vote on this bill.
A Declaration of Homestead is an easy way to protect the equity in your home, but it must be filed for you to have the protections. If you are unsure whether you have a Declaration of Homestead on file, it is simple both to verify and to file as needed.
Showing posts with label title. Show all posts
Showing posts with label title. Show all posts
Saturday, April 25, 2009
Tuesday, December 2, 2008
Do I REALLY need that owners title insurance policy?
I am often asked by home buyers whether they really need to buy owners title insurance. The answer is an unequivocable "absolutely". I know insurance is one of those products that people love to hate—you spend a lot of money on something you hope you will never need, but isn’t that the point? Owners title insurance provides a whole lot of protection on the most valuable investment most people will make in their lives. The premium is paid only one time, at the purchase of the policy, and the protection remains in effect, with an inflation factor on the coverage, for as long as you own the home. Not such a bad deal.
So what does owners title insurance cover? In my view the most important thing it insures against is human error. In preparing for a purchase, a title search will be done at the registry of deeds. Said registry of deeds is run by humans, and errors in the indexing of documents are inevitable. If a name is misspelled, or some other irregularity occurs as a document is input into the system, it may not thereafter show up in a chain of title search. Among other things, title insurance protects against many defects in title that a proper registry search would not reveal.
The benefit of owners title insurance is more often not that it indemifies for a loss, but rather that it provides "costs of defense" in the event of a claim. In truth, most title defects are fixable, and it is rare that a property owner experiences a total loss of title. Costs of defense means that if an insured defect in your title is discovered, the title insurance company will step in and take the responsibility to cure it. One of the most common uses of title insurance is the situation when you are about to sell your house, and a few days before closing you are notified that an old mortgage from a prior owner in the chain of title was never discharged, or that the discharge was in some manner defective. Without owners title insurance, odds are the closing will get postponed while you scramble to track down a lender who may have merged 4 times since the original transaction in order to get the correct discharge. If you have an owners policy, on the other hand, in most cases your title insurer will agree to indemnify the new buyer, lender and title insurance company and clean up the problem, without any delay in closing.
Title insurance companies have developed several different levels of policy coverage, and they do vary somewhat among the companies. In addition to insuring clear title, the standard owners policy insures against (a) forgeries in documents; (b) incompetency or incapacity of a signatory; (c) missing signatures; (d) undisclosed (but recorded) prior mortgages, liens, easements or restrictions; (e) errors in legal descriptions; (f) lack of a right of access; and
(g) deeds not properly recorded.
"Extended" or "enhanced" policies, which are available for about 10% more, also cover against such additional defects (depending on the policy) as: (a) off-record matters, such as claims for adverse possession or prescriptive easements; (b) encroachments; (c) off-record liens such as mechanics' or estate tax liens; (d) certain violations of land use (subdivision and zoning) laws; and (e) certain post-policy occurrences.
The loan policy that you will be required to purchase for your lender as part of your closing costs does not provide you as owner with any protection, so don’t be fooled. You need your own owners policy. If you purchase both the loan and owners policies simultaneously, the combined premium is discounted from the total amount which would be paid if they were purchased separately. Premiums are calculated at a fixed dollar amount per thousand of coverage, and in Massachusetts the premiums at present are the same among all title insurance companies.
So the next time you are buying a property and are asked whether you want the owners title insurance coverage, say yes. Don’t be "penny wise and pound foolish" and use this opportunity as a place to save on closing costs. Be sure to include the owners policy premium when calculating your probable total purchase expenses, and do the smart thing and buy the owners policy. Yes, it is one of those products that you hope you never need, but if it turns out you do need it and did not get it, you will be sorry.
So what does owners title insurance cover? In my view the most important thing it insures against is human error. In preparing for a purchase, a title search will be done at the registry of deeds. Said registry of deeds is run by humans, and errors in the indexing of documents are inevitable. If a name is misspelled, or some other irregularity occurs as a document is input into the system, it may not thereafter show up in a chain of title search. Among other things, title insurance protects against many defects in title that a proper registry search would not reveal.
The benefit of owners title insurance is more often not that it indemifies for a loss, but rather that it provides "costs of defense" in the event of a claim. In truth, most title defects are fixable, and it is rare that a property owner experiences a total loss of title. Costs of defense means that if an insured defect in your title is discovered, the title insurance company will step in and take the responsibility to cure it. One of the most common uses of title insurance is the situation when you are about to sell your house, and a few days before closing you are notified that an old mortgage from a prior owner in the chain of title was never discharged, or that the discharge was in some manner defective. Without owners title insurance, odds are the closing will get postponed while you scramble to track down a lender who may have merged 4 times since the original transaction in order to get the correct discharge. If you have an owners policy, on the other hand, in most cases your title insurer will agree to indemnify the new buyer, lender and title insurance company and clean up the problem, without any delay in closing.
Title insurance companies have developed several different levels of policy coverage, and they do vary somewhat among the companies. In addition to insuring clear title, the standard owners policy insures against (a) forgeries in documents; (b) incompetency or incapacity of a signatory; (c) missing signatures; (d) undisclosed (but recorded) prior mortgages, liens, easements or restrictions; (e) errors in legal descriptions; (f) lack of a right of access; and
(g) deeds not properly recorded.
"Extended" or "enhanced" policies, which are available for about 10% more, also cover against such additional defects (depending on the policy) as: (a) off-record matters, such as claims for adverse possession or prescriptive easements; (b) encroachments; (c) off-record liens such as mechanics' or estate tax liens; (d) certain violations of land use (subdivision and zoning) laws; and (e) certain post-policy occurrences.
The loan policy that you will be required to purchase for your lender as part of your closing costs does not provide you as owner with any protection, so don’t be fooled. You need your own owners policy. If you purchase both the loan and owners policies simultaneously, the combined premium is discounted from the total amount which would be paid if they were purchased separately. Premiums are calculated at a fixed dollar amount per thousand of coverage, and in Massachusetts the premiums at present are the same among all title insurance companies.
So the next time you are buying a property and are asked whether you want the owners title insurance coverage, say yes. Don’t be "penny wise and pound foolish" and use this opportunity as a place to save on closing costs. Be sure to include the owners policy premium when calculating your probable total purchase expenses, and do the smart thing and buy the owners policy. Yes, it is one of those products that you hope you never need, but if it turns out you do need it and did not get it, you will be sorry.
Wednesday, November 19, 2008
Tip for Real Estate Practitioners in Middlesex County
If you are a practitioner in Greater Boston handling transactions in cities and towns whose land records are maintained at the Middlesex North Registry of Deeds in Lowell (Billerica, Carlisle, Chelmsford, Dracut, Dunstable, Lowell, Tewksbury, Tyngsborough, Westford and Wilmington), you will be happy to know that you no longer have to travel up to Lowell to record your closing documents for recorded land. Effective November 3, 2008, the recording counter at the Middlesex South Registry of Deeds in Cambridge will accept in-person land recordings for the North Middlesex District. This does not pertain to registered land documents or plans, but this new convenience is likely to save you at least a few trips north each year.
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