Title Changes After Closing – Key Considerations To Be Evaluated With Counsel

Clients occasionally express a desire to alter the way a property title is held, whether it involves adding a significant other, engaging in estate planning, or transferring title to an entity. What considerations should be considered when making such choices?

1.     Legal Implications: Consult with counsel to assess the legal implications of the proposed change in ownership interest. Consider potential consequences, including legal implications and alignment with overall estate planning goals.

2.     Creditors of the Acquiring Entity/Individual: Consider the financial history of the person or entity acquiring the ownership interest. If they have creditors, there is a risk that these creditors may attempt to place liens or potentially even foreclosure on the property to satisfy outstanding their outstanding judgments.

3.     Risk to Title Insurance Policy: Consider the possibility of invalidating the owner’s title insurance policy. Closing with a title company provides insurance that the new owner holds clear title. However, in certain situations, changing how title is held can invalidate the title insurance policy. 

4.     Involvement of a Lender: Is there a current mortgage on the property? Mortgage documents typically include a provision requiring the owner to obtain written permission from the lender before conveying any interest in title. Failure to secure this approval may lead to the lender declaring the borrower in default of the mortgage. A declaration of default may lead to foreclosure.

5.     Associated Costs: Beyond deed preparation and recording fees, there may be additional costs related to compliance with municipal requirements for recording the deed. Explore and confirm these costs with counsel.