(1) Joint tenancy, tenancy by the entirety, life estate, or determinable or conditional interest in real estate may be terminated by an affidavit that: (a) meets the requirements of Subsection (2); and (b) is recorded in the office of the recorder of the county in which the affected property is located. (2) Each affidavit required by Subsection (1) shall: (a) cite the interest that is being terminated; (b) contain a legal description of the real property that is affected; (c) reference the entry number and the book and page of the instrument creating the interest to be terminated; and (d) if the termination is the result of a death, have attached as an exhibit, a copy of the death certificate or other document issued by a governmental agency as described in Section 75-1-107 certifying the death. (3) The affidavit required by Subsection (1) may be in substantially the following form: “Affidavit State of Utah County of ___________) I, (name of affiant), being of legal age and being first duly sworn, depose and state as follows: (The name of the deceased person), the decedent in the attached certificate of death or other document witnessing death is the same person as (the name of the deceased person) named as a party in the document dated (date of document) as entry _______ in book _______, page _______ in the records of the (name of county) County Recorder. This affidavit is given to terminate the decedent’s interest in the following described property located in ___________________ County, State of Utah: (description of the property). Dated this ______ day of ___________________, ________. _____________________________________ (Signature of affiant) Subscribed to and sworn before me this _______ day of ______________, _________. _____________________________________
Utah Real Estate Code 57-1-5.1 Termination of an interest in real estate – Affidavit.
Priority, Termination of the Mortgage, and Other Methods of Using Real Estate as Security
Priorities in Real Property Security — Secured Transactions and Suretyship — it is important for a creditor to perfect its secured interest in the goods put up as collateral. Absent perfection, the creditor stands a chance of losing out to another creditor who took its interest in the goods subsequent to the first creditor. The same problem is presented in real property security: the mortgagee wants to make sure it has first claim on the property in case the mortgagor (debtor) defaults.
General Rule of Priorities
The general rule of priority is the same for real property security as for personal property security: the first in time to give notice of the secured interest is first in right. For real property, the notice is by recording the mortgage. Recording is the act of giving public notice of changes in interests in real estate. Recording was created by statute; it did not exist at common law. The typical recording statute calls for a transfer of title or mortgage to be placed in a particular county office, usually the auditor, recorder, or register of deeds. A mortgage is valid between the parties whether or not it is recorded, but a mortgagee might lose to a third party—another mortgagee or a good-faith purchaser of the property—unless the mortgage is recorded.
Exceptions to the General Rule
There are exceptions to the general rule; two are taken up here.
• Fixture Filing: The fixture-filing provision in Article 9 of the UCC is one exception to the general rule. As noted in Chapter 16 “Secured Transactions and Suretyship”, the UCC gives priority to purchase-money security interests in fixtures if certain requirements are met
• Future Advances: A bank might make advances to the debtor after accepting the mortgage. If the future advances are obligatory, then the first-in-time rule applies. For example: Bank accepts Debtor’s mortgage (and records it) and extends a line of credit on which Debtor draws, up to a certain limit. (Or, as in the construction industry, Bank might make periodic advances to the contractors as work progresses, backed by the mortgage.) Second Creditor loans Debtor money—secured by the same property—before Debtor began to draw against the first line of credit. Bank has priority: by searching the mortgage records, Second Creditor should have been on notice that the first mortgage was intended as security for the entire line of credit, although the line was doled out over time. However, if the future advances are not obligatory, then priority is determined by notice. For example, a bank might take a mortgage as security for an original loan and for any future loans that the bank chooses to make. A later creditor can achieve priority by notifying the bank with the first mortgage that it is making an advance.
Termination of the Mortgage
The mortgagor’s liability can terminate in three ways: payment, assumption (with a novation), or foreclosure.
Unless they live in the home for twenty-five or thirty years, the mortgagors usually pay off the mortgage when the property is sold. Occasionally, mortgages are paid off in order to refinance. If the mortgage was taken out at a time of high interest rates and rates later drop, the homeowner might want to obtain a new mortgage at the lower rates. In many mortgages, however, this entails extra closing costs and penalties for prepaying the original mortgage. Whatever the reason, when a mortgage is paid off, the discharge should be recorded. This is accomplished by giving the mortgagor a copy of, and filing a copy of, a Satisfaction of Mortgage document.
The property can be sold without paying off the mortgage if the mortgage is assumed by the new buyer, who agrees to pay the seller’s (the original mortgagor’s) debt. This is a novation if, in approving the assumption, the bank releases the old mortgagor and substitutes the buyer as the new debtor. The buyer need not assume the mortgage. If the buyer purchases the property without agreeing to be personally liable, this is a sale “subject to” the mortgage. In the event of the seller’s subsequent default, the bank can foreclose the mortgage and sell the property that the buyer has purchased, but the buyer is not liable for any deficiency. Banks, of course, would prefer not to allow that when interest rates are rising, so they often include in the mortgage a due-on-sale clause, by which the entire principal and interest become due when the property is sold, thus forcing the purchaser to get financing at the higher rates. The clause is a device for preventing subsequent purchasers from assuming loans with lower-than-market interest rates. When interest rates are low, banks have no interest in enforcing such clauses, and there are ways to work around the due-on-sale clause.
The third method of terminating the mortgage is by foreclosure when a mortgagor defaults. Even after default, the mortgagor has the right to exercise his equity of redemption—that is, to redeem the property by paying the principal and interest in full. If he does not, the mortgagee may foreclose the equity of redemption. Although strict foreclosure is used occasionally, in most cases the mortgagee forecloses by one of two types of sale. The first type is judicial sale. The mortgagee seeks a court order authorizing the sale to be conducted by a public official, usually the sheriff. The mortgagor is entitled to be notified of the proceeding and to a hearing. The second type of sale is that conducted under a clause called a power of sale, which many lenders insist be contained in the mortgage. This clause permits the mortgagee to sell the property at public auction without first going to court—although by custom or law, the sale must be advertised, and typically a sheriff or other public official conducts the public sale or auction. Once the property has been sold, it is deeded to the new purchaser. In about half the states, the mortgagor still has the right to redeem the property by paying up within six months or a year—the statutory redemption period. Thereafter, the mortgagor has no further right to redeem. If the sale proceeds exceed the debt, the mortgagor is entitled to the excess unless he has given second and third mortgages, in which case the junior mortgagees are entitled to recover their claims before the mortgagor. If the proceeds are less than the debt, the mortgagee is entitled to recover the deficiency from the mortgagor. However, some states have statutorily abolished deficiency judgments.
Deed of Trust
The deed of trust is a device for securing a debt with real property; unlike the mortgage, it requires three parties: the borrower, the trustee, and the lender. Otherwise, it is at base identical to a mortgage. The borrower conveys the land to a third party, the trustee, to hold in trust for the lender until the borrower pays the debt. (The trustee’s interest is really a kind of legal fiction: that person is expected to have no interest in the property.) The primary benefit to the deed of trust is that it simplifies the foreclosure process by containing a provision empowering the trustee to sell the property on default, thus doing away with the need for any court filings. The states using the deed of trust system are as follows: Alabama, Alaska, Arkansas, Arizona, California, Colorado, District of Columbia, Georgia, Hawaii, Idaho, Iowa, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, North Carolina, Oklahoma, Oregon, Rhode Island, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. But the deed of trust may have certain disadvantages as well. For example, when the debt has been fully paid, the trustee will not release the deed of trust until she sees that all notes secured by it have been marked canceled. Should the borrower have misplaced the canceled notes or failed to keep good records, he will need to procure a surety bond to protect the trustee in case of a mistake. This can be an expensive procedure. In many jurisdictions, the mortgage holder is prohibited from seeking a deficiency judgment if the holder chooses to sell the property through non-judicial means.
Installment or Land Contract
Under the installment contract or land contract, the purchaser takes possession and agrees to pay the seller over a period of years. Until the final payment, title belongs to the seller. The contract will specify the type of deed to be conveyed at closing, the terms of payment, the buyer’s duty to pay taxes and insure the premises, and the seller’s right to accelerate on default. The buyer’s particular concern in this type of sale is whether the seller in fact has title. The buyers can protect themselves by requiring proof of title and title insurance when the contract is signed. Moreover, the buyer should record the installment contract to protect against the seller’s attempt to convey title to an innocent third-party purchaser while the contract is in effect. The benefit to the land contract is that the borrower need not bank-qualify, so the pool of available buyers is larger, and buyers who have inadequate resources at the time of contracting but who have the expectation of a rising income in the future are good candidates for the land contract. Also, the seller gets all the interest paid by the buyer, instead of the bank getting it in the usual mortgage. The obvious disadvantage from the seller’s point is that she will not get a big lump sum immediately: the payments trickle in over years (unless she can sell the contract to a third party, but that would be at a discount).
Termination of Easements
Easements can be terminated via a variety of methods. The first and easiest is expiration, when the easement terminates once the time period for the easement’s existence lapses.
The second method of termination is unity of ownership, also known as the merger doctrine. Under this doctrine, when the dominant and servient estates come under common ownership and possession, the easement terminates.
Third, an easement can terminate via release where the holder of the easement provides the holder of the servient tenement with a deed of release. To be enforceable, a deed of release for an easement must include the names of the grantor and grantee, the date of execution, a description of the land with the easement, and the operative release language (such as “the easement is hereby released”).
The fourth way to extinguish an easement is through abandonment. Abandonment requires physical action and clear intent by the easement holder to permanently abandon the easement. This can be implied by conduct. For example, if someone has an easement to use a shortcut over someone else’s property but builds a wall that blocks off the path over which he has the easement, he could be said to have abandoned the easement.
A fifth process for termination is peculiar to an easement by necessity. Such an easement will terminate once the necessity ends. Let’s assume that Jane lives on a parcel of land that is blocked on all sides without access to the single major roadway servicing her neighborhood. An easement by necessity arises to allow her to cross one of his neighbor’s parcels of land to access the major roadway. This is because Jane has no practical way to access the roadway. Years after the easement by necessity arises, the municipality builds a new roadway that Jane can access more easily. Once the new roadway can be easily used and accessed, the easement by necessity terminates because Jane’s easement ceases to be necessary. Condemnation (which means government takeover) of the servient estate and involuntary destruction of the servient estate also extinguish all easements. A 1918 case illustrated this latter method of easement termination. A building owner granted a right-of-way easement over a stairway to his neighbor in an adjoining building. A month later, the building caught fire due to an electrical malfunction and was destroyed. The building owner rebuilt the building, but decided not to rebuild the stairway. The court held that the easement was terminated when the building caught on the fire and the building owner was not obligated to rebuild the stairway for the neighbor. Easements are a critical component of real estate law. Understanding the basics of their operation can help property owners better structure their requests to use the land of another, even if for a short-term or limited purpose.
Terminating a Joint Tenancy
A joint tenancy is a form of joint possession of real property. Joint tenancy is similar to tenancy in common in that certain rights and duties come with joint tenancy, but joint tenancy includes a right of survivorship. A right of survivorship means that if a joint tenant dies, their interest in the land passes to the other joint tenant(s). The surviving joint tenant(s) have a right to the whole estate. Thus, when a joint tenant dies, they may not pass their share on to their heirs. Joint tenants are entitled to possess and use the entire property, even though they only own a share of it.
In order for a joint tenancy to exist, four conditions, or unities, must be met:
• All tenants acquired the property at the same time
• All tenants have an equal interest in the property
• All tenants acquired title by the same deed or will
• All tenants have an equal right to possession
If any one of the four unities has not been met, or if it is unclear whether a joint tenancy has been formed, most courts will presume that the more favored tenancy in common has been formed.
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