Say Person A and Person B have a piece of property in both their names. The property is owned free and clear.
Person C decides to sue Person A over a civil matter. Person C does not name Person B in the suit.
If Person C wins their case against A then how does that effect the property and Person B's rights to the property?
Does that make sense?
Posted by fugu13 (Member # 2859) on :
I can already sketch the basics:
It'll depend, particularly on the jurisdiction in question.
Consult a local lawyer.
Posted by pooka (Member # 5003) on :
I'm not a lawyer of any kind, but my understanding is that person B is not protected from losing everything co-owned with A.
Posted by David G (Member # 8872) on :
Assuming you are inquiring about real property (as opposed to personal property):
If A and B are married, and the property is titled in A and B as "tenants by the entirety," then any judgment awarded to C would not be a lien against the property. In that case, neither A's nor B's interest in the property would be affected.
However, if the property is titled in A and B as "joint tenants" or "tenants in common," then C may obtain a lien against A's interest in the property. Technically, that would not affect B's interest in the property. But C may be able to enforce the lien on A's interest by seeking to have a court "partition" the property. That could result in a sale of the property, with B being paid for his or her interest from the proceeds of sale.
(Note: This is not necessarily the law in all jurisdictions.)
Posted by Wendybird (Member # 84) on :
Thanks David - just so I understand properly - if A and B are married then C can't force the sale of the property but if A and B are not married then C can force a sale of the property? Is this also true in community property states?
Posted by Goody Scrivener (Member # 6742) on :
(real estate legal secretary here, this is not legal advice but just my understanding based on 6 years' employment)
Just because A and B are married does not automatically mean that title is held as "tenants by the entirety". Husband and wife can still hold title as tenants in common or joint tenancy if they choose. However, T by E can only apply if married.
We always recommend that married couples transfer title from themselves as T in C to themselves as T by E if not already held that way because of the protection from claims against one party.
But David's also right that a court can order partition if liquidating the property is the only way that a party can redeem a lien. If this happens, Party B will receive a portion of the proceeds of sale based on their interest in the property, then whatever's left goes toward paying the lien held on Party A's portion. If Party A's portion exceeds the value of the lien, then Party A receives the remainder and the lien is waived. If it's not sufficient, Party A gets no cash from sale and the lien stays valid until paid in full.
Posted by David G (Member # 8872) on :
Wendybird - I believe that the law may be different in community property states, and even may change in some respects among jurisdictions that are not community property states. So you really should check with a lawyer in the state where the property is located. I do not know what happens in a community property state.
In non-community property states, I agree with Goody Scrivener: Generally (and unless a particular jurisdiction has a different law), If A and B are married, AND the deed evidences their intent that the property be owned as "tenants by the entirety," then a creditor of A cannot force the sale of the property. However, if A and B are not married, or they are married but the deed does not designate ownership as "tenants by the entirety," then a judgment creditor may be able to force a sale or division of the property.
Posted by David G (Member # 8872) on :
I am having second thoughts about whether the deed actually has to designate ownership as "tenants by the entirety" for property to be deemed owned as "tenants by the entirety." The common law talks about the "five unities" of title, estate, time, possession, and marriage. Unfortunately, I don't have the time to unpack all of that right now.
Posted by Wendybird (Member # 84) on :
Okay - we are contacting an attorney but I thought I'd see what you guys thought. So the best way to protect the property is put it soley in person B's name OR make sure the deed states Tenants by the entirety?
Posted by Dagonee (Member # 5818) on :
Just make sure you tell the attorney about whatever is making you think that Person A will be subject to a claim. Transfers that can be interpreted as intended to foil creditors need to be done very carefully to be effective.
Posted by David G (Member # 8872) on :
Yes, but... Depending upon the circumstances, if A conveys her interest to B or re-titles property, thereby rendering A insolvent or with the intent to defraud creditors, then A (and possibly B) may face potential "fraudulent conveyance" claims. This is a whole other complicated set of issues that you may need to consult with an attorney about.
(Edited to Add: I am responding to Wendybird's post. Dagonee beat me to the punch.)
[ August 29, 2007, 02:12 PM: Message edited by: David G ]