Assume mortgage with transfer-on-death deed

Daughter worries bank will call loan due before she can find a job

DEAR BENNY: My mother died in February of this year. About a month before her death she executed a beneficiary deed leaving the home to me, her daughter. I was also the sole beneficiary of her will. She had no other assets (only debt) and so there was no probate.

My son and I have lived with her in this home for the past 18 years. I’ve been making payments since her death (she had them set up to be deducted from her checking account with the exception of her equity loan). I did not tell them of her passing, but she apparently requested information about refinancing just before her death and they found out.

Two months ago they sent a letter asking what her estate planned to do with the house. My attorney sent a letter indicating that her relatives would make a decision within 60 days. That time is almost up and I’m afraid they are going to take the house away from us.

As I’ve been unemployed since her death, I’m barely able to make the payments, but want to keep this house. I don’t think there is any way I can get financing on my own at this time. I was hoping to be able to just continue to make the payments, but I think they are going to want me to finance it in my name, which is not possible at the moment.

Can they just allow me to take over the payments and not get a new loan? If so, how do I go about making that happen? Just to be clear, she had a mortgage and an equity loan, and the payments are current on both and have never been late.

I’m desperate not to lose our home, but can’t see a way to keep this house unless they will allow me to take over payments and then hope that I get a job soon that will allow me to do that. I have some savings left to make the payments a while longer until I can find a job. –Ann

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DEAR ANN: There is a federal law on the books called the Garn-St. Germain Depository Institutions Act. Among its many provisions there is a section dealing with "due-on-sale clauses."

Such clauses are generally found in most deeds of trusts (mortgages). Basically, they state that if you sell your property, your borrower cannot assume your existing mortgage but must obtain one on his or her own. The objective was to prohibit buyers from taking over a very-low-interest-rate loan that the seller may have had.

However, the law spells out a number of situations in which lenders are specifically prohibited from exercising the due-on-sale clause. One such exception is where there is "a transfer to a relative resulting from the death of a borrower."

You can find a lot of information on the Internet, merely by typing in "due on sale" on your favorite search engine.

Tell your attorney to rely on this law, and tell the lender it has no right to call your loan.

DEAR BENNY: In a previous column, a homebuyer had a problem concerning a warranty he never got, and you gave him a few good ideas. I just do not understand why you did not instruct him to contact his lawyer who represented him at his closing. Is this not one of the reasons we have our own lawyer at closings? –Bill

DEAR BILL: You are referring to an earlier column where a reader had warranty issues with his developer. I did not instruct him to contact the lawyer who represented him at the closing for several reasons.

First, my column is carried in many papers throughout the United States, and settlement procedures differ from state to state.

In New York, for example, I understand that the settlement is often held in the office of the bank’s lawyer, although buyers are instructed to have their own attorney present also. In the Western U.S., the settlement is called "an escrow closing," and often there is no attorney present on either side.

And in many jurisdictions, such as Washington, D.C., or Maryland, where I practice law, settlements take place either in an attorney’s office or at a title insurance company where lawyers may not be present.

Clearly, however, if the buyer has his or her own attorney, and is comfortable with him, that attorney can be consulted on any warranty claims, or any other legal issue for that matter.

DEAR BENNY: Can you please tell me how to file a claim for property damage against a property that is in a land trust? The trees on that property have roots that are overgrown and have spread into my yard and destroyed the concrete. –Debra

DEAR DEBRA: All I know about "land trusts" is that they started in Illinois in an effort to hide the names of owners of commercial property. You will have to talk with an attorney in your state about how and where to file complaints.

However, the law in all states regarding tree roots and branches is that you have the absolute right to cut down branches overhanging on your property. You also have the right to chop off roots that are creeping onto your property.

You do not have the right to trespass on your neighbor’s property, however, to take this self-help.

The laws involving trees and damage to property differ dramatically throughout the country. Here’s a brief summary:

The Massachusetts rule: Even if damage is done to the neighbor’s property, that neighbor is limited to self-help. That is the exclusive remedy. Many judges have called this rule the "law of the jungle" because "self-help effectively replaces the law of orderly judicial process as the only way to adjust the rights and responsibilities of disputing neighbors."

The old Virginia rule. Until the Virginia high court reversed itself, the law there was that the injured landowner is limited to self-help "unless the encroaching tree or plant is noxious and causes actual harm to the neighboring property."

But several years ago, the Virginia court acknowledged that it was difficult to determine exactly what is meant by "noxious." Accordingly, the law in Virginia now states that if a neighbor’s tree causes actual harm or poses an imminent danger of harm to an adjoining owner, the tree owner maybe held responsible.

The Restatement rule: The American Law Institute — a prestigious organization composed of lawyers, judges and professors — periodically issues "Restatements of Law" on various topics. While such statements are not legally binding on the courts, they do assist lawyers and judges in understanding and interpreting cases.

The Restatement of Torts, promulgated in 1979, determined that the tree owner has an obligation to control encroachments when vegetation is artificial — i.e., planted or maintained by a person — but not when the encroachment is natural.

In other words, if you planted your tree, and it causes damage to your neighbor, you may be financially responsible for this damage.

Most states rejected this theory, simply because it is often impossible to determine whether a tree is "artificial" or "natural." If you just moved into your new home, you have absolutely no way of knowing the origin of your trees.

The Hawaii rule: In 1981, the high court in Hawaii further modified the self-help rule. Normally, said the court, living trees and plants are not nuisances. While it may be an inconvenience for the neighbor if the trees next door cast shade, or drop leaves, flowers or fruit, this is not actionable at law.

However, "when they cause actual harm or pose an imminent danger of actual harm to adjoining property," the neighbor may require the tree owner to pay for the damage and to cut back the endangering branches or roots. And if this is not done within a reasonable period of time, the neighbor "may cause the cutback to be done at the tree owner’s expense."

The current trend seems to be following the new Virginia rule, but you have to consult your own attorney to determine what the law is in your jurisdiction.

DEAR BENNY: I was widowed last year and have decided to move to another state where my daughter lives. I have put my house up for sale. I don’t owe anything on it. Unfortunately, I found my perfect house in the other state and signed a contract to buy it before mine is sold.

I am 62. I have savings and some investments but am hoping not to drain those. My house is not selling fast enough to keep me from worrying myself to death. If it doesn’t sell by the time I close on the new house, what would be the best thing for me to do? When the contract with my real estate agent expires, should I advertise it as rent to own or lease to own, or what? –Judith

DEAR JUDITH: I assume you can afford to buy the new house without having to sell your present one. If that’s the case — and if you are satisfied with the activities of your real estate agent — I would continue to advertise the house. But I would consider advertising it either (a) renting it out (with or without an option to buy) or (b) for sale.

From my experience, if possible, it’s always nice to be able to buy another property before selling your current one. This gives you flexibility to fix up the new place without having to move all of your furniture and belongings immediately into the new place.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

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