THE LAW OFFICES OF
DAVID CARNEY

Frequently Asked Questions

How can two or more persons hold "title" to real estate?

Tenants in Common, Joint Tenants, or in Massachusetts only, Tenants by the Entirey.

• With tenants in common - there is no right of survivorship.
• When title is held as joint tenants or tenants by the entirey, the title automatically passes to the surviving owner(s) without the necessity to probate estate of deceased.

Difference between joint tenants and tenants by the entirety: Under M.G.L. Chapter 209 Sec. 1, : the interest of a debtor spouse in property held by the entirety shall not be subject to seizure or execution by a creditor of such debtor spouse so long as such property is the principal residence of the non-debtor spouse. However, both spouses shall be liable jointly for debts incurred on account of necessaries furnished to either spouse.

Who can perform a closing in Massachusetts?

The Colonial Title decision and Section 6(k) of Executive Order No. 455 has determined that "a notary public who is not an attorney licensed to practice law in Massachusetts shall not conduct a real estate closing and shall not act as a real estate closing agent.

What are the implications of the Patriot Act?

As settlement agents for purchases, we are now required to check both buyers and sellers names against a searchable database to see if they are on a list of persons involved or potentially involved in terrorist activities.

What is a 1031 Tax-Deferred Exchange?

A tax-deferred exchange is an approved method of selling investment properties and acquiring one or more like-kind properties without paying any federal capital gains taxes whatsoever. Most states allow favorable capital gains tax treatment.

When such an exchange meets the criteria of the Internal Revenue Code Section 1031 and the regulations promulgated by the IRS, the taxes are deferred until sometime in the future. For investments held by individuals, the deferral can continue through any number of exchanges until the tax liability is extinguished by death.

What are the Laws regarding Prepayment Penalties?

MASSACHUSETTS

Chapter 183: Section 56 Mortgage notes; provisions for prepayment Section 56. Any mortgage note secured by a first lien on a dwelling house of three I less separate households occupied or to be occupied in whole or in part by the mortgage shall be subject to the condition that if said note is paid before the date fixed for payment any additional amount required to be paid in such event shall be an amount which should be the balance of the first year's interest or three months' interest whichever is less; except, that if anticipatory payment is made within thirty-six months from the date of note for the purpose of refinancing such loan in another financial institution, an additional payment not in excess of three months' interest may be required; provided, however, with respect to any such mortgage loan insured by the Federal Housing Commission the mortgagor may be required to reimburse the mortgagee to the full amount of any charges, premiums, or fees required by any statute or by any regulation of the Federal Housing Administration to be paid by the mortgagee upon payment of such note befe the date fixed for payment.

NEW HAMPSHIRE

There is no comparable statute that governs prepayment penalties in New Hampshire. The only applicable provision as follows:

Section 397-A:15

397-A:15 Borrower's Rights.

I. A borrower may pre-pay a first mortgage loan, in whole or in part, any time. Partial prepayments of principal shall be applied on the due date of the next regularly scheduled payment. Prepayments in full (payoff) shall be credited on the date received, except as provided under United States Department of Housing and Urban Development regulations.

II. The repayment terms of any loan made under the provisions of this chapter shall be conspicuously and clearly set forth in the note. Any prepayment penalty required of a borrower shall be printed in bold type in the note or in any addendum to the note.

TITLE INSURANCE

What is title insurance?

It is an insurance policy that protects the insured against loss should the condition of title to the land be other than as insured. Unlike other types of insurance that offer protection against future possible occurrences, title insurance offers protection against past occurrences which could result in a claim at a future date. Coverage continues in effect for so long as you have an interest in the covered property. If you should die, the coverage automatically continues for the benefit of your heirs. If you sell your property, giving warranties of title to your buyer, your coverage continues. Likewise, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage continues to protect your security interest in the property. Title insurance provides the insured with "peace of mind" in knowing that you are receiving good and meritable title to the real estate you are purchasing.

Why do I need title insurance?

When you buy a home, or any property for that matter, you expect to enjoy certain benefits from ownership...to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan. Title insurance is designed to cover these rights. Without an owners title insurance policy, you may not be fully protected against errors in the public records, hidden defects not disclosed by the public records, or mistakes made during the examination of the title of your new property. As a result, you may be held fully accountable for any liens, judgments or claims brought against your new property. However, your owners title policy insures that if such an occasion arises, you will be defended, free of charge against all covered claims and paid up to the amount of the policy to settle valid claims.

What is a title search?

A title search is a thorough review or examination of the public records that pertain to real property ownership and the rights/limitations of its use. The search period begins with the current owner(s) and extends back in time for a period of 50 years (Massachusetts) (commonly referred to as the "chain of title"). All documents affecting the subject property are reviewed for accuracy, completeness and proper execution. Similarly, all owners of record during the search period are indexed to determine their ownership interests, marital status and legal and mental capacity to enter into a contract to sell/buy real property. All conveyances must have been properly conducted and approved by the appropriate governmental departments. Once the title search is completed, the results are provided to a title officer who makes a determination as to the insurability of title.

What issues can a title search reveal?

A title search can show any number of title defects, liens, and other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgments against buyers/sellers and any restrictions or conditions limiting the use of the land.

Are there any issues a title search may not reveal?

Yes. There are some "hidden hazards" that even the most diligent title search may not reveal. For instance, a previous owner could have incorrectly stated his marital status resulting in a possible claim by his legal spouse. Other hidden hazards include fraud, forgery, defective deeds, mental incompetence, confusion due to similar or identical names, and clerical errors in the City/County land records. These defects can arise after you've purchased your home and can jeopardize your right to ownership in part or full.

What does title insurance cost?

The cost varies, depending mainly on the value of your property. The important thing to remember is that you only pay once, then the coverage continues in effect for so long as you have an interest in covered property. If you should die, the coverage automatically continues for the benefit of your heirs. If you sell your property, giving warranties of title to your buyer, your coverage continues. Likewise, if a buyer gives you a mortgage to finance a purchase of covered property from you, your coverage continues to protect your security interest in the property.

If I have a problem, will I lose my property to make a claim?

Not at all. At the mere hint of a claim adverse to your title, you should contact your title insurer or the agent who issued your policy. Title insurance includes coverage for legal expenses that may be necessary to investigate, litigate, or settle an adverse claim.

If my lender obtains title insurance, why do I need it?

The lender's policy covers only the amount of its loan, which is usually not the full property value. In the event of an adverse claim, the lender would ordinarily not be concerned unless its loan became non-performing and the claim threatened the lender's ability to foreclose and recover its principal and interest. And in the event of a claim, there is no provision for payment of legal expenses for an uninsured party. When a loan policy is being issued, the small additional expense of an owner's policy is a bargain.

What types of risks are covered by title insurance?

Standard Coverage addresses such risks as:

• Forgery and impersonation
• Lack of competency, capacity or legal authority of a party
• Deed not joined in by a necessary party (co-owner, heir, spouse, corporate officer, or business partner)
• Undisclosed (but recorded) prior mortgage or lien
• Undisclosed (but recorded) easement or use restriction
• Erroneous or inadequate legal descriptions
• Lack of a right of access
• Deed not properly recorded

HOMESTEAD QUESTIONS AND FACTS

What are the filing requirements?

All Homesteads must be filed in the county in which the residence is located. Be sure the form is filled out completely and has been properly notarized, and remember to enclose a check for the proper recording fee with the Homestead form. The check should be made payable to the Registry of Deeds. The filing fee will be $35.00.

Who has the right to acquire a Homestead?

An owner or owners of a home who occupy or intend to occupy said home as a principal residence may acquire an estate of homestead to the extent of three hundred thousand dollars ($300,000.00) and upon filing of such shall be protected against attachment, levy on execution or sale to satisfy debt (except for certain cases that are specifically excluded by the statue); provided that only one owner may acquire an estate of homestead in the home for the benefit of his/her family.

The statute defines owner to "include a sole owner, joint tenant, tenant by the entirety or tenant in common" it also defines family to "include either a parent and a child or children, a husband and wife and their children, if any, or a sole owner."

Are my spouse and children still covered by my Homestead should I pass away?

Yes. Should the spouse or parent who declares the Homestead die, the law protects the house until the youngest unmarried child reaches the age of eighteen (18) and until the surviving spouse dies or remarries.

Can trustee(s) file for home homestead protection?

The Massachusetts Supreme Judicial Court has determined that registered land held in trust cannot be given Homestead protection. The case did not address recorded land, therefore until there is court clarification, if your property is recorded land and is in trust you may want to record a Homestead.

Can I declare a Homestead on two properties?

NO. A Homestead can be declared only on an applicant's "principal residence". A person can have more than one residence but the statute only allows the protection on one's legal domicile. There is no legislative intent to allow the exemption to apply to a summer and winter residence. For example, a husband cannot declare a Homestead exemption on one residence while the wife declares the exemption on the other residence, unless each can prove that the residence is their "principal residence" or "domicile."

How can I get a copy of the form to fill out?

Homestead forms may be obtained at most Registries of Deeds. They are also available at legal stationery stores or your local attorney's office.

How am I protected if I am 62 or older, or disabled?

The real property or manufactured homes of persons sixty-two (62) years of age or older, regardless of marital status, or of a disabled person or persons, (as defined in the statute definition set forth below), regardless of age, shall be protected against attachment, seizure or execution of judgment (except for certain cases that are specifically excluded by statute) to the extent of Three Hundred Thousand Dollars ($300,000.00) each; provided such person occupies or intends to occupy the home as their principal residence. Therefore, each individual will be eligible for protection of up to Three Hundred Thousand Dollars ($300,000).

Can my Homestead be terminated?

The estate or claim of Homestead shall be terminated upon the sale or transfer of the real property or mobile home during the declarant's lifetime, upon the death of the surviving declarant or by a release of the Homestead estate duly signed, sealed, and acknowledged by the declarant, and recorded at the Registry of Deeds, or when the property ceases to be your residence.

What happens to my Homestead if I should re-mortgage or take out a second mortgage or home equity loan?

In some cases, the lending institution may require that your Homestead be released. In this case, once the mortgage is recorded or registered, you can record a new Homestead. The statute in some cases, exempts first and second mortgages from Homestead rights, so chances are you will not have to release a Homestead to refinance or obtain a home equity loan. Also, most standard mortgage forms used today have a specific release of homestead rights for that particular transaction, which negates the necessity to file a general release of Homestead.

If I am over 62 and my spouse is under 62, should we both file?

Only one joint owner under 62 years of age can file a Homestead for the family. However, for elderly and disabled individuals, the protection up to Three Hundred Thousand Dollars ($300,000.00) exists for each person's ownership interest. Therefore, it is recommended that the person over 62 years of age file for the larger protection. As the other individual owner turns 62, he/she should also apply.

Important Information Regarding Massachusetts Closings

1. INSURANCE. (a) At the time of closing, please bring with you a homeowner fire and extended coverage insurance policy or binder for such insurance either in amount at least equal to the total of all new mortgages on the property or 100% of the replacement cost of all insurable buildings and other improvements on the land. IF YOU ARE GOING TO RELY ON THE 100% REPLACEMENT COST AMOUNT AS SUFFICIENT INSURANCE, THEN THE POLICY OR BINDER MUST STATE THAT 100% REPLACEMENT COST IS IN EFFECT. The insurance policy or binder must name all of the persons who will hold title to the property. The mortgage clause adding the mortgagee's insurable interest to all policies MUST BE WORDED in accordance with the instructions listed in your commitment letter issued by (Lender).

Your insurance agent MUST fax or deliver to our office a copy of a binder for such insurance along with a receipt showing that the first year's premium is paid in full, at least three (3) business days prior to closing. Please have them fax it to us at one of our offices:

2. FLOOD INSURANCE. If the premises is located within a specially designated federal flood hazard area then flood insurance is a mandatory requirement and you must provide a flood insurance policy together with a paid receipt for the full first year's premium at or before the closing. Please note that if the premises is located within Zone B, flood insurance is not required.

3. RENT LOSS INSURANCE. If this transaction involves a loan on investment premises or a 2-4 family dwelling then rent loss insurance may be required and an appropriate binder to that effect will be required at or prior to closing. You should check with the Bank for applicability of rent loss insurance to your loan.

4. TITLE INSURANCE. Lending institutions require that they be provided with a lender's title insurance policy (loan policy) to protect their interest in your property up to the amount of the mortgage. While the premium for the loan policy is included in your closing costs, it does not protect you. Your ownership interests are insured only by an owner's title insurance policy (owner's policy). While your lending institution's coverage under the loan policy decreases as the mortgage is paid down and terminates when the final payment is made, your owner's policy remains in effect for as long as you and your heirs own the property. The owner's policy is available for a one-time premium and at a discounted rate if purchased simultaneously with the loan policy at the time of closing.The owner's policy provides coverage for numerous matters which are not covered by the standard attorney's certification of record title and which are not discoverable by searching the land records. Typical examples of such matters include forged documents, the incapacity of a grantor, undisclosed or missing heirs, missing signatures, mistakes in recording, unknown creditors and problems involving access to the land. The best owner's policy now available is known as the Eagle policy, which provides additional protection for problems such as zoning and building permit violations, restrictive covenant violations, encroachments and defects in title.

5. CONDOMINIUM INSURANCE. If the mortgage involves a condominium unit, we will require a Certificate of Insurance from the insurance carrier for the condominium naming you and the Association and identifying the unit you are purchasing. The language naming the Bank must be in the form set forth in Paragraph 1 above. Please note that you may be required to purchase additional insurance if the insurance company does not provide 100% replacement cost coverage.

6. OTHER CONDOMINIUM REQUIREMENTS. A "6 (d)" certificate stating that there are no unpaid common charges to the condominium association as of the date of closing must be issued and sent to us prior to closing. This certificate is obtained from the trustees or managers of the condominium and must be in the form prescribed by law. You should be sure that the seller procures such a document before the closing.

7. MANNER IN WHICH TITLE WILL BE HELD. You will find enclosed an explanation of some options on how to hold title to real estate. Please advise our office or fill out and return the enclosed form indicating how you would like to take title to the property and fax it back to us. This information should be provided to us as quickly as possible since many documents which we prepare require this knowledge.

8. OUR CERTIFICATION OF TITLE. The following matters apply only if the transaction involves a purchase of real estate with a dwelling designed to be occupied by not more than four families and occupied in whole or in part by one or more of you. Please find an attachment to this letter relative to the examination of title and our certification pursuant to Massachusetts General Laws, Chapter 93, Section 70. We are required to certify to you that the title to the premises meets the standard established by that law. Our certification to you should not be construed as establishing an attorney/client relationship between you and our office. The services we render are only on behalf of the mortgage lender unless other arrangements are made with our office, and we cannot advise or counsel you relative to the transaction. If you wish to obtain legal advice regarding the quality of the title or with regard to some other aspect of the transaction, you should retain independent counsel.

9. SMOKE DETECTOR COMPLIANCE. We call your attention to the provisions of Massachusetts General Laws, Chapter 148, Section 26E. You may be required to execute a certification at the closing that you have inspected the installation of the smoke detectors and are satisfied as to compliance with this law. You should contact the sellers and insure that they have obtained, and will bring with them a current certification from the city or town fire department relative to the installation of smoke detectors. The foregoing may not apply in certain commercial transactions. If you are unsure of the applicability of this law, please check with your counsel or contact our office.

1O. WATER, SEWER AND ELECTRICITY. You should ask the sellers to obtain a final reading of the water meter so that all outstanding water and sewer bills may be taken care of at the closing. If you are purchasing a condominium unit, it is likely that water and sewer charges are included in the monthly condominium fee. In that case, a final water and sewer bill is not required. If electricity is provided by a municipal light plant, the sellers should obtain a final electric reading.

11. HOMESTEAD DECLARATION. Our office can prepare a Homestead Declaration if the home you are purchasing will be your primary residence. Under Massachusetts Law an owner of a home who intends to occupy it as their principal residence can protect a portion of the equity in their home by merely filing a Declaration of Homestead in the Registry of Deeds where the property is located. The cost for this service is $95.00 which includes the cost to prepare the Declaration and the recording fee. Please let us know if you want us to prepare and record this Declaration.